E-commerce isn't just evolving; it's transforming in record time.
As Ops and IT folks, we’re on the front lines of this shift, tasked with not just keeping up but staying ahead… and with being ready to handle an ecommerce future that is moving too fast, in too many directions, for anyone to accurately predict.
But just because the future isn’t clear, doesn't mean you can’t have a clear strategy for tackling it.
Here are three strategies to future proof your ecommerce operations and ensure you are ready for whatever lies ahead.
1. Embrace Integrations
Ecommerce is about integrations. New sales channels. New fulfillment partners. New and legacy platforms and systems of record. New acquisitions. No one goes it alone in ecommerce, so you need to connect and communicate with whatever systems, partners and opportunities business growth and an unpredictable future throw at you.
Point-to-point integrations won’t cut it. They take too long to create. Task already overloaded IT resources to maintain. And don’t scale.
Future proofing your ecommerce operations depends on embracing a hub-and-spoke approach to ecommerce integrations.
Think of this method as the central hub in a bike wheel, with each spoke connecting to a different part of the rim. In ecommerce, the hub is the main system that controls everything. It's the brain of the operation. It can be a purpose-built ecommerce integration engine like Etail, middleware, a message broker, or an integration platform offered as a service (IPaaS).
The spokes are the various platforms and systems a business uses, such as its online store, sales channels, 3PLs or other fulfillment options, an inventory or order management system, or a CRM and other systems of record.
By using a hub-and-spoke model, businesses can easily add, update or change any part of their system without causing a major headache. Component spokes don’t need to directly integrate with each other as in a point-to-point model; they just need to integrate with the hub. The hub then handles communications throughout the system. Since everything connects back to the central hub, making changes to component spokes is a lot simpler.
A platform built around the hub-and-spoke model like Etail offers several advantages for future proofing your ecommerce operations and technology stack:
Centralized control: The hub manages all integration processes, providing both a single control point and visibility to the entire system. This simplifies integration architecture and management compared to point-to-point integrations.
Simplified connectivity: Systems only need to integrate with the hub, reducing complexity and the connections required. Easily add new systems or applications by connecting them to the hub. Adapt to changes in business needs or systems without extensive reconfiguration. Simplifying connectivity also frees up scarce IT resources to focus on other parts of the business.
Data transformation: The hub can harmonize data formats and structures between different systems, ensuring compatibility. The systems that you’re connecting to often have their own formats, standards and requirements for categorizing and reporting data – called their taxonomy. This disparate data needs to be collected, normalized and aggregated into a common centralized format to be used in inventory management, data analysis and other applications with your ecommerce ecosystem. Point-to-point systems depend on error-prone humans and unscalable spreadsheets to manually aggregate data that should be collected automatically. That won’t scale.
Routing and orchestration: The hub directs messages and data flows to the appropriate systems based on defined rules and business logic. That’s the basis of automation. Automation isn't just a time-saver; it's a strategic imperative. From order processing to supply chain coordination, automating repetitive tasks reduces errors, increases efficiency and frees up your team for higher-level activities.
Once ecommerce ecosystems are integrated, you’re laid the groundwork for a strategy that improves customer satisfaction, increases profitability and results in organizational resilience to meet unforeseen events: Distributed Logistics.
2. Implement Distributed Logistics
While the future of ecommerce can be difficult to predict, one thing remains consistent: consumer expectations continue to grow.
Customers not only expect rapid shipping and free delivery but also seek seamless omnichannel fulfillment experiences including traditional ecommerce delivery, expedited same-day local delivery, curbside or in-store pickup, and more.
The challenge is clear: how can ecommerce operations adapt to not just meet but exceed these constantly evolving fulfillment expectations?
Distributed logistics, encompassing both distributed order management (DOM) and distributed inventory management (DIM), offers the answer. This approach is about decentralizing the placement and management of inventory to support faster and more cost-effective delivery options.
Here’s how these components work together:
Distributed Inventory Management (DIM)
This strategy involves spreading inventory across multiple locations rather than centralizing it in one major warehouse. Inventory locations could include the brand’s warehouses and DCs; 3PLs and other fulfillment partners; Amazon FBA, Walmart’s WFS and other channel fulfillment options; dropship suppliers; retail locations; and micro warehouses and dark stores. DIM helps identify demand across fulfillment locations to determine the optimal inventory by SKU, by location. That minimizes the distance products need to travel to reach consumers, cutting delivery times and shipping expense.
The challenge comes in maintaining visibility, managing and replenishing inventory for multiple SKUs across multiple locations. Often, such as when you work with 3PLs, you don’t own the location and they may have warehouse and inventory management systems different than yours.
The problem is complex and directly affects your bottom line. Too much inventory results in poor inventory ROI, while too little may result in lost sales opportunities or stockouts. And stockouts can lead to penalties from Amazon and other sales channels.
