By John Pollard, Technical Writer, k-eCommerce
This is the first article in a two-part series on key online competitive differentiators. Here, we look at ways to lower operational costs, using a success story example. Be sure to check out our second installment, with a focus on sales growth, coming out soon!
Part 1: Reducing Operational Costs
Just like with any other kind of business, success in eCommerce relies on more than just making sales. To maximize profits and ensure growth, you’ve also got to reduce your operational costs.
So, when a consumer electronics company with a small staff and a limited budget decided to open a new web store, this meant finding ways to reduce costs before, during, and after order processing to ensure they saw a substantial ROI for their eCommerce investment.
Pre-Order Costs: Advertising Automated
A consumer electronics company with a wide selection of popular products, they enjoyed a large, active market right out of the gate. But they didn’t have the budget to invest in a lot of advertising, and while they knew they had high-quality merchandise, they weren’t sure how to get it in front of their customers.
They started with an eCommerce platform that allowed them to build a rich product catalog. For each product offered, they included not only photos, descriptions, and detailed specs, but in many cases video as well.
As they began making sales, they were able to showcase their best sellers, and even feature them in posts to the company blog. And the flexibility of their platform let them integrate with
In other words, free advertising.
The platform allowed customers to rate and review products, so very soon their clients were providing first-hand accounts of both the company’s products and their service. All this information was right there on the product pages, encouraging new customers to make purchases without ever having to run an ad.
The company expanded their reach even further with a lineup of direct-download digital goods. Offering products that were instantly available upon purchase allowed the online store to leverage an “impulse item” strategy (comparable to the snacks and magazines in the checkout line at the grocery), which resulted in a shockwave of quick, easy sales.
Furthermore, their web store’s functionality let them suggest products similar to those customers had browsed or bought and presented customers with past purchases and previously-viewed items whenever they visited. Without having to pay a single sales rep, they were upselling 100% of the time.
In the first year alone, orders went up by 22% as more of their customers switched to their website, and they saw an average order value increase of 15%. Who needs advertising?
Order Costs: Time Is Money
Their order process was slow. Really slow. Every time an order came in, they had to copy all the information from their web store to their ERP, and then copy the invoice back to the web store. On average, this took about eight seconds per order line, which, at thirty lines, came out to four minutes per order. One hundred orders per week meant nearly seven hours of data entry, every single week. As orders went up, the cost went up, because they had to enter even more orders. And since the company was doing business nationwide, they had to remit taxes from every state, as well as coordinate shipping logistics all over the country.
They slashed data entry from their budget with an integrated eCommerce solution that could send orders back and forth between the web store and the ERP directly. Freeing up almost 20% of their resources’ time per week allowed them to train data-entry clerks as customer service agents.
They cut significant further costs (and effort) by integrating their platform with
All this lightened the company’s workload, even as their business grew exponentially. Orders were fast, easy, processed themselves, and went to the right place for the right amount, every single time. As more started pouring in, the staff was able to function with greater efficiency instead of spreading themselves thinner.
Post-Order Costs: Customer Service 2.0
Even after processing their orders, customers still frequently had questions about them. A sizable percentage of customer service calls were for routine inquiries, often issues as simple as confirming the order had gone through properly or was being shipped to the right address.
The company configured their eCommerce platform to send an automated confirmation email the moment the customer placed an order. This email included a confirmation number and all the essential information: item and quantity ordered, total with taxes and shipping, destination address, and payment method used.
Additionally, their customers could review their full order history at any time just by logging into their account, while tracking and back order information was pulled automatically from the company’s ERP and made available.
These may seem like details, but each one represents a point of contact between the customer and the business which required human intervention. Someone had to answer the phone and find the customer’s information, and with back orders or delayed shipping, they might have to do so several times. All told, the company was spending roughly $5 per order for customer service reps to answer order-related inquiries. At one hundred orders per week, this came out to $26,000 per year in post-order costs.
For a small company with a shortage of dedicated customer service personnel, automating routine order information allowed their support staff to focus on resolving issues and making clients aware of new products and promotions, increasing customer satisfaction across the board. Everyone was happy.
And it’s easy to see why. Simply by making a smart, scalable choice of eCommerce platform, this young business was able to reduce their operational costs by 50% over their first five years—all while consistently (and dramatically) growing their sales.
More on that next time...