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Functions of e-Commerce

Why read this? : E-Commerce is about more than just having a website. You need functional expertise in other areas like marketing, finance and supply chain. Read this to learn how to set up and run these other functions of e-Commerce. Learn how to drive visits and sales. Manage payments and deliver products efficiently. And most of all, keep your online customers happy. 

Functions of e-Commerce

How this guide raises your game :-

  1. Learn how marketing and digital marketing activities connect to your online store. 
  2. Explore the role finance plays for your online store to manage sales, costs and profits. 
  3. Understand the importance of supply chain to support efficient storage and delivery of online store orders. 

In e-Commerce, the store website is the most visible part of online selling. It’s where the sale happens.

But on its own, the website isn’t enough to run a full e-Commerce business. It has to integrate with many other functions in the business. 

You need to include 3 key other functions in your overall e-Commerce plan :-

A rope net with many connections

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3 key functions of e-Commerce

For example, marketing activities like market research and brand strategy development help you understand what online shoppers want and build your store’s brand identity. Key marketing skills like communication and digital marketing help drive store visits and increase conversions.

Once you start to drive online sales, you need financial management systems to manage payments. Those same systems also need to track performance on your e-Commerce dashboard. They also need to track and measure costs to make sure your store stays profitable. You need financial expertise to drive your online store business model

Finally, you need good supply chain skills and processes to manage moving orders from the warehouse to the customer’s doorstep. This includes managing the vital last mile of delivery

Let’s review how the overall e-Commerce experience “works”, and how and where the key functions of e-Commerce fit in.

E-Commerce experiences

To understand how functions of e-Commerce support online selling, it’s helpful to walk through “how” an online sale actually happens.

What are the key events which need to happen to begin and end the e-Commerce experience for an individual shopper?  

First, that shopper needs to visit the online store. And for that to happen, some sort of digital media needs to prompt them to visit.

The shopper sees a search result which takes them to the store, for example. Or they see advertising on their social media feed. 

e-commerce planning process - 5 key steps in e-commerce experience

You’ll likely have carried out some qual and quant research before creating this advertising. And the advertising should also reflect your brand values and personality.

So, already your one key skill of digital media is supported by the related marketing skills of market research, advertising and brand identity.

Then, the potential customer reviews what’s on offer on the store website. Based on the product range, price and any sales promotion, they make their decision to buy or leave the site.

Order to delivery

Once they enter their credit card details, you have to process that payment. This means the set-up and operation of financial management systems to track and manage the details of the order.

You need payment gateways so the money goes into your bank account. And, you need a system to confirm payment has been received to notify the warehouse to proceed with the order. 

With the payment confirmation, you need a supply chain system which then picks the order from storage and packs it ready for dispatch. Then, it actually needs to be shipped to the buyer. 

Behind this delivery system, you’ll also need customer service support so the customer knows when the order will arrive, and any issues in the process can be resolved. 

So, as you can see, there’s more to processing an order than just having a store website. 

Functions of e-Commerce to support online experiences

Now we have the basic flow of an order, let’s dig into these major functions of e-Commerce in more detail. There are many interdependencies. But take each step in turn, and it’s a logical process to join the steps together. 

1. The marketing of e-Commerce

We’ll start with what other marketing activities you need to support your digital media activity.  

Market research

First. you’ll have any market research you used to identify and validate the opportunity as part of the e-Commerce planning process.

This identifies the benefit to focus on such as ease and convenience, range, price or product information. (See also our what online shoppers want article). It’ll also give you an idea of the size of the opportunity, so you can create your e-Commerce forecast

Marketing activities to drive e-Commerce

You’ll also likely carry out more secondary research. Looking at search trends on Google Trends, for example. Ideally, you’d also carry out qualitative and quantitative research with your target audience on their e-Commerce needs.

But knowing what your target audience needs from online shopping is only the first step. You have to build your brand strategy so your brand delivers against those needs. In particular, your brand identity has to be able to cover the online shopping customer experience

Brand management

For example, do your essence, values and personality fit with the needs of the online shopper?

Look back at those core needs of ease and convenience, range, price and product information and consider where your brand identity best fits. 

Do you have the right assets in place to sell online? 

These can be as simple as pack images, product copy and key selling messages for your product page. But think about other assets like logos, colour palette and typography.

