Black Friday, Easter, Valentines Day and Christmas represent the biggest sales opportunities of the year for many retailers; but how many SMEs really look forward to the peak trading time? Mike Cockfield, MD, Khaos Control, reveals how to look forward with delight not dread
Customer Expectation – Reinforced by Amazon
ecommerce platforms such as eBay and Amazon, even Shopify and Notonthehightstreet, have transformed the cost of entry for retail start-ups. Anyone can now set up a new business and gain immediate access to an amazing global customer base with minimal up-front outlay. But while manually processing orders, checking stock and tracking finances is totally achievable for a small scale business, hit critical mass and the business model suddenly looks extremely shaky.
The problem is that while ecommerce platforms level the playing field, they also set customer expectations very high. Whether buying from a global brand or a one man band, customers do not differentiate. From stock accuracy to next, even same day delivery, slick returns processes and excellent communication, a company operating from the spare room has to be as switched on and responsive as the world’s biggest retailers. And the ecommerce platforms reinforce these standards – rapidly flagging up, even blacklisting, any firms that fail to hit the required standards.
And it is when companies hit those peak trading times, from Valentine’s Day to Black Friday and Christmas, that the fragility of a business based upon manual processes – essentially the good practice of individuals – becomes apparent, often painfully so.
Scalability – Chasing Sales
The first few months – or years, depending on the business’ success – of any new company are all about chasing sales. Whether it is ramping up a single online channel or opting for multiple ecommerce platforms plus a high street presence or regional events, every start-up is totally focused on winning new business. But what happens when those sales start to grow? At best, many start-ups are using a basic online accounts package – but stock is manually checked, emailed orders are manually processed and an accurate picture of profitability is attained only weeks after the event.
As sales increase, companies tend to add bodies – but there is an inherent lack of scale within any business reliant on manual processes. Doubling staff numbers does not result in a doubling of turnover; at best a business will handle 40% more sales. Why? Because the more complex the business model – adding channels to market, for example – the more complex the manual processes and hence opportunities for errors.
Just consider the process of updating stock availability and pricing across every eCommerce platform – logging in and out of each one in turn. Or juggling click and collect orders, plus returns and the often bizarre range of customer questions at a trade counter. It is inevitable that tasks will be interrupted and pieces of paper misplaced, leading to unacceptable delays in fulfilment, inconsistent information across ecommerce platforms and a complete lack of confidence in the value, volume and location of the key business asset – inventory.
Automate to Gain Control
People are fallible. And as a business hits a critical mass, adding more heads to support manual processes raises the risk of mistakes, mistakes that can have a very negative impact on customer perception. Scale up these manual processes to any kind of peak trading event and it is a recipe for disaster.
Once a business hits a certain volume of sales, level of turnover or even channels to market, the only way to retain control is to automate. Rather than relying on manual updates of spreadsheets and accounts software, an integrated Enterprise Resource Planning (ERP) solution provides a single source of all stock, order and finance information across the business, irrespective of the number of channels to market.
With direct integration to the major ecommerce platforms, pricing and inventory is always up to date and consistent, plus orders are automatically registered within the system. In addition to removing the need for any manual processing, the stock is automatically reduced and picking order automatically created. Suddenly, the business goes from a massive in tray of printed emails with staff dedicated to manually processing orders that simply cannot be turned around in less than five days to an automated process that enables same day dispatch.
Financial Control – For Sustainable Growth
Furthermore, with real-time processing a business can see immediately the level of margin being attained on each and every sale. There is no need to wait for six weeks for the management accountant to review the month end accounts; a business owner has a complete, accurate and real-time view of business performance at all times. And it is this information that enables time critical decision making that supports the next stage of business growth.
For example, when Amazon forces prices down it is easy to get pushed to the bottom and discover only after the event that every sale has been made at a loss. With full visibility up front, a business owner can take a decision about whether or not to press Go on these orders. Similarly, with integration to all the major eCommerce platforms, a company can swiftly trial a new channel to market without making any major financial outlay.
Essentially, as organisations move beyond start-up towards business maturity the focus has to change. It is time to stop chasing sales and think about selling better – and that can only be attained with real time insight into the business value and an understanding of what products work best at what price – backed up by slick, integrated processes.
The great thing about a small business start-up is the agility, the ability to react to customer requests or new opportunities. But typically, this dynamic approach is achieved by throwing bodies at the problem and, once a critical mass is attained, that model begins to fall down. That responsiveness that was the business’ competitive edge, suddenly becomes an expensive Achilles heel because the model is not repeatable, it is not scalable.
Amazon has set the standard: everyone knows what good looks like. From up to date stock to good packaging, on time delivery and efficient returns processes, customers expect the same from every retailer. As the next peak trading season approaches, it is time to consider: is your business going to enjoy or dread the festive season?