“Beware of little expenses: a small leak can sink a great ship.” -- Benjamin Franklin
Your company has finally decided to take action and develop an eCommerce strategy. Now it’s time to budget the initiative. At first glance eCommerce might seem like an IT project. But while technology drives eCommerce, it relies heavily on marketing, logistics and customer service – functions that depend on brick and mortar infrastructure and human resources. And whether you’re budgeting for technology or the other operational pieces, the devil is in the details.
To launch an eCommerce operation, you’ll need an eCommerce platform to manage your catalog and accept payments; a marketing plan to drive customers to your site; a warehouse to store and ship your products and accept returns; and a support team to provide customer service.
Your business already does marketing, has a warehouse and a customer service team. Now all you need is the right technology platform and you’re in business, right? Not so fast. The requirements for eCommerce marketing, fulfillment and customer service differ from the same functions used to support your traditional channels. eCommerce has a unique infrastructure that demands different skill sets and this needs to be considered in your budget.
Let’s take a look at some of the specifics.
Warehousing and Fulfillment
Most businesses working within a traditional channel business model have warehouse operations configured for B2B fulfillment – shipping bulk orders to distributors and retailers. eCommerce has a different set of requirements. If you’re doing DTC you’ll need to pick, pack, and ship individual orders, which means you’ll have to budget for the following:
- Kitting and light manufacturing capabilities may be needed
- Racking requirements may be different from your existing infrastructure
- The reconfiguration of warehouse zones
- Additional labor headcount
eCommerce customer service also has demands that are different than the B2B environment. Consumers expect an omnichannel experience and you should be prepared to budget for what is needed to support a higher volume of interactions, including:
- Support for all channels: phone, live chat, e-mail, social media
- Self-service website options
- CRM/Customer Service software that is integrated with your website
- Increased labor requirements to handle volume
A study by Forrester Research indicates that 43% of businesses underestimate the TCO of their eCommerce platform.
Many people think of eCommerce as a website with a catalog and a cart. But licensing costs for an eCommerce platform are only the tip of the iceberg when it comes to an eCommerce technology budget. To have an efficient eCommerce operation, your website must be integrated with other business systems. Uncovering the Real Costs of eCommerce Software discusses how technology can be a hidden landmine for eCommerce budgets. Costs include:
- Customization – While many eCommerce platforms come with design templates, customization will be needed to establish a true brand identity.
- Integration – Your eCommerce website should be integrated with relevant business systems such as ERP, CRM, WMS, and Order Management.
- Maintenance – According to Forrester, the median cost of ongoing support and maintenance of an eCommerce platform is 7% of online revenues.
Orderhouse CEO Mike D'Errico discusses the costs behind implementing an eCommerce strategy
While you might have in-house expertise in traditional advertising media and managing channel marketing programs, eCommerce requires digital marketing experience and a different range of skills. These include:
- Search Engine Optimization – People need your products, but will they find your website when they do an online search?
- PPC Advertising (Pay Per Click), an internet advertising model used to direct traffic to your website.
- Social Media – Important in creating awareness and building engagement.
- Content – In addition to rich product content, blogs, videos, eBooks, newsletters and tutorials are ways to gain traction and convert website visitors into customers.
- Strategic Planning – Develop and oversee the digital marketing direction.
The above functions can’t be carried out effectively by one person and often require an entire department. A marketing manager might understand retail co-op advertising and endcaps, but not SEO and content marketing. Can your existing resources adapt or will you have to consider adding head count or outsourcing?
While there are many advantages in building and managing an eCommerce operation in-house, the upfront investment is prohibitive for many businesses. Let’s consider the median salaries involved to staff just one component – digital marketing:
- Digital Marketing Director - $148k/Yr (Salary.com)
- SEO Specialist – $42k/Yr (Payscale.com)
- PPC Manager - $50k/Yr (Payscale.com)
- Social Media Manager - $42k/Yr
That’s nearly $300k/yr – unrealistic for many businesses, and your eCommerce operation may not justify in-house FTEs until it reaches a certain level of revenue and profitability.
Alternatively, there are many advantages to outsourcing your digital marketing, including:
- You’ll have access to resources and a team of experts on demand.
- It will enable you to focus on core competencies and reduce capital investment.
- You’ll be relieved of the time and cost of hiring and training employees.
- It’s easier to scale and adapt to seasonal fluctuations.
- Outsourcing partners have the latest technology for their niche–you don’t have to invest in it.
It’s easy to see how outsourcing delivers efficiency and cost advantages, especially to small and mid-market businesses that are scaling. This model gives you access to best-of- breed solutions in all components across the eCommerce value chain. In addition to marketing, there are numerous options for outsourcing warehousing & fulfillment, customer service, and technology.
Will Best-of-Breed Bring the Best Results?
The ability to leverage best of breed solutions would seem ideal. But is there a potential downside to this approach? Consider…
- The burden will be on you to evaluate, select, and coordinate the various vendors and business processes. Do you have the bandwidth?
- Systems used by disparate vendors often don’t communicate well together.
- Integrating systems and processes can be expensive and time consuming.
- One weak link in the chain can derail your processes and result in problems such as delayed orders and customer service lapses.
To be successful in omnichannel eCommerce, it may be risky to rely on siloed systems. Data is gathered at several touchpoints in the value chain and it’s essential that this information is shared across functions. Efficient workflows can be very difficult to attain when there are multiple outsourcing partners operating with siloed systems and processes. Is there another alternative?
The Integrated End to End Solution
The final option is to partner with a turnkey eCommerce solutions company. A turnkey company can offer all the components needed to run an eCommerce operation. They can build your branded eCommerce store and provide complete ongoing managed services. They have the technology, infrastructure, and resources already in place. Their systems, people, and processes are fully integrated, which results in higher levels of efficiency, customer service and profitability. Most importantly, the majority of turnkey providers have a revenue share model that enables you to launch your eCommerce operation with a minimal upfront investment. This mitigates budgeting concerns. Because they rely on a revenue share, a turnkey provider is heavily invested in your success and has a greater stake in ensuring that your business is profitable.
Barrier or Hurdle?eCommerce can be complicated from an operational standpoint, but it can also be a risky fiscal proposition. Tackling an eCommerce project in-house can be a budget buster for a lot of organizations. But now outsourcing options exist that include turnkey solutions with financial models that mitigate risk. Budget is no longer a barrier to entry - it’s a hurdle that can easily be cleared.