Category: Ecommerce

To position your business for success and growth, we’ve gathered insights from CFOs who have successfully led e-commerce enterprises.

When ordering online, customers have a lot of expectations. They want faster delivery, secure packaging, live order status, and, most importantly, they expect to receive the correct order.

This is even more important now that shipping has become so expensive. According to the United Nations, container freight costs rose five times during the pandemic. While freight has stabilized some, the freight index is still roughly $400 more per container than it was in 2018.

In order to meet customer expectations without going broke, you’ll have to optimize your operations. Shipping fees cover transportation, but what about the cost of packaging items so they don’t break in transit? Or the cost of safely storing and maintaining inventory in your warehouses?

That’s where handling fees come in. In this article, we’ll break down handling fees, show you how to calculate them, and explain why they’re necessary.

What is a handling fee?

A handling fee is an amount you charge a customer in addition to the order subtotal and the shipping fees. These fees cover fulfillment expenses such as:

• Warehouse storage: While this is a fixed cost, you can help cover some of your storage expenses with your handling fees. After all, it costs money to securely hold your inventory and make sure there is no quality deterioration.
• Packaging: This includes boxes, tape, and protective material. It also includes other minor details you may add to make the brand stand out, such as branded tissue paper, gift wrap, and even stickers.
• Labor: The time it takes for your warehouse team to fulfill an order.

Helpful tip: Handling fees are charged once per order, not per each product in the order.

Handling charges may differ depending on whether deliveries are domestic or international.

This is because international orders might have additional expenses such as insurance or extra packaging to preserve the products through a longer journey. USPS provides a good breakdown of how shipping internationally works, from packaging requirements for different countries to the packing sizes accepted, and what items can be shipped.

How to calculate handling fees

Calculating the handling fee is a pretty straightforward process. You just need a few numbers from your warehouse team and some basic math to figure it out.

[(Time in minutes/60) * Hourly labor rate] + Packaging materials = Handling fee

If you choose to recoup your warehouse storage as part of handling fees, set a rate per order and add that to the total in the formula above.

Handling fee calculation example

Let’s look at an example calculation and then break down the details of how it works.  For this example, let’s assume the following numbers.

• 15 minutes to prepare and package the order.
• $15 hourly rate for your warehouse worker.
• $2 in packaging material costs.
• $2 per order warehouse storage recoup (optional).

Your calculation for the handling fee would be:

[(15/60) * $15] + $2

[.25 * $15] + $2

$3.75 + $2

$5.75 handling fee

Optional warehouse storage recoup:

$5.75 + $2

$7.75 handling fee, including the storage recoup.

Step 1: Determine the average number of minutes it takes to prepare each item for shipping

First, you need to determine the time it takes for your employees to prepare a package for shipping. This includes the time needed to pick up the ordered items from the warehouse shelves and package them.

The more efficiently your warehouse team works, the lower this number will be. Your warehouse layout, inventory management system, number of items in the order, type of item handling required, and the type of packaging needed will also impact how much time it takes to pick and prepare an order for shipment.

Step 2: Divide the result by 60

Once you have determined the time to pull and pack the order, you need to divide that by 60 to convert the time from minutes to hours.

For our example, divide 15 minutes by 60 to get .25 hours.

Step 3: Multiply the result by the employee’s hourly rate

Next, we need to figure out how much that time costs. If you have one employee picking and packaging an order from start to finish, you can use that employee’s hourly rate. However, if orders are worked on by multiple people, you can take an average hourly rate for your warehouse team. For our example, we’re using $15 as the hourly labor cost.

Multiply that hourly rate by the time in hours to get your labor costs for picking and packing the order. In our example, that is $15 * .25 for a total of $3.75 in labor costs.

Step 4: Add packaging costs

Labor cost isn’t the only cost that needs to be considered. It’s a good idea to recoup your packaging materials cost as well. For small items, it might only be a small shipping box, bubble wrap, and some tape, but for larger items, you might need wood pallets, custom boxes, and foam padding.

For our example, the items are small and use simple materials, so we used $2 in packaging material. Add that cost to the labor cost to get a total handling fee. In our example, that’s $3.75 + $2 for a total handling fee of $5.75. If you choose to add a fee to recoup some storage costs, add that number ($2 in our example) to the $5.75 for a total of $7.75.

If your handling fees are high compared to competitors or you have had customer complaints, you may need to find ways to reduce your costs. For example, streamlining your processes or finding lower-cost suppliers of shipping materials.

Shipping costs

Shipping costs go hand in hand with your handling costs but are usually charged separately from handling fees. Shipping costs include the costs involved in moving the item rather than preparing it for shipping. Postage, fuel charges, and surcharges make up shipping costs.

The final cost of shipping depends on many factors, including the package weight, size, destination, and any special handling required. If you outsource your shipping to a carrier like FedEx, UPS, or USPS, they may charge additional fees for pickups and other services as well. Be sure to compare prices frequently to find the best shipping provider for your needs.

Setting shipping and handling fees

When setting prices that will leave room for profit, remember that high shipping and handling fees may be enough to convince customers to abandon their shopping carts. A 2022 Statista survey found high shipping costs were the leading reason shoppers abandoned their shopping carts, with 48% of people leaving after seeing the shipping price.

