ECommerce business owners are always looking for ways to increase profits and efficiency. But for a small business with few employees, that is often easier said than done.
With the many complex, interconnected aspects of eCommerce, it can be difficult to determine where you can make useful adjustments.
That’s where optimization comes in. Business optimization is the process of analyzing the different aspects of your business, identifying points of weakness, and finding ways to improve them. For eCommerce sellers seeking to grow their businesses, optimization is a vital process that should not be overlooked. Read on to learn more about business optimization and how small eCommerce businesses can improve their management operations, boost efficiency, and increase profitability.
For many small businesses, improving existing aspects of their operations is the key to increasing profitability. You might be overspending on various processes without realizing it, or wasting valuable time and resources on practices that can be done more quickly and effectively. While optimization might seem like a daunting task, the benefits are undeniable.
Deciding to optimize your business is the first step, but it can be hard to know where to start. We’ve put together a list of five tips to help eCommerce sellers optimize their businesses.
Due to the unpredictable nature of eCommerce, many sellers run their businesses on a day-to-day basis. With the ups and downs in demand, supply chain uncertainty, and the seasonality of online sales, it can be difficult to look ahead.
While this style of management is common, it can be harmful to your business. That’s because if you can’t clearly visualize the flow of goods and capital across your supply chain, you’re more likely to find yourself in a cash flow crunch.
ECommerce businesses frequently run into problems with cash flow because they have to pay costly supply chain expenses to acquire inventory before they ever see revenue from sales. Each time you need to order a new batch of inventory, those pesky expenses pop up again, putting pressure on your cash flow.
In order to avoid running out of capital so you can stay in stock, it’s important to plan ahead.
Mapping out cash flow across your supply chain over the longer term is a great way to start. Once you have a clear picture of where expenses accumulate, when you’ll have goods on hand to sell, and when you’ll start bringing in revenue, you’ll be able to identify problem spots. Then, you can react quickly to avoid cash flow issues.
In the world of eCommerce, you never know when something can go wrong. Global events can lead to supply chain delays and disruptions, demand can suddenly rise or fall, a shipment can arrive damaged, and more. In this ever changing environment, flexibility is invaluable for ensuring your business’ success. Particularly now, with supply chain uncertainty, inflation, and rising prices, flexibility is more important than ever.
Optimizing your supply chain for flexibility means making adjustments to ensure that you have the ability to quickly respond to changes such as damage, delays, or disruptions. If you can rapidly pivot aspects of your supply chain when something goes wrong, you’ll be able to avoid serious losses.
Diversifying your suppliers is one way to optimize for flexibility. If you seek out multiple suppliers who can produce your product, you won’t have to worry if one of them runs into trouble. When one supplier can’t keep up with demand, or if shipping becomes problematic from their location, you can simply place an order with another supplier.
The same is true when it comes to shipping methods. Having a backup option in place is a great way to make sure you don’t go out of stock. For example, you may prefer to ship your inventory by sea, since it’s typically cheaper and better for large orders. Having a backup air freight option, however, gives you the ability to place a small order to stay in stock if your sea shipment is delayed.
Another way to ensure flexibility in your supply chain, particularly when there is a great deal of uncertainty regarding demand and supply chain stability, is to order smaller batches more frequently instead of larger batches in bulk. That way, if demand suddenly shifts or if something happens to a shipment, you’ll suffer smaller losses. In addition, there will be a shorter turnaround time while you’re waiting for the next shipment, allowing you to adjust more quickly.
Small eCommerce businesses typically have very few employees. Therefore, it can be nearly impossible as well as inefficient to handle every aspect of managing your business in house. In order to optimize your operations and ensure a well functioning business, it’s a good idea to outsource where possible.
When it comes to logistics, partnering with an experienced 3PL, or third party logistics provider, can greatly benefit your business. Supply chain logistics are complex, and 3PLs have the knowledge and experience to coordinate and streamline order fulfillment, freight forwarding, shipping, warehousing, and more. This not only saves you time, but can also help cut costs. Plus, if something does go wrong in your supply chain, 3PLs have the know-how and connections to quickly pivot and remedy the situation.
In addition to logistics, there are many other aspects of your business that can be outsourced. If you lack the time and proficiency to take your marketing to the next level, you can hire an expert. If your graphic design is lacking, find a talented designer to provide you with eye-catching and on-brand imagery and graphics. An SEO (search engine optimization) guru can work wonders with organic search results, and a dedicated social media specialist can help drive traffic to your store.
While it may seem more costly in the short term to outsource these tasks, it can help you increase profits and efficiency in the long run.
In order to make sure your business is running efficiently, it’s vital that you stay on top of your data. From sales analytics to marketing metrics, gathering and analyzing data about your business lets you know what’s working and what’s not. Then, you can identify areas in need of improvement and make relevant changes.
KPIs, or key performance indicators, are metrics that measure various aspects of your business’ performance. By tracking and analyzing relevant KPIs, you can gain a more accurate understanding of how well your business is doing. This allows you to set goals and accurately evaluate your progress toward reaching them. This minimizes errors and ensures you’re spending your capital wisely.
In addition, staying on top of demand forecasts can help you order the optimal amount of inventory for every season. You don’t want to order too little inventory, or you risk stocking out. If you order too much inventory, on the other hand, you’ll be stuck paying extra warehouse storage fees.
Tracking benchmarks that allow you to compare your business metrics with those of competitors is also a great way to use data to optimize your business. You want to make sure that you’re not paying significantly more supply chain expenses than similar businesses, that your pricing is comparable to other sellers, and that your product is performing up to par.
One of the biggest pain points for eCommerce sellers is a lack of working capital. ECommerce businesses need plenty of working capital to order enough inventory and avoid stockouts. This is a common challenge for sellers, particularly those who wish to grow their businesses.
As mentioned earlier, eCommerce sellers often face a cash flow crunch when they need to order more inventory before revenue from sales comes in. In many cases, they simply don’t have enough cash available to pay the supply chain costs necessary to stay in stock.
Finding a flexible funding partner is a great way to avoid this problem. In the past, bootstrapping or traditional loans were the way to go. Today, however, thanks to the growth of eCommerce as a global industry, there are a number of eCommerce specific funding options available. Many of these companies have a better understanding of the unique needs faced by eCommerce sellers and are therefore able to offer them more suitable solutions.
8fig, for example, is a growth platform designed exclusively for eCommerce sellers. They offer flexible, continuous capital infusions based on your supply chain cash flow. Instead of one lump-sum, you get the amount of cash you need when you need it, over and over again. In addition, the 8fig platform provides sellers with mapping and planning tools as well as sales analytics, forecasting, and benchmarks.
Optimizing your business management is a great way to cut costs, utilize your resources more effectively, and ensure that your business is running as smoothly as possible. By planning ahead, prioritizing flexibility, outsourcing, utilizing data, and working with a funding partner, you’ll be able to minimize your financial risk, improve the quality you are able to offer customers, and reduce delays and disruptions.