ECommerce is a highly resource-intensive business. The time it takes to process each order – from sourcing the product, packaging them, shipping them, answering customer queries and handling returns is the same regardless of whether you are just starting out or handling millions in turnover.
This makes eCommerce harder to scale; especially for low-margin SKUs. Business owners may find it challenging to hire workers at the same rate as their growth. Fewer workers to handle growing volumes degrades customer experience and this can impact sustainable growth.
There are various strategies businesses can adopt to scale their operations without having to hire additional resources. We will briefly discuss them here in this article.
Dropshipping is an operational model where the retailer does not handle the warehousing and shipping of the product. That is handled by a third party (in most cases, the supplier). With eCommerce, dropshipping is a very popular strategy since it takes away the biggest pain point in the initial stages of your business – scaling up.
Dropshipping is often the preferred model among large ticket products (like washing machines, refrigerators, mattresses, etc.). However, when it comes to eCommerce, even small ticket items like t-shirts and coffee mugs are commonly dropshipped. This is because dropshipping allows the eCommerce business owner to focus entirely on marketing their business without worrying about operations.
The 80-20 Rule Of Customer Targeting
Like it is with every other aspect of a business, 20% of customers contribute over 80% to your business. Identifying who this 20% is can however be a challenge.
When you start marketing your business, you tend to reach several segments of the prospective buyers’ market. This is because it is difficult to establish the most profitable buyer right away. The money you spend on ads in these initial campaigns is like paying for data that you can then analyze to find the profitable markets.
Most business owners are wary of letting go of the remaining target groups. The idea here is that as long as you make money from a customer group, it is worth marketing to them. However, customer acquisition costs money and if there is one group that is cheaper to convert, they are exactly who you should be targeting for your product. Focusing on one group also lets you build a brand identity sooner and more efficiently.
Spending money on a group that does not convert equally well can be a drain on your budget, especially in the initial stages of your business. That is not to say that you have to stop reaching out to other customer groups altogether. Instead, it is a good idea to allocate a part of your budget for experimentation. There comes a point when the marginal utility by expanding reach to the same customer group is lower than targeting a different customer. When this happens, you may diversify your reach and target the next profitable customer segment.
Invest in scalable processes
It is worth finding out which of your processes can scale up and which of them cannot at every step of the eCommerce journey. For example, do you manually place the order to your supplier every time you are running low on stocks? Can this be automated so that an order is placed automatically at a pre-defined stock level?
Similarly, do you manually print the labels on every package that gets sent out? Is there a way to print these details directly on the package so that you can avoid this step? These are questions to ask for each of your processes. This is straightforward for some processes. For instance, there are tons of tools available to help you with marketing automation that can instantly take off several hours of manual effort from your end.
However, for the other examples mentioned above, you may either need to build custom solutions or find third-party apps and extensions that can do the job for you. In any case, finding these scalable process alternatives can dramatically alter your resource bandwidth and can help you scale up seamlessly.
Improve organizational productivity
One of the most sustainable ways to scale your operations is by improving productivity at the organizational level. We have already discussed how automation and outsourcing certain components of your business can improve productivity. In addition to this, you may also look at organizing your processes, improving communication efficiency and building better onboarding and training processes – such strategies can shave off a few seconds or minutes from every task which, in turn, can lead to cost savings in the order of several hundred hours of manual labor each year.
Running an eCommerce business involves a lot of trial and error. To know what works and what doesn’t requires an investment in pursuing tasks and processes that may not be efficient in the first place. But by being watchful of every step, you can eliminate inefficient processes and identify processes that can help you scale your business up effectively.