To avoid cart abandonment at checkout, some sellers roll their shipping and handling fees into the overall item price instead of adding it as a separate line item on the invoice. However, including these costs in the item price could make your products appear more expensive than your competitors.

If you list shipping and handling as a line item, make sure it’s clearly labeled on the invoice. Cin7 inventory management software offers various integrations that allow you to customize your invoices easily and add or remove shipping and handling fees as needed.

Benefits of charging handling fees

Charging for handling fees can be a good business move. There are a number of benefits you may see when implementing these in your company.

Fulfillment cost recovery

If you aren’t covering all of your costs, your business won’t be able to turn a profit. This includes the fulfillment costs that your inventory incurs.

If your handling fees don’t cover all of your fulfillment costs, you might need to compromise on quality by using cheaper packaging or making other concessions in quality. In the long run, this will hurt your business’ reputation.

At the very least, you need to raise prices enough to cover your expenses, or you can look for ways to cut costs, like shopping around for a new shipping supplies provider.

Of course, if you don’t charge a separate handling fee, you can always add in these costs to the final price of your products. While this is simpler, it doesn’t explain your costs as clearly as an itemized report would. Most companies find that adding the handling fee as a separate line item from the subtotal helps simplify pricing for single items.

Upsell and cross-sell opportunities

Handling fees apply to the entire order rather than individual items. This opens up opportunities to sell more and increase your overall profit margin.

Customers love free shipping — it can even be a deal breaker — but one that can make you money too. According to Shopify’s data, customers spend an average of $22 more when free shipping is offered.

You can set up a minimum order amount to make orders eligible for free shipping and handling. This way, you can encourage customers to spend a bit more to qualify.

Say a customer has a cart worth $30, but an order is only eligible for free shipping and handling once it totals $40 or more. Customers are more likely to spend an additional $10 to get that free shipping than they are to pay a shipping fee to have their $30 order shipped.

To encourage customers to spend more, use their order history to recommend specific products they might be interested in purchasing. They might buy something else and spend more to get free shipping, making the customer happy with perceived savings and raising your profit margin.

Final Thoughts: How to calculate handling fees on your orders

After calculating the shipping and handling fee, you can set up your invoice template with one of the integrations offered by Cin7 inventory management software, such as QuickBooks Online, which will automatically add the fee to each online sale.

Cin7 has several other features that streamline your order receiving and fulfillment process, such as printing pick lists or batch tracking. Cin7 will help you set your business for multichannel sales and long-term success.

Are you interested in trying out Cin7 for your business? Book a free demo with our experts now.

Frequently asked questions

Who pays the handling fees?

The handling fee can be paid for either by the consumer or the company. Keep in mind, however, that by paying the handling fee yourself, you’ll reduce your profit margin in the process.

Is the handling fee the same as the delivery fee?

No! The delivery fee covers the costs associated with getting the item to the customer. Things like freight or transportation and often mail are lumped in this fee as well. The handling fee, on the other hand, covers the wages and any materials used to ship the item.

Should I charge a handling fee for my online store?

In general, yes. Handling fees help you ensure you’re pricing your items at a price point that’s sustainable. Not charging a handling fee means you risk charging too little and not being able to cover the costs of your business.

In a way, customers are like golden geese: The fact that they buy your goods is the reason you have a business and are making profits, but they’re likely to fly away if you don’t give them a good shopping experience.

For a customer, this good buying experience comes down to finding the products they want easily, getting them for a good price, and, for online sales, getting them delivered quickly. That last part is the final stage of the whole order fulfillment process, the behind-the-scene activity that takes place between an online order being placed and the products being sent out. To get products to the customer as quickly as possible, order fulfillment has to be working at its best.

The ecommerce order fulfillment process explained

The order fulfillment process starts in the warehouse when goods are received from vendors, moves on to these items being sorted and stored, and goes through to them being picked for an order, packed, labeled, and sent out.

While this all seems simple enough, the vast number of items stored and the enormous number of orders to be filled, often coming in from several different sites, create challenges. There are five main challenges to overcome.

Ecommerce order fulfillment’s challenges

1. Managing inventory

If you don’t have a product a customer has ordered in stock, you may have to refund the customer’s money, and you could end up looking unreliable. In other words, you’ll lose the sale, the customer, and your reputation.

An inventory management system (IMS) is the best way to take care of these issues. A software that does all the hard work for you, an IMS gives you minute-by-minute information on your inventory, letting you know where every item is at any point of the fulfillment process and the number of items there are in the system. Plus, it does all this in real time.

To make things even easier, barcode scanners that record every item in your inventory are available. This significantly reduces the chances of stockouts and overstocking.

Sometimes, despite all the precautions you take, things happen and you run out of items that have been ordered. Maybe your supplier had a problem, or the goods are tied up in an overseas shipment. For cases like these, there’s backordering. It means you sell products even when they aren’t in stock and fulfill them as soon as you have them again. Cin7 handles this by sending timely alerts, so that you can create a backorder and avoid letting your customers down.

2. Monitoring orders from several online channels

Perhaps you have heard the expression: “Don’t put all your eggs in one basket.” In general, the expression means to diversify. That way if something happens to one “basket” to destroy whatever is in it, you still have something — eggs, money, inventory — in another basket. Applied to ecommerce, it makes good business sense to sell your items on more than one marketplace and use other online possibilities like social media, so you open your business up to more customers, get more sales, and become a recognizable name.