Do all of these assets you created to persuade people to buy, also work when it comes to persuading people to buy from an online store? 

Brand identity wheel showing elements of brand identity including essence, values, personality, and benefits

You then also have to think about how the online selling experience will fit into your marketing plan. And, in particular, the different Ps of the marketing mix. 

Products

You may well have developed your products to sell in traditional channels. But this doesn’t always mean they suit selling through e-Commerce channels.

For example, do you need to evolve areas like the packaging to make them more e-Commerce friendly?

How will the packaging look on an online product page compared to a traditional shelf? Do you have all the right information to complete entries into product information management systems?

And, will your product need extra packaging to protect it as it moves from the warehouse to the last mile and the shopper’s doorstep?

Examples of the marketing mix 4Ps and 7Ps - product, price, promotion, place, people, process, physical location

Price

As per our e-Commerce planning process guide, your pricing will be highly visible and comparable online. Customers can go to price comparison sites to look at price offers, so, you have to consider how this price transparency impacts your other sales channels.

From an e-Commerce pricing point of view, you can also target sales promotion prices to specific segments at specific times. With an online shop, it’s possible to run a short “Flash sale” where a discount price is only available for a short time, for example. Or, you can target and send specific price promotion codes to people who visit your store, but don’t buy.

(See also our article on whether price discounts are a good idea).

Promotion

There are several promotion activities which cover advertising, media and digital media. We’ll come to these shortly.

Place

Then, there’s the idea of place as part of the marketing mix. The online store website becomes the “place” where the customer buys the product. So, you have to work out how to optimise that experience. 

This usually covers the different interactions the customer has with the store when they visit it. How do they navigate to products, for example? Where do they find out information? What’s the process to add to basket and check out?

See our online store website guide for answers to these sorts of questions.

People, process and physical location

Your e-Commerce store also pulls in broader marketing mix factors like people, process and physical location. (See our digital services article for more on these extra marketing mix Ps).

Shoppers want to know there are “real” people behind the store, for example. This builds trust. 

You need supply chain people to make sure the product moves from the warehouse and is delivered properly. And if there are issues, shoppers want to speak to a real person to ask questions. 

These processes to take payments, manage orders and respond to customer service enquiries are important. We’ll cover them in more detail later in the guide. 

Lastly, there may not be a physical store the shopper visits to buy. It exists “virtually” through their device, after all.  But what happens in that virtual online store needs to trigger actions in the real physical world. Ordered products need to move from warehouses, for example. And someone needs to physically deliver the product to the customer.

Communications and Digital Marketing

With your market research, brand identity and marketing plan in hand, you next build your communication and digital marketing plans. The goal is to drive traffic to the store.

You put together a brief which outlines the brand identity, business objectives, communication objectives, the brand rationale and any project-specific information such as budgets and timing. 

Advertising and media

In particular, your brief defines the advertising and media objectives to support your online store activities. As per our guides to advertising and advertising evaluation, your advertising must be relevant, impactful and unique.

Marketing Communication brief - blank template

The creative idea has to meet the online shopper’s need. For example, if your online shopper need focuses on price, then your advertising will focus on sales copy and online sales promotion activity.

E-Commerce advertising is usually focused on the point of purchase. It’s heavily sales copy driven, so consider what will drive the potential customer to buy. 

What’s the timing of the sales promotion, for example? Is there a time of day or day of the week when it’ll be more relevant and have more of an impact?

Or, what about seasonal offers like Christmas, Easter, Black Friday and Singles Day? At these times of year, online shoppers are usually more open to buying. 

These advertising and sales promotion activities then need to get in front of the target audience and be seen in the right context. This forms your online store media plan. 

Digital media

Bigger online retailers may use traditional media channels to advertise their services such as in this example from Woolworths. But it’s more common to focus on digital media channels for e-Commerce. 

The potential customer is already online when they see the advertising. And the advertising can be more targeted. It can reach specific segments based on the digital data available. You can manage the time when it’s shown, so it’s more relevant to the purchase. 

Breakfast cereal ads in the morning, or alcohol ads in the run-up to the weekend, for example.

For the online shopper, responding to online advertising takes minimum effort. It’s easy to click on a link to visit a store or landing page.

With traditional media, it’s not so easy. You need to go online, remember or search for the URL, and then click to the store. That takes more effort. 

