Today’s commerce landscape presents unique obstacles never before encountered by retail companies. Through the advent of e-commerce, consumers purchase at all hours of day and night. And thanks to some giant competition, consumers have come to expect a higher level of convenience, better prices and more expedited services.
To achieve success in the modern e-commerce landscape starts with developing and balancing a well-functioning supply chain. To setup your infrastructure for long-term growth, it’s all about balancing these three essential details.
People get into business for different reasons. Some entrepreneurs see an opportunity to make money online, so they start a dropshipping business backed behind a strong brand. Others experience a problem and develop a fix. They decide to start a business because they want to extend their solution to people facing the same issue. Whether the central goal of an online store is to make a lot of money or not, supply chain decisions ultimately need to be made around cost if the business is to truly be a business and not a “pet project.”
In their breakdown of what an e-commerce site is, hosted store provider Shopify states there are eight different examples of e-commerce models to follow: retail, dropshipping, wholesale, crowdfunding, subscription, physical products, digital products and services. So, clearly, the specific questions and business areas to analyze hinge on the model with which you plan to operate.
But ultimately, deciding how to balance price in your supply chain requires a bird’s eye view of the entire operation. Look at every detail of your business to see how to reduce cost. For example, If your defect rate can be decreased, your overall cost will be lower. If products can be produced faster, the quality may decrease, which will ultimately hurt your price if your return rate increases.
Most entrepreneurs don’t embark on a business idea with the intent to sell low-quality products. However, at some point in the supply chain construction, quality ends up being the pillar sacrificed. As an e-commerce company, building your supply chain around quality contributes to a loyal customer base. However, if you take your quality initiatives too far, you can risk slowing down your operation and incurring subsequent costs.
That’s why it’s important not to get caught in the weeds when analyzing product-quality concerns. What features or details will resonate the most with your target customer base? Which details are nice-to-haves but don’t ultimately sway purchasing decisions?
Focus on a few key details that matter and get them right. Of course, the partners you choose will also affect your quality control. Lazy suppliers or manufacturers can overlook crucial details or let mistakes slip through that wouldn’t slip by a more attentive partner. Likewise, your quality-control efforts will be infinitely helped if the supply chain employees you hire possess that innate attention to detail and tenacious work ethic.
However, if you are planning to choose dropshipping or print on demand as your e-commerce business model, you might not be able to investigate your supply chain employees. For this reason, be careful what you choose, always order the products for quality-check and if possible have meetings or video conferences with the prospective suppliers.
According to the National Retail Foundation, 68 percent of consumers expect free shipping, even on purchases less than $50? Nearly half (47 percent) admit they back out of the purchase if they have to pay for shipping, while 38 percent expect free two-day shipping. With such lofty demands to meet, it’s understandable why some retailers push out subpar product or sacrifice their margins to keep pace with expectations.
Unlike achieving favorable pricing margins and quality control, it’s easy to observe when your lead times aren’t cutting the mustard. Your customers will be upset, you won’t be pushing as much product as you intended and your revenue won’t be meeting projections.
Unless you’re handling most of your supply chain processes directly, striving to find a balance in your lead times will depend on the companies with which you partner. Aim to contract with companies that have a track record for safety, reliability and communicativeness. In the supply chain world, a lot of issues can be minimized when the problem is observed and communicated from the onset.
Creating the infrastructure that’ll power your supply chain is a necessary task to succeeding in the online business landscape. But don’t expect to ever find the perfect balance, especially when starting out. Mistakes are inevitable, inefficiencies tough to avoid and problems constantly evolving.
If you want to be a prosperous online business that carries out its mission, it might be better to focus on nailing two of the three pillars, and compromising on the third one.
After all, would you rather be a company that does a few things really well, or one that does everything but in a mediocre manner? Set your sights on finding harmony in your supply chain and the healthier your business will be as a result.