However, while it’s easy to set these channels up, keeping all the orders that come through them in their separate silos, monitoring them, and turning them around quickly is a challenge.  An ecommerce order management system, like Cin7, is essential in this situation. The beauty of this software is that it puts all the channels you sell through onto a single platform. That’s how you’ll never overlook a sale, or deliver one through the wrong site. To simplify the process even more, this automated system lets you process items in bulk. Order management software cuts back several administrative tasks, streamlining your fulfillment as it saves you time and money.

3. Picking the right items from the warehouse

Knowing exactly where everything in a warehouse is stored and being able to map the best route to collect items for orders in the fastest way is important. Your employees shouldn’t have to search through every bin in every aisle to find each item. Thus, even before items arrive in the warehouse, decisions about where to place them have to be worked out, and those decisions have to be recorded so everyone is aware of them.

With this organization in place, items for orders can easily be found. They’re pulled from their storage spots by “pickers,” who work from “picklists,” which are lists of items for orders organized so that actual collecting takes the shortest route around the warehouse.

Creating picklists by hand can result in problems. It’s easy to leave an item off or get an item wrong, and if the warehouse is large and stores a lot of things, working out the best picking route to take is almost impossible. The easy answer to these pain points is to have a modern warehouse management system (WMS) installed. These automated systems generate flawless picklists, tell the picker exactly where each item is located, and list them in the quickest picking order. With Cin7, you can also create picklists from multiple orders in bulk.

As a complement to everything, and as a final way to make sure all the correct items have been collected, barcode scanners can do a final verification after the picking has been done.

4. Coping with returns

It’s your responsibility as a seller to make sure your buyers get exactly what they order, in good order, in good time. Your customers are trusting that you’ll deliver your goods as promised.

But however hard you try, and no matter how good an automated system you put in place to ensure accuracy, things can go wrong. An item may end up not being what the customer imagined, or they may have just made a mistake in selecting it. For cases like this, part of the trust you build with your buyers is giving them an easy way to return items and get their money back.

The best way to do this is with returns management. Cin7 software can process returns quickly and easily. It lets you approve the return, keeps customers in the loop by sharing status updates via phone and email, and arranges refund payments. For the returned items, you can decide which warehouse they should go back to, and log them back in the system if they’re in a good enough condition to be sold again.

5. Shipping orders quickly

In a world where giants like Amazon offer one-day shipping, the bar for delivery time has been raised for everyone. To keep up, you may want to contract with fulfillment services providers that offer an expedited service at affordable costs.

Cin7 offers third-party logistics that you should find helpful. Nearly 200 3PLs are integrated into the software, and more 3PLs are added monthly. This enables you to leverage local 3PL services to prevent slow delivery and guarantee that your clients always receive what they purchased.

To speed up the time between an order being placed online and the goods arriving at the customer’s address, getting the items sorted and packed needs to be as quick as possible. If you promise a three-day delivery and your warehouse operations take two days to prepare an order, for instance, your window to physically transport it will only be one day. With automated order routing, online orders can now go straight to your 3PL warehouses, ensuring that orders are shipped from the nearest location.

Making order fulfillment easy with Cin7

Cin7 can help you overcome or prevent altogether most of the order fulfillment pain points we’ve discussed in this blog. As a tool, it will give you the kind of accurate, real-time check on your inventory that will make sure you never run out of an item again or end up with too many of something you can’t sell. Cin7 can automate your purchase orders as well.

Our software can also present information from several sales platforms on a single dashboard. No matter how many online marketplaces or sites you advertise your products on, you’ll be able to take care of every sale from this one place. This centralized system also means that any changes you have to make on all these sales platforms, like updating product listings or prices, can also be taken care of from this single area.

When it comes to managing warehouses, Cin7 is there for you as well. On top of monitoring stock and making sure there’s enough of it on hand at all times, it will produce picklists and register barcode scanning to double check that the right items are being picked. Since Cin7 automatically generates packaging slips, it also makes that part of the process easy.

If you like what you’ve read about Cin7, you can book a demo with our experts today.

The pandemic era and a massive shift to digital experiences have made the prospect of launching an ecommerce business very tempting. However, starting and sustaining an ecommerce business is easier said than done. You need the right business idea, suitable ecommerce solutions, a well-planned strategy, and more.

Still, if you’re thinking about starting an ecommerce business, you’ve come to the right place. This blog post will provide you with a step-by-step guide to start and run your online business. We’ll go through idea generation, technology options, online store management, maintenance, and more.

Here’s what you need to know to start and run your online business.

How profitable is ecommerce?

Trends show ecommerce business is becoming increasingly profitable. For established businesses and aspiring entrepreneurs, ecommerce is a profitable model as both the sole focus of a business and an additional selling channel.

Data shows that in three months, a new ecommerce store can make more than $63,000 in monthly revenue. In just one year, a successful ecommerce store can average $127,000 in monthly revenue. After three years, a successful ecommerce store can earn an average monthly revenue of $352,000, which is an increase of about 175% between years one and three. On average, your successful ecommerce company can make as much as $39,000 of revenue in the first month in business, and some jump up to $6.5 million in total after three years.