You can also track and measure these digital media clicks with digital data and analytics. With digital media, you can see how many people saw an advert, how many people clicked on it, and how many bought. So, digital media’s impact on e-Commerce is easier to calculate than traditional media. You can more easily work out your Return on Investment. 

See our digital media channels guide for more on this. But, let’s consider the key ones from a functions of e-Commerce point of view. 

Search

Search is a great tool for e-Commerce. When a shopper searches for something, it signals they have a need. And that need is often to buy something.

You can do keyword research with Google Ads to identify these potential ‘needs’. See our secondary research guide for more examples of this. 

It’s also important to understand SEO writing to boost your online store visibility through search. 

How you name your product and write product descriptions should be based on your keyword research, for example. The more people see links to your store, the more people will visit. More visitors helps drive more sales. 

Google hmne page on a Samsung phone lores

It’s worth also looking at Google Shopping via the Google Merchandise Centre for extra search visibility. See our product information systems article for how this works. 

Social Media

Social media is another great channel for e-commerce. 

First, most social content is highly visual. On sites like Facebook, Instagram and Twitter, you can bring your products and services to life.

You can create eye-catching advertising messages and video content which makes your products stand out and look and feel more appealing. 

Then, it’s also easy to set up links to specific product pages from the social post.

This puts an immediate call to action in front of the shopper.

They can “find out more”, “shop now” or “book an appointment” just by clicking.

Facebook post originally on Instagram of woman wearing Three-brains Blue Controller Hoodie design

Advertising response rates

When your advertising focuses on one of these outcomes, this ability to immediately respond leads to better advertising response rates.

With traditional advertising, there’s always a time gap between the customer seeing the advertising, and when they need to do something about it. This time gap leads to people forgetting about the advertising and so, no action. Of course, with some advertising, the focus is more on building the brand identity and brand equity, so the call to action isn’t always the most important thing.

And finally, because social media generates a lot of data, you can be quite specific and targeted in who sees your advertising, and when they see it.

For example, the Facebook pixel allows you to target groups who’ve already interacted with your website. This is called retargeting. So, if they visited your store but didn’t buy, for example. Or, they added a product to the cart but then abandoned it before check-out.

You can show a different advert to these people, than the one you show to new visitors to your website.

Display advertising

Display advertising on other websites can reach new audiences and make an impact if they find the right types of customers at the right time. However, the quality of other websites and the media space they offer can be highly variable. It often requires the services of a specialist media agency to identify the best sites. You need to set up a strong media planning and buying process to book, measure and optimise the performance of display ads. 

For smaller businesses, search and social are easier to manage and offer a lot of test and learn flexibility. They can often be managed in-house, without having to pay media agency commission fees. So, your overall bang for your media dollar buck can be higher. 

Online store website

Once your digital media has driven traffic to your online store website, you need to create a good online shopping experience for those customers, so they feel confident enough to buy from you. 

The skills to set the store up can be quite broad. 

We’ve written a whole separate guide on how to set up an online store website. So, we won’t go into a lot of depth here. 

At a very high level, you need to make sure you cover marketing technology areas like the choice of software platform, and how systems link together.

Plus, you need to be clear on areas of design and functionality like user experience and the use of colour, typography and SEO copy.

Screengrab of Three-brains Shop - headline says "merchandise to raise your game"

You need to take those core areas of marketing knowledge like your market research and brand identity and apply them to the online store. This leads to you developing a clear sales proposition and offer on the store so that it’s clear why the online shopper should buy from you.

2. The finances of e-Commerce

E-Commerce is driven by the exchange of money for goods and services. When money is involved, finance becomes one of the most important functions of e-Commerce.

When you sell through online retailers, they’re basically just another trade customer. Your financial and IT systems need to capture data and report performance on all sales, costs and profits generated through e-tailers. 

But when you run your own online D2C store, it’s more complex from a finance point of view,

Lit up dollar signs on a dark background

You have to manage customer orders at an individual transaction level. The payment process that transfers money from the shopper’s credit card to your bank account needs clear processes and controls to make sure it runs smoothly.

Your finance system also needs to be able to roll up all the individual payments to report on sales at a total level. This forms part of your e-Commerce dashboard, so you can track and analyse how your activities are doing. For example, how are you doing against your e-Commerce forecast? What does your e-Commerce profit and loss look like? How will you identify and track all the costs associated with running the store? 