Distributed Order Management (DOM)
At the core of distributed logistics, DOM systems allow for real-time inventory visibility across all channels and locations. This capability enables businesses to fulfill orders from the optimal location, considering factors like proximity to the customer, total cost of fulfillment, packaging options and inventory levels. By leveraging DOM, companies can reduce shipping times and costs while increasing efficiency.
Implementing distributed logistics requires careful planning and investment in the right technology. Distributed order management, once a specialized strategy pioneered by Etail and a few others, has grown to become a common feature in dozens of order management platforms – although most platforms fail to mention their DOM only works within locations using their proprietary order management systems. Etail's DOM capabilities are system-agnostic and integrate across the systems you or the fulfillment partners you already have in place.
How DIM/DOM Creates Sustainability and Resiliency
Along with consumer’s constantly growing expectations around fulfillment, online shoppers are also setting higher expectations around sustainability.
Placing inventory closer to consumers not only cuts delivery time and expense, it also cuts the distance orders need to be shipped. That can have a real, quantifiable impact on corporate sustainability efforts.
For one Etail customer, a study showed implementing a distributed logistics strategy would cut 35.5 percent of their total emissions from last-mile transportation and result resulted in $5.6 million of annual shipping savings due to lower tractor trailer and last mile delivery van fuel and labor costs.
As ecommerce grows, having a flexible logistics framework that can scale with increasing order volumes and changing market conditions is crucial. Along with meeting predictable demands like increased ecommerce sustainability, a distributed logistics approach helps future proof against unpredictable supply chain interruptions.
For example, during the early days of the COVID epidemic, Amazon limited FBA shipments only to critical products – leaving other sellers who depended only on Amazon for fulfillment stranded. A distributed logistics approach reduces the risk associated with relying on a single fulfillment center or partner, which enhances operational resilience.
3. Focus on Growing Margins
For brands getting into ecommerce, D2C growth often means growing pains.
They need to shift their fulfillment operations from shipping pallets to retail distribution centers to delivering individual packages to ecommerce shoppers. They face high shipping costs – which sometimes cost as much or more than manufacturing the product. Inexperienced management strategies yield low return on inventory investment. Fumbled attempts to manage everything through spreadsheets and legacy systems caused overhead and errors to soar.
And it all hits the bottom line.
At first, CEOs and CFOs are (somewhat) patient. It’s all part of the learning curve and a seismic shift in how brands sell online, fulfill D2C orders and meet changing customer expectations.
That patience is ending.
While the future can’t be predicted, the history of successful businesses paints a clear direction: winners have higher than industry average margins. That gives them more money to fund customer acquisition to grow revenue, invest in infrastructure to continue to drive margin improvement, and meet stakeholder expectations.
The good news? Developing hub-and-spoke integration capability along with a distributed logistics fulfillment model sets up a solid base for revenue and margin growth.
As we’ve seen, integration, automation, distributed inventory management and distributed order management all contribute to increasing efficiency, reducing error and overhead, and building a stronger bottom line.
These strategies will take you a long way towards increasing ecommerce margins. But, given the right toolset, you can boost margins to industry-leading levels.
Etail was purpose-built with a set of tools specifically designed to improve sales growth and profitability for ecommerce brands and 3PLs.
With Etail’s technology, companies can seamlessly connect with multiple sales channels and logistics partners, broadening their market reach and streamlining operations.
Listing content, inventory publishing and even pricing can be set based on inventory levels and the true total cost of fulfillment – ensuring you never take an order you can’t profitability fulfill.
Along with DIM and DOM, Etail offers fulfillment tools like cartonization, designed to ensure every order is shipped in the most appropriate, cost-effective packaging plus advanced carrier rate-shopping tools to cut shipping costs.
Plus Etail provides deep insights into customer behavior and inventory needs through a drill-down analytics dashboard, which is fundamental for making informed decisions, spotting trends and managing stock efficiently.
Etail's suite of tools not only enhances current ecommerce operations but also future-proofs businesses against evolving market dynamics and consumer expectations. With Etail, businesses are equipped to handle future challenges and capitalize on new opportunities, ensuring sustained growth and profitability.
Additional resources
ETAIL PLATFORM OVERVIEWS
BLOG POSTS
Siloed Data and Spreadsheet Olympics: Taming data silos and dis-integrated systems
The Ultimate Guide to Order Management
Making Ecommerce More Profitable
INFOGRAPHICS
Six Tools to Maximize Ecommerce Margins
WHITE PAPERS
Mastering Ecommerce Integration: Bridging Legacy Systems & Cutting Edge Solutions
Distributed Order Management Solutions Overview
Ecommerce Fulfillment: Meeting the 1-2 Day Delivery Challenge
VIDEOS
Distributed Logistics for Digital Commerce (video series)
CASE STUDIES
Evenflo: Conquering Legacy System Challenges, Empowering Online Sales
LIVE BRIEFINGS