A step-by-step guide to starting your ecommerce business

The ecommerce business journey begins well before you launch your business. A successful ecommerce business demands tremendous research early — whether you’re starting an online store or doing an ecommerce integration.

Thanks in large part to the pandemic, there’s more competition than ever. To succeed in this market, you need to think strategically and act methodically.

Step #1: Research your business model

An online business is a big investment, and you need to take it seriously. Your ecommerce business isn’t a one-size-fits-all proposition— you must have a unique online business model. You need to map out marketing, manage inventory, coordinate shipping, and more. Because of all of these factors, research is extremely important. You should make sure to talk to an ecommerce consultant to ensure you have a viable plan. Look for an ecommerce development company as soon as you have a rough plan.

Step #2: Validate your target market

It’s time to identify your target market and the type of products you want to sell. Before finalizing your offerings, it’s essential to understand buyer personas. Begin with a few, well-defined product ideas. You can always expand gradually from there. Before you invest in products, you must evaluate them and think about leveraging low-cost methods like drop-shipping.

Step #3: Know your competition

Competitor analysis is crucial in any business. When you analyze your competition, try to understand them categorically. The presence of competition validates the niche you have selected.

For example, you must know all direct competitors and top players in the market. You will learn a lot from your competitors. Hence, analyze them and observe them closely. Take note of things you like and dislike about them. It’s also important to understand the kind of ecommerce platforms they use. For instance, if a competitor uses Magento ecommerce development, you should understand all the pros and cons that went into that decision.

Step #4: Create a brand name and register your business

It’s crucial to develop a brand name and logo that reflects your business model. In a world dominated by ruthless competition and brand identities, it’s impossible to succeed without a brand name. Make sure you’re sending the right message to your target audience through your brand image.

Register your business name and company name to get tax benefits, legal protection, and more. Make sure to apply for a business license, permits, and other certifications to operate without legal obstacles.

Step #5: Build your online store

The kind of online store you build determines a lot about your long-term strategy. If you want to build a customized online store, you need to make sure to choose the right ecommerce development company.

There’s a  large number of ecommerce solutions out there, and it can be overwhelming. The ecommerce platform you pick will impact your store’s performance and profit. It’s important to make an informed decision based on both comparison and research. Choose an ecommerce platform that suits your business needs. For example, smaller companies might find that Shopify solutions are the perfect selection.

For fully customized B2C and B2B ecommerce, we recommend Magento, which is popular among medium to large companies. While building your online store, you should think about mobile-optimized design, SEO, and secure payment gateways.

Step #6: Showcase your products

It’s important to display your products properly and professionally. You need to include well-written product descriptions and visually captivating images to entice your customers. Product pages should be custom-built and create an immersive experience for shoppers.  Reviews and testimonials are essential elements of your product pages, and you need to be strategic about displaying prices, too.

Step #7: Attract customers with great UX and marketing

Competition is more intense than ever, so you need to stand out and attract the right audience to your store. SEO plays a vital role in attracting the customers you want. The most successful ecommerce operators meticulously manage their brand and digital marketing strategies.

You can use paid marketing like pay-per-click or free marketing like content curation. Social media marketing is also huge for online store visibility. In order to be successful, you need to develop a loyal base of customers. Make sure to take advantage of loyalty programs, gift cards, coupons, and more. It’s important to keep your customers as engaged and loyal as possible.

How to launch a successful ecommerce business

The ecommerce economy is poised for significant growth in the coming years, but you can only expect to see results if you approach your launch the right way. The following tips are critical for a successful ecommerce launch.

Don’t rush the launch

One of the biggest mistakes ecommerce entrepreneurs make is rushing or forcing the launch of a website. You only get one shot to launch your website, so you shouldn’t mess it up.

It’s okay to purchase your domain name and throw up some sort of “coming soon” page, but you should avoid the big reveal until you lay some substantial groundwork (content marketing, SEO, social media, paid advertising, etc.).

Focus on your customers

Many ecommerce businesses fail because potential customers can’t touch, smell, feel, and see (firsthand) products before making a decision. Obviously, there’s no perfect solution to solve this problem. But you need to compensate for the lack of real-life experience in other ways.

Make sure you price your products well, offer free shipping, and make the checkout process as simple as possible. You need to make customers comfortable online if you expect to make sales.

Test everything

Invest in testing and analytics before, during, and after launching your ecommerce business. Think like a potential customer and figure out what works, what doesn’t, and the “why” behind those answers.

Leverage social media

An ecommerce entrepreneur who completely outsources social media is going to have trouble succeeding in ecommerce. Social media is the heartbeat of the business. It offers you an uninterrupted glance into the lives of your customers. While it’s okay to have a social media manager, it’s pertinent that you are involved with it, too.

Use testimonials and product reviews

Testimonials, product reviews, follow buttons, and social login options are huge in the world we live in. You need to leverage your customers, as well as their positive experiences, to make other customers feel comfortable enough to shop at your ecommerce store.

Make sure your mobile experience is seamless

Bill Siwicki of Goldman Sachs says, “Tablets will play an important role, as worldwide consumer spending via mobile jumped from $204 billion in 2014 to $626 billion in 2018.”

Those are huge numbers. And when you factor in the growth of the post-pandemic era, mobile is becoming even more popular. Simply put, you need to make sure that you are thinking about mobile shopping in every single decision you make.