When you sell through multiple channels, you must have clear systems that allocate sales and costs to the right channel. This is the only way you’ll know for sure if your online store is profitable. 

Payment

As per our order to delivery guide, online payments are made through a Payment Gateway. This online portal acts as an intermediary between the shopper’s credit card and your bank account. 

Payment gateways work to improve the security of the transaction for both the shopper and your business. 

For the shopper, they ensure that the shopper’s credit card details are kept hidden (hashed), so they can’t be copied or stolen.

With most payment gateway setups, you never see the specific details of the shopper’s credit card.

Hand holding a VISA card in front of a laptop

When there are dubious transactions on a credit card, payment gateways can flag where there might be an issue and put a hold on payments.

For your business, the payment gateway will vet and validate the payment before processing it.

So for example, it will check that the card is genuine and hasn’t been reported stolen or cloned. It will check that there are no “red flags” such as the order being placed from a country with no link to the owner of the card.

You can set “rules” of what types of payments you’ll accept. And, with these “rules”, you can be more certain that only genuine orders come through to your website. You may need extra IT skills to help you set these rules up. 

Chargebacks

Payment gateways are also important when it comes to refunds. They handle the transfer of money back from your bank account to the buyer’s card when there needs to be a refund. These refund transfers are called chargebacks.

Again, this system is designed to protect shoppers and businesses. It keeps bank details separate from each party and manages the transfer of money securely.

But when you run an online store, there’s another side to chargebacks that is more of an issue. And that’s online shoppers who exploit this system.

The exploitation goes like this. The credit card company always guarantees the transaction to protect the shopper from fraudulent sites.

If the online shopper cancels or queries the payment, they refund the customer. But, the assumption is you’re the wrong party, so they pursue YOU for payment. The default position is the shopper is right. You have to prove otherwise, even if you’ve done nothing wrong.

With this setup, unscrupulous buyers can order products from you, have them delivered and then challenge the payment, and get a refund. So, in effect, they get the product for free. You’ve paid for it.

Chargeback management

Most payment gateways aim to prevent this sort of activity. They can recognise credit cards that exhibit this sort of behaviour and put warnings on them, so your payment gateway won’t accept orders from risky cards. But, if someone gets a new credit card, they can do the same again, until the new card gets flagged.

While most online payments go through with no issues, a small percentage of transactions will have these chargebacks and fraud issues. This varies by category. Typically, it’s only 1% to 2% of sales. But we do know of cases, where it’s been as high as 10%.

Financial management of payment issues

So, part of the role of finance as one of the functions of e-Commerce is to manage all of these issues. For example, to manage refunds. And to respond to transaction queries and fraudulent transactions. 

This means when you take payments directly, you need someone with the appropriate level of financial understanding and authority to make these decisions. It’s important to have the right controls in place to ensure everything’s above board. 

Make sure the person who handles refunds checks the refund is for a valid reason before applying it, for example. Appropriate checks and processes need to be in place to make sure the payment system works smoothly.

Financial performance tracking

Beyond individual transactions, there’s also a need to manage your finances as you would with any other part of your business.

This usually focuses on financial planning and reporting in your profit and loss. This is a standard accounting tool which reports on the financial health of your business. 

It’s outside the scope of this guide to cover a full Profit and Loss account review. Your finance team or accountant is best placed to do this. 

But, even with expert help, it’s still important you understand the overall shape of the P&L. In particular, you should know how to look at the key areas of sales, costs and profits.

e-commerce d2c simplified profit and loss

Profit and Loss #1 - Sales

You calculate your total sales by multiplying the total number of items sold (often called the volume) by the selling price per item. This gives you an overall sales value. This is usually called the “gross sales”

In some businesses, if you have other income streams such as interest on savings or other investments, sales might roll into a higher number called Income or Revenue, but for this guide, we’ll keep it simple and focus on sales. 

However, when selling direct online, your “gross sales” number is not necessarily your true sales number.

Sales tax

Depending on where you sell, the selling price the customer pays may also need to cover any local or national sales taxes. This is money you have to pay the government as a % of the transaction. The name and rate of the tax can vary by country and even within countries.

In Australia, it’s called GST (Goods and Services Tax). In the UK, it’s VAT (Value Added Tax). And, in the US, you usually just call it a “sales tax” but the % rate can vary by state.

