The Secret to Effectively Managing an Ecommerce Business
E-commerce businesses range from the one-person setup to the organizations with a global presence. In all cases, success promotes growth, and this growth is not just in terms of sales, but also in terms of the complexity of managing the enterprise. Especially if you are a small e-commerce business, where everyone seems to do everything, you should be ready to reach a point where you set up specialized functions and responsibilities.
In this context, it is important to understand the various legs on which the edifice of e-commerce management stands. Given the competitive nature of e-commerce businesses, all legs of the e-commerce business should be strong. Here are the top five legs.
The Production or Sourcing Function
Seasonality and changing consumer preferences can cause wild swings in the sales originating from your e-commerce website. The people in charge of securing the product—regardless of whether they manufacture it or source it—have to be able to keep up. Here are some illustrations that will explain the critical nature of this function:
- In the few days preceding Christmas, there is a spike in online sales. The expectation is that you will deliver by Christmas. Imagine the loss of face and sales if you are unable to get your hands on the product in time.
- You get an outstanding deal in sourcing a certain product, let's say 90% off. But the caveat is that you have to source a high volume without the option of returning unsold goods. If you do take that opportunity, imagine the loss if you are saddled with a huge inventory of unsold goods. At the same time, if you reject this opportunity because you want to avoid the risk of unsold inventory, you might be missing a good deal.
The above are just two of the many possible scenarios that could lead to unfavorable outcomes based on the product people not being able to deliver.
Most e-commerce professionals understand the importance of marketing. There are differences in people's approaches; some prefer pay-per-click advertising (PPC) and expend their energies on optimizing their PPC spends, while others drive traffic through search engine optimization (SEO) and focus on link building, and still others believe that branding is the only way to go. Some prefer to rapidly expand overseas, while others try to write a business plan that involves them setting up a network of niche e-commerce websites.
Then there are those on the cutting edge that believe in deriving the most from the benefits of online marketing tools and technologies, such as gaining from Clickstream data or targeting customers based on their online behavior.
I am not one of those that believe that e-commerce is primarily a technology play. But there is no denying that it is a technology-enabled play. As a result, we need to stay on top of our technology. This starts from basic decisions such as choosing your hosting, domain name, and shopping cart software, to implementing security measures and more.
We need to constantly evaluate the wide range of new technologies that are introduced all the time. In addition, we need to measure and optimize the present platform that we are working on.
The potential for stratospheric growth of an e-commerce enterprise is unlikely to be realized without a periodic infusion of money. Contemporary figures in the investment landscape show that investors have poured in billions of dollars into e-commerce players that display some potential of being the last guys standing.
But the finance function is not just about fund-raising. There is deliverables management, accounting, financial engineering decisions that permit innovative payment options to customers, and more.
Except in the case of digital goods, you need to get the product into the hands of the customers. And when the product needs to be returned or repaired, your reverse logistics process needs to get it back. There are many examples of otherwise good e-commerce companies who went belly-up because they could not manage the accuracy or costs of logistics. So, logistics should be seen as a specialist function and given adequate attention.
The Bottom Line
A five-point list is not adequate to capture the diverse range of functions that go into managing an e-commerce business. We could go ahead and talk about many more functions, e.g., human resource management. But the idea is to address the small e-commerce business where everyone does everything. Sooner or later, success will cause the organization to balloon up in complexity. At that point, a sound management strategy is required to ensure that the business continues to thrive, or at the very least survive.