Leverage SEO

As the ecommerce economy grows, more and more businesses will enter an increasingly crowded space. That means it will be increasingly important to stay on top of SEO and stand out from your competition. Connecting with a skilled SEO company can pay huge dividends in the long run.

Collect as much customer information as possible

Unless you plan to launch a single site and step away, you must collect as much customer information as possible. They will help with customer satisfaction, repeat business, and even future launches. Start building your customer database today.

Be flexible and adaptable

Never stop evolving. Technology, customer tastes, and trends all change. You must do the same if you want to succeed in such a fast-moving market.

Be creative with your brand

As you visualize your brand, try to be creative as possible and think out of the box. Mood boards, for example, are a fun and creative exercise that can help you visualize your brand’s overall direction.

Creativity helps keep you inspired and on track. Think about your brand’s fonts, images, and colors. What does it say about your brand? What will your customers think? It’s important to work with a designer to create a professional logo and other branding elements to use on the website and packaging.

If you’re consistent and focused, you will succeed

A lot goes into starting an online business, The process may be intimidating, but you can make it happen. Work through it step by step, and never worry about making things perfect right out of the gate. Most importantly, you need to learn by doing.

Success requires a lot of time, patience, and research. However, it’s also very important to have help along the way. Cin7’s inventory management software will make your ecommerce brand’s launch a lot easier and allow you to leverage useful integrations. Ultimately, we can save you a lot of time, money, and headaches. If you have any questions, or are curious about how we can help, book your demo today.

If you’re running a fashion store, you need to keep up with the latest product and service trends in the market. Zara has been one of the most successful (and most copied) brands in the fashion industry, and companies can find both inspiration and business ideas by taking a closer look at how they operate. 

Zara is a leading Spanish fashion retail brand owned by the distribution group Inditex. Founded in 1975, Zara works in textile design, manufacturing, and distribution. With over 1,700 stores across 86 countries, Zara’s profitability is still among the highest in the industry.

So, what makes Zara so successful? What operational strategies do they use? And finally, what can other fashion retailers learn from Zara? The answers to these questions can help you as you make your way towards retail success. 

Zara capitalizes on fashion trends

For Zara, its competitive advantage is its supply chain. Zara designs fashionable products inspired by trade fairs, catwalks, magazines, and more. Their designs are unique, and they are able to meet the demands of fashion-centric customers from all age groups. Whenever a new style is seen in the market, the talented designers at Zara can move quickly and capitalize while trends are at their peak. 

This flexibility means that Zara is associated with new trends in the industry, and that recognition leads to higher demand. So, how do they move so quickly? It’s obvious that Zara’s processes are very efficient. They surely have a great inventory management system that helps them automate and streamline their processes. 

Zara has a clear, defined, and consistent system

Zara designs thousands of products every year, and they deliver new products to their stores twice a week. They have a precise inventory management tool that makes it easy for them to determine which products they have in stock, how many of those products are available, and which sizes need to be delivered to what stores. 

Looking at Zara, it’s clear that having an inventory optimization model in place is essential. Zara is able to make sure that each store receives only the products they need, and no more. This way, Zara is able to stay efficient and avoid wasteful over-stocking.

Zara can go from idea to shipped product in 15 days

Zara’s stores place two orders per week, and they do it on a scheduled date and time. The shipping carriers are scheduled to leave and deliver shipments at specific times. This level of attention to detail and organization allows Zara’s staff to have clear expectations and processes.

With an organized logistic system in place, Zara also has the ability to go from idea generation, to design, and finally stocked in stores in only 15 days. The industry standard, on the other hand, is 6 months.

Zara’s distribution process is extremely efficient, too.They’re able to deliver products to their European stores within a day, and to their American and Asian outlets in 2 days or less.

Zara’s supply management sets it up for success

Zara’s flexibility, efficiency, and organization make it an outstanding organization, and a great model for fashion retailers around the world. Their cross-functional operations strategy, efficient supply management, and organized distribution methods result in well-managed inventories, lower prices, higher profits, and fantastic brand value.

Want to get organized like Zara? Request a demo here and speak to a specialist who can discuss how Cin7 increases operational efficiency and overall productivity for all kinds of retailers and wholesalers.  

Ecommerce, also called electronic commerce or internet commerce, is a business model that lets you buy and sell goods and services over the Internet. So, ecommerce software allows your online store to operate. The transaction of money (funds) is also a part of ecommerce.

ERP systems are a type of software used to manage enterprise data. ERP systems help different organizations in dealing with various departments of an enterprise. It takes care of departments like inventory management, customer order management, production planning, shipping, and accounting.

ERP systems combine all databases across the company into a single database and can be accessed by all employees of the enterprise. It helps you in the automation of the tasks involved to perform a business process.

We will learn about the fundamental differences between the two systems in this article to help you make a better choice.

What is an ERP system?

Running a business is all about juggling things from finance to operations, and sales to marketing. ERP systems aim to consolidate back-office processes into one system. They help you track, share and store information across various departments, and ensure that all the employees rely on the same data.