As part of your reporting and financial management, you need to make sure records are kept of this tax. You need to make sure it is paid to the appropriate body at the right time and in full.

Delivery charge

When you sell direct to consumers (D2C), you also need to consider how you will manage the part of the price that covers delivery costs. The total price the customer pays you includes a payment for delivery. 

But you then use that part of the payment to pay for the delivery. It never actually makes it to your profit line. The money comes in and then goes out of your bank. 

Essentially, you’re collecting the delivery fee from the customer and paying it to the delivery company. So, there’s a question of whether that’s actually part of the “sale” from a tax and reporting point of view. It’s sometimes called a “through cost” as it passes through your business from the customer to the supplier.

It’s particularly important because it can impact how you calculate your percentage profitability if it changes the “sales” number. We share an example of this in our article on how D2C finances can freak out accountants. 

Nonetheless, after you’ve dealt with tax and delivery factors, what you’re left with is what accountants call “net sales”. This is your “true” level of income from which you have to then cover all costs for which you’re liable. 

Profit and Loss #2 - Costs

From that “net sales” income though, there are a lot of costs that have to be paid.

Transaction costs

First, you need to cover any transaction costs associated with the payment.

Typically, the credit card company and/or the bank will take a % of the transaction value as a fee for processing the transaction.

So, you either need to charge this separately, or include it in the total price the customer pays.

Person holding 6 hundred dollar bills in front of them which have been set alight

It’s more usual to roll the credit card fee into the price the online shopper pays. Otherwise, shoppers can perceive the credit card fee as a “hidden” charge and decide not to buy.

The payment gateway provider usually also takes their own % from the transaction. Payment gateways will also usually charge an initial set-up fee, and may also charge a fixed annual amount for the service, particularly where there is a low number of transactions.

Credit card and payment gateway fees can vary between markets and suppliers. But it would be normal to factor in anywhere from 1% to 3% to cover these fees.

Cost of goods

Like any normal transaction, you then have to cover the cost of the item itself. This cost of goods is how much the item costs you to produce in terms of materials, staff and any other relevant production costs.

Delivery costs

You then need to account for all the costs to move the product from where it’s stored to deliver it to the customer.

As per our online store business model guide, the cost of delivery of a single item can be much higher than the delivery costs associated with delivery to a retailer. The delivery costs to pick, pack and deliver are usually a much higher percentage of the sale when selling online. In particular, the last mile costs are high. 

It’s more cost-efficient to move trucks loaded with pallets to a central location such as a retailer’s warehouse, than to move single items to an individual shopper’s house. You also need to consider any additional packaging costs required to protect the product while it’s en route to the customer.

Products which are fragile or temperature sensitive for example, require extra packaging. This adds more cost.

All these costs add up to your operational cost of doing business and are seen as variable costs. They vary in direct relation to the sale.

Fixed costs

However, that’s not all. There are also fixed costs to consider.  

We talked about about all the marketing requirements to drive traffic to the store and to generate sales through market research, brand identity and digital media These all come with costs which the store’s sales need to cover. 

There are also several other operational fixed costs to consider. 

For example, do you own the warehouse where you store your goods? If so, what about all the costs associated with storage such as staffing, security and utility bills? Even if you rent space in someone else’s warehouse, your rent is an ongoing fixed cost you need to pay, whether you sell or not. 

What about the website you set up to run your online store? You need to consider operational costs like server hosting and maintaining the URL license.

Then you have to factor in content development costs. It takes time and money to create photography, video and sales copy, usually by hiring an agency to do those things for you. All, more costs for you to cover. 

As we mentioned above in the section on payments, there are also the costs associated with chargeback and fraudulent transactions. These costs will also appear as part of the “debit” section of your profit and loss account. 

But once you factor all those in, then you get to the reason why you set up an online store in the first place. Because what’s left is your profit. 

Profit

The profit is what’s left after all the costs have been covered. In simple terms, profit equals sales minus costs. It’s how much you actually earn from the store. It’s by far the most important financial measure.

You want to track changes in profit over time and understand what drives changes in sales and costs that affects your profit line. This diagnosis helps you decide where to prioritise your activity and feeds back into your marketing plan. 

For example, when profits drop, this flags a need to increase sales – attract more shoppers or get shoppers to buy more or buy more frequently. It can also push you to review costs and look at where you can do things more efficiently. 

