Having evaluated the e-commerce business and carried out as much on-site optimization as possible, it is time to consider the best way of managing the business on a day-to-day basis.
This is particularly important in the e-commerce space, where there are typically several moving parts involved with the operation of the business. It is therefore likely that some elements can be outsourced to improve its overall management.
In the online world, outsourcing is big business – the current market was estimated to be worth around $87.5bn in 2014.
Embedding an outsourced model has lots of benefits and will help to free up important and often-scarce management/owner time, which is better spent on the more strategic elements of running the business.
Outsourcing is only efficient if the right tasks are outsourced. Some factors to consider:
- Is the task specialized? If the task is particularly technical/specialized (e.g. a PPC campaign to hit a certain uplift in product sales) then it is important to look to those with experience.
- Does the task require capital equipment or upfront investment? If the task involves expensive equipment or capital outlay, it is likely that a company already exists that can provide the service at a lower cost to the business (g. product packaging).
- Task requirement is temporary? If an e-commerce store experiences trends at certain times of the year (g. Black Friday), there is limited value in hiring a full-time member of staff to cover such sporadic events. So, outsourcing some customer service at this time of year would be an efficient way of handling the additional capacity requirement.
- Low skill requirement, cheaper elsewhere? If the task involves a low level of skill, it may not require a full-time member of staff. For example, manual CRM data entry can be carried out elsewhere without the overhead costs of employment (desk space, healthcare, pension, etc.) Outsourcing would also offer greater flexibility for a growing business.
A few examples of e-commerce tasks that meet the above criteria and are most commonly outsourced include:
- Graphic Design – specialist, temporary
- Fulfilment – specialist, capital investment required
- Paid Advertising – specialist, ongoing
- Data Entry – low skill requirement, ongoing
- Store Design / Development – specialist, temporary
Whilst outsourcing offers lots of benefits, its likely that certain elements of the business should be kept in-house. Deciding what to insource will require an ability to distinguish business activities that are considered ‘core’ from those that are ‘not core’.
Activities that are revenue generating, customer facing or involve intellectual property of any kind should be considered ‘core’. If the tasks have a direct impact on the overall mission of the e-commerce business, then they are highly strategic and thus retained control is important.
For example, if the e-commerce store is built around premium customer service and customer service is a key element of the business/sales proposition, then the owner may choose to keep this in-house. In this example, customer service is integral to the business and could be considered a core competence. There is a risk that outsourcing this task could result in a lower quality output and less overall control.
A few examples of e-commerce tasks that are likely to be kept in-house:
- Product Development
- Customer Service
- Sales/New Business Development
Going for a Hybrid Model
Many e-commerce business owners end up somewhere in the middle – a blend of insourcing and outsourcing. Strategic elements of the business are kept in-house and non-critical customer support/website maintenance are outsourced at a relatively low-cost. Implementing a hybrid model provides a level of comfort in that core competencies remain in control of the business, but non-core activities are outsourced with flexibility.
It is important to note that establishing an outsourced or hybrid model requires trust as ultimately all tasks being outsourced are still important to the business. Buyers should remember that it takes time to find and build a good relationship with the right provider.
Practical Tips and Guidance for Outsourcing
Customer Facing Tasks (outsourced fulfilment/inventory management). If looking to outsource fulfilment, there are plenty of tips to help navigate the process. It is critical that you trust that the provider will uphold high levels of customer service. Take the time to research enough providers to know what is and is not expected and if they work with a similar set of products. Read customer feedback and ask for referrals too.
Some key questions to ask:
- How large/small are their clients (in terms of sales, on average) and where do you fit in their overall priority list?
- How do they report to their clients? Do their systems integrate with Shopify, salesforce or other popular platforms and CRMs?
- How have they handled clients that have experience sales growth in the past?
- How are returns handled?
- Do they handle customer service?
- How do they handle perishable items?
- What kinds of discounts are available at different thresholds? What pricing models are available?
- Do they offer international services?
Adhoc Tasks (e.g. website maintenance and content). Before committing to any contract (short or long-term) it is important to ensure that the individual is a good fit. Many of the websites that web owners use to find contractors provide reviews and testimonials, providing some reassurance. However, be proactive and ask them to complete a small task prior to committing them to a project and look for trust signals throughout. For more information, review this first-timer’s guide to hiring a VA.
It is important to conduct regular briefings, status reviews and as screen shares to review and monitor the working relationship. Keeping in regular contact with all outsourced partners will help to strengthen the relationship, paying dividends in the long term.
If self-management and outsourcing still seems too hands-on, there is always the option of working with a company to outsource e-commerce store management entirely. Companies offer services that include on-going maintenance, brand strategy as well as content management, otherwise known as ‘Website Management Outsourcing’. With expert resources in place as well as vast experience, this option can be attractive to online investors. A website management company will offer the full spectrum of services required to successfully management an e-commerce store, including:
- Inbound marketing
- Website design and development
- Search marketing
- Social media management
- Content marketing
- Email marketing
- Customer support
Website management companies usually charge a flat monthly fee, which covers everything required to manage the business. Clearly, the amount charged will depend on the services required, size and complexity of the business in question. At FE International, we offer website management services outlined above and are happy to discuss this with buyers.
E-commerce businesses have a lot of moving parts, more so than many other business models. As a result, it is important to understand which tasks are critical to the business vs. those that can be outsourced. Developing an outsourcing strategy early on is a great way of setting up the business. Investors who outsource business activities will have more time to invest in strategic planning and growth.
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