Popular ERPs like NetSuite, Oracle, SAP, and Microsoft Dynamics are traditional business management systems with accounting at the core. To keep up with the changing tide of retail, there are many integrations for ecommerce solutions like:

Warehouse Management Systems (WMS)

Order Management Systems (OMS)

Inventory Management Systems (IMS)

Supply Chain Management (SCM)

Product Information Management (PIM)

Product Lifecycle Management (PLM)

Customer Relationship Management (CRM)

Business Intelligence (BI)

Customer Experience Management (CX)

Human Resources Management (HRM)

Shopping carts like Shopify

Challenges of ERPs in ecommerce

ERP monoliths are not tailored to a specific industry or line of business, so the quality of ecommerce integrations often fall short of expectations. ERPs were built based on older technology and have not kept up with the ever-changing marketplace requirements or the level of innovation that ecommerce software regularly delivers.

Most ERPs are built for back-office purposes. They are not meant for customer-facing sites like a web store that require real-time transactions and analysis.

By hinging your whole multi-channel business on an inflexible system like this, you risk non-compliance, listing errors, and other mistakes. It could cost you the right to sell on marketplaces like Amazon.

ERPs require major financial and time investments. Apart from annual subscription fees, you may face up-front and support costs running into hundreds of thousands of dollars. Plus, it may take years to implement an ERP system fully and that could lead to disruptive changes to your business.

What is ecommerce software?

Ecommerce software is the system that allows your online store to operate. Ecommerce software may include business tools like inventory management, accounting, and email marketing.

Put simply, ecommerce software lets you list products for sale and accept payments online. But, most online businesses usually need more than the bare minimum, and ecommerce software adds other business management tools.

The best ecommerce software has all the basic tools you need to get started, with an ecosystem of upgraded tools and platforms that you can use as your business grows.

Types of ecommerce software

There are mainly three types of ecommerce software:

1# Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS)

Both of the above offer ecommerce solutions via the Internet. SaaS provides solutions through cloud-based software, and if adding hardware, it becomes a PaaS. These are both straightforward options for those who are not tech-savvy.

Additional design and custom features may require some developer skills. But, patches, updates, and new features are dealt with automatically.

These services charge on a monthly basis and may include transaction fees, but provide full support when required.

2# On-premise platforms

These solutions are hosted locally on servers by the retailer and managed by their IT department. On-site professionals are required to fix any problems as they occur, add new features, and do manual updates.

If you have your own internal IT team, then on-premise may be an excellent option for you. It allows firms to gain more control over their site and create their custom storefront solution.

ERP vs ecommerce software

Let’s compare ERP systems with inventory management software (an ecommerce software) as an example to get a better idea.

While researching inventory management software online, you may end up on a site that aggregates a list of providers like Capterra or GetApp that helps you compare features, benefits, and prices.

So, you can usually group your options into two main categories:

All-in-one platforms such as a supply chain management platform or an ERP

Dedicated warehouse and inventory management software

An all-in-one solution may sound enticing as it offers “full stock” in one place and can manage multiple systems and processes using one software solution. A dedicated inventory management software specializes in specific sales and accounting functions and integrates with a wide range of other software.

So, the choice depends on either using software that does everything but doesn’t specialize in a specific area or using a stack of specialized software with integrations to one another.

Conclusion

Businesses often choose to use an all-in-one or ERP as it offers the ability to manage all administrative tasks in one place. But, as all-in-ones are so focused on managing so many things at once, they often lack the level of granularity required to fully handle inventory and warehouse processes like ecommerce software can.

If the idea of a cloud-based SaaS solution for inventory and order management is one that appeals to you over an ERP, schedule a demo of Cin7 here and we’ll show you how it can be your centralized resource for managing sales, inventory, accounting, warehousing and fulfillment.

In today’s market, the supply and demand environment is more volatile than ever before. To make sure that you are not paying more for your stock than necessary, you will have to negotiate with suppliers more effectively.

It is said that the more you negotiate, the better the outcome for your balance sheet – but this suggestion should be taken with a grain of salt. After all, anyone can negotiate, but to successfully do it, it should be understood that the concept of supply and demand is the foundation for any negotiation. Failing to keep this in mind may end up straining or fracturing your relationships with suppliers, diminishing your reputation within the ecommerce community and placing your business in peril. 

So how should you negotiate with suppliers for your ecommerce business? There are myriad negotiation hacks that will help you secure the deals you seek and build your reputation as a shrewd business owner. The experts at Cin7 have created a list of five negotiating tactics to help you get better deals with a win-win outcome. Let’s get started!

#1 Research before negotiating with suppliers

Before you begin negotiations with a potential supplier, you must first conduct comprehensive research. Since they are selling you the product(s), they will have a thorough understanding of its market costs, demand, importance in the product value chain, and they know about your competitors. You should have a fair understanding of these factors too so that you bring credibility to the negotiating table and have a productive discussion. 

Doing the due diligence in researching a supplier, as well as their competition, will help you get an idea of market prices while keeping the sales goal of the supplier in mind. Based on your research, your proposal could involve promising long-term business, a shorter credit cycle, or changing the frequency of payments. Therefore, it is important to do your homework in order to proffer potential suppliers a fair, tangible, and mutual benefit in doing business with you.

Helpful Hint: As you research, be sure to note industry-specific terminology. Using it will help enhance your credibility and may be the difference in reducing the chance of suppliers quoting inflated prices.

#2 Calculate your purchasing needs 

Once you have a better understanding of the supplier’s business and its needs, your next step is to make sure your proposal fits both their needs and yours. 

To construct that proposal, determine the quantity of what you want to purchase, the order frequency, and the total cost of the purchases you would make during a given year. Having this information handy will provide you with more negotiation leverage and give the supplier a better idea as to how much potential you have as a business opportunity for them. The more your proposal meets the needs of the supplier, the more likely they are to offer you the discounts you seek.

Helpful Hint: Ask for bulk discounts. If you have a large order, you are in a great position to negotiate prices. Request to see their discount grids, as most suppliers use them regularly to manage sales. Be sure to refer to data gathered from your  inventory management software when finalizing your tentative order size. 

#3 Offer partial advance payments and deferred discounts

The next tip is to offer a partial or full advance for the first order. This is one of the best ways to establish trust and help the supplier decide to start working with you. You can always switch to their standard credit cycle down the line.

This also presents an opportunity to demonstrate a commitment to a mutually beneficial business arrangement. Specifically, when offering an advance payment, remember to ask for a discount on a total purchase volume after achieving a milestone, i.e., meeting a certain sales threshold. This is considered a deferred discounting mechanism, and it helps suppliers ensure that they are going to reach their sales goals before activating your agreed-upon discount. 

#4 Be honest and transparent

There are all sorts of reasons to seek a better price for products. For example, you might urgently need a product at a lower price to keep up with the competition or to have enough profit margin to meet your own sales goals. You might be a small business owner who needs a discount to remain profitable or a combination of any of these scenarios and yet not have much to offer in terms of value to the supplier. One thing you can offer, however, is full disclosure of your status. This is a gesture of good faith and will lay the foundation for a solid professional relationship. 

It is imperative that you do not use any deceitful tactics like negotiating under false pretenses or making hollow promises to get discounts from your potential suppliers. A business is only as good as the word of those who represent it, so make sure you are earnest in your negotiations. 

Helpful Hint: Sometimes a negotiation results in a stalemate. Don’t shy away from pausing a negotiation in the event of a failure to reach an agreement. Keep in mind that the number of sellers for the items you need may be limited based on your purchasing capacity and expected price range.

#5 Once an agreement is reached, get it in writing

One of the most important qualities of a good negotiator is to close the deal in writing. All too many businesspeople make the mistake of not signing agreements after they have completed the negotiation simply due to procrastination or lack of operational knowhow. This can lead to a situation where the other party forgets the details of your conversation, and hence, you may have difficulty reminding them. Also, if the decision-makers forget about certain details that you previously negotiated, you may miss out on the deal you thought you had secured. Therefore, it is in your best interest to finalize and ink the deal as quickly as possible.

Helpful Hint: You may use document signing tools available online to expedite the process and then email a copy of the signed agreement to the supplier. Place your first order reflecting the explicitly stated terms and conditions. 

With an inventory and order management system like Cin7, you have the option of connecting to your suppliers via a custom EDI connection streamlining future orders by placing them electronically.

In summary

Negotiating is a tough skill to master in any industry, but as an ecommerce business owner, you will put that skill into practice quite often, thanks to the shortening life cycles of various SKUs and sudden surges in demand for products. While you will naturally get better at negotiating over time, it is crucial that you apply the five tips to be a successful deal broker. Keep your eyes open for discount opportunities, negotiate your way into the best deals with your suppliers, and watch your ecommerce business thrive. 

Enter into supplier negotiations armed with accurate sales data gathered from a robust inventory and order management solution like Cin7 that updates in real time with your accounting software. Request a Cin7 demo today.

The last two years have been very profitable for the online selling industry. The pandemic boosted ecommerce and made online shopping an integral part of all our lives. Most businesses finally made their transition online, and a lot of new online businesses were created, too. In fact, US ecommerce sales passed the $1 trillion mark for the first time in 2021. If you’re an entrepreneur, now’s a fantastic time to start an ecommerce store.

This guide will walk you through building your ecommerce business without paying a penny! Let’s jump right in.

Step #1 – Choose an ecommerce website platform

The first thing you should know is that ecommerce websites are significantly different from typical websites. That means you’ll need to put some extra effort into the setup process and opt for a specialized ecommerce website platform. If you already have a WordPress website, we recommend that you install the WooCommerce plugin to make a smooth, seamless transition.

Setting up your WooCommerce-based online store is pretty simple.  You can easily find a step-by-step tutorial on YouTube that will walk you through the entire process. WooCommerce is free to get started and you can run your business for a long time without needing to pay for any plugins or custom development. In just a few hours, you’ll be able to go live.

If you don’t want to use a WordPress-based website, you can go with a dedicated ecommerce website builder like Shopify, which provides you with all the necessary tools you need to build a professional online store. Shopify comes with a 90-day free trial — but you may have to shell out some money for third-party app integrations. Like WordPress, building a Shopify store is fairly simple and you can achieve great results without paying a developer.

Step #2 – Choose a social media tool to market your business

Next, you’ll need to get yourself a dedicated social media management tool for content distribution. A social media presence will help you build your audience and brand, and most platforms are providing new and exciting ways to monetize the attention you get there. A proper social media tool will allow you to save time and automate posting across different social media channels.

To get started, we recommend Hootsuite — which allows you to manage up to 10 channels for free. Hootsuite gives you access to their main features and is the perfect tool for new businesses. It’s easy to use and has tons of free resources — including troubleshooting — in case you face any problems.

While it can be a good practice to customize your marketing communications for each social media platform, there’s no need to worry about that in the beginning of your ecommerce journey.

Step #3 – Select an email marketing platform for high ROI

Email marketing is extremely important for ecommerce sellers. From cart abandonment emails to reactivation and retargeting campaigns, it’s essential to market directly to potential customers. In fact, email marketing delivers an impressive ROI of $42 for every dollar spent! That ROI is much better than any social media or paid marketing method. So, no matter what product you want to sell, or what your personal opinion is of email marketing, the fact is that it’s extremely important to collect as many email addresses as you can.

One great strategy for growing your email list involves offering a freebie or a discount in exchange for an email address. You can also choose to run referral campaigns, which we’ll discuss later in the article. For your email marketing needs, we recommend MailChimp. Not only is it the market leader, but it also has a bunch of free HTML email templates to choose from.

Mailchimp is a “freemium tool” – meaning you won’t have to pay a penny before crossing 2,000 contacts or 10,000 sends per month. It provides great marketing capabilities, an excellent drag-and-drop responsive email builder, and it integrates with your website, too.

Step #4 – Find a CRM tool to manage customer interactions

As your business grows, the challenge of keeping track of all your customers will become more complex. Disorganization will eventually lead to dissatisfied customers. Let’s face it: there’s no way for startup owners to check and respond to every social media comment, direct message, and email. On top of that, customers often reach out on multiple platforms, and keeping track of all the communication can be confusing. That’s exactly why you should be using a CRM tool to help you centralize your customer interactions.

HubSpot is a perfect place to start. It allows you to have a common dashboard to track conversations and automate future interactions. You can use HubSpot’s “free forever” plan to fuel your customer interactions with up to 1,000,000 contacts and no limit on data storage. Although many people find their pricing plans expensive, paying a premium in the future can be a great value add to your efforts. However, you can simply use the free version for now.

HubSpot also publishes a lot of courses on digital marketing and tutorials for getting the most out of the platform. Learning HubSpot is fairly straightforward, and we recommend that you brush up on the basics of your CRM to grow your business and knowledge base.

Step #5 – Get an accounting tool for your online store

Accounting can be a headache. But the worst thing you can do is ignore the need for accounting altogether. Accounting tools help you stay on top of your finances and in compliance, and it’s imperative to have one.

Xero is a great pick for ecommerce sellers. Xero offers you a 30-day free trial which is more than enough to test your ecommerce business idea — and it has very affordable prices if you do decide to continue. Integrating accounting software is a no-brainer for any business owner — so the sooner you take care of this, the better.

Step #6 – Use a payment gateway with a large user base

Now comes the best part: getting paid. You’ll need a payment gateway integration for accepting payments on your ecommerce site. There are more than 100 payment gateway providers, but we recommend you choose from those with the biggest reach in the industry: PayPal or Stripe.

Furthermore, you may also want to integrate your web store with Apple Pay and Amazon Pay, too. This will help increase your compatibility with popular payment methods. As a fledgling business, it’s important to make it as easy as possible for your hard-earned customers to pay you.

Step #7 – Add your referral and rewards software

Referrals and rewards are two of the best strategies you can implement to retain your most valuable customers. Not only do these tactics motivate your customers to return and spend more money — it also makes them feel special and valued.

The way it works is quite simple – existing customers invite new users to your store using referral links. When any new user signs up using an existing customer’s referral link, they both get rewarded. These rewards could be a discount promo code or a free voucher that they can redeem to buy an item of their choice from your store. Rewarding your customers for referrals is a great way to bring in new customers and get the existing ones to shop more frequently from your store.

There are plenty of good solutions available for both, but we would recommend starting with Referral Factory. It has a huge library of ready-to-use templates and comes with a trial period of 15 days. For rewards, you can try Marsello, which is one of the best-rated rewards software there is. Marsello also comes with a 30-day free trial, so you can try both without putting any money down.

You’ll be surprised at how much of a difference having these solutions make. They’ll also help your brand reputation and boost its value in your customers’ eyes.

Step #8 – Choose your inventory and order management software

The last, and perhaps most important step, is finding an inventory and order management software solution. If you want to be successful in ecommerce, this is absolutely essential. This software will automate your backend processes and allow you to seamlessly scale your business. When you manage inventory by hand, mistakes are almost inevitable. It’s important to avoid overordering, understocking, and losing track of inventory.

These are the kinds of mistakes that put your business in jeopardy. Frustrating customers ultimately costs you orders. On top of that, it’s important to keep customers updated on shipping status, order time, and operations. When done manually, all of these tasks add up to an unsustainable workload.

That’s where all-in-one solutions like Cin7 come in handy. You’ll be able to seamlessly manage your inventory, process your orders, facilitate your shipping, and more. The ability to automate workflows, integrate with hundreds of platforms, and access cutting-edge analytics is integral to your ecommerce store.

Step #9 – Get started!

Now it’s your turn to put what you’ve learned here to the test. You have most of the tools you’ll need to be successful in building your ecommerce store — with zero investment!

If you have any questions about the exciting journey you’re about to take, feel free to get in touch with the experts at Cin7. They’re more than happy to help you as you make your way towards ecommerce success.