3. The supply chain of e-Commerce

The supply chain (sometimes called logistics) system stores and delivers your products to the customer. It usually also includes customer service teams who handle enquiries and any delivery issues. 

Storage

There are many questions related to the storage of e-Commerce products. 

Who will store the products? 

Unless you manufacture to demand, you’ve likely already produced the goods you’ll sell. But, they need to sit somewhere until they are sold.

Work out if you have space to store these yourself. Otherwise, you need to outsource storage to someone else.

Delivery companies like DHL and Fedex can manage the whole storage and delivery system for you. But they obviously charge fees for both storage and delivery.

Interior of a warehouse showing high shelving and main aisle

Where will the products be stored?

As per our e-Commerce planning process guide, one of the benefits of e-Commerce is access to global customers.

But that means you have to work out where to store your products depending on where orders come from. The closer to the customer, the better. 

The greater the distance between the storage location and the customer, the longer the delivery will take. You can lose sales if customers don’t want to wait. But if you store your products near your customers, you can get faster deliveries and more sales. It’s a balancing act to find the sweet spot between delivery speed and storage costs.

How will you store the products?

You should make sure you store products appropriately in the warehouse. They should be easy to find and dispatch when ordered. It’s also important you store the goods safely, and that they won’t deteriorate over time if they’re perishable.

This means you need to set up clear inventory management systems to check best-before dates. These inventory management systems need to know when goods are dispatched, so they can re-order and replenish stock so you don’t ever run out. You usually need extra IT skills to set these sorts of systems up. 

What are the costs associated with this storage?

As per the finance section above, all costs associated with storage and delivery need to factor into your P&L, So, if you manage your own warehouse, that includes staff costs, security and any utility bills. If you rent space in someone else’s warehouse, it includes your fee to cover those types of costs. 

Delivery to customer

From when the product first moves off the shelf in the warehouse, to landing in the customer’s hands, it incurs costs at each “touch” along the way.

There are staff costs associated with each person who “touches” the product on its journey. For example, the wages of the person who picks it from the shelf, and the one who delivers it to the customer.

But depending on how far the product has to travel, it may be “touched” by intermediaries who move it from one location to the next until the delivery driver picks it up. Each of these “touches” incurs a cost.

Close up of a delivery driver handing over a cardboard box delivery to a customer

Influences on delivery costs and customer experience

How far the product has to travel is another cost of delivery to consider. Products that have to go to other states or countries will cost more to deliver. You need to consider whether to pass this geographic delivery cost on to the customer or try to average it out across all customers.

You should also think about speed of delivery. It’s common to offer standard delivery for free, or at a low rate. But to then offer an express delivery option that the shopper pays extra for. As an example, we recently reviewed the delivery speeds and costs for Print on Demand companies. 

Another delivery consideration is whether the delivery company offers a tracking service. With this, the online shopper can track the progress of their delivery. This is very popular with online shoppers as it gives them confidence their product is on the way. It reduces the need to contact your customer services team. 

However, it does require some IT skills to know how to send the delivery company tracking details with the invoice when the customer places an order. This is another cost to factor into your online store business. 

Customer service considerations

You usually plan the process of shipping products from your warehouse direct to consumers, so it runs relatively automatically and smoothly. 

But several things can and do go wrong. It’s important to plan for those. You should set up customer service systems, processes and FAQs to handle challenges like these common scenarios :-  

  1. Non-delivery : The product never arrives with the customer
  2. Claimed non-delivery : Delivered to the customer, but the customer claims they never received it
  3. Damaged goods : The product arrives damaged
  4. Mis-delivered goods : The wrong product or quantity is delivered
  5. Stolen delivery : The product was left, but someone else took it

When your customer emails or calls with these types of questions, it’s important to know how to respond. Scenario preparation is hugely important.

Scenario preparation

For example, if you have a tracking number, the delivery company should be able to provide more details of where and when the product was delivered or not. 

Often, they’ll photograph the delivery to ‘prove’ it was delivered. Or, if you make a signature mandatory for delivery, it reduces the number of items which go missing. It’s also common to request “permission to leave” the package, or an alternative address if the customer isn’t home. This puts the onus on the shopper to manage the delivery at their end.  

If the driver can’t deliver the product, you have to agree with the delivery company on how to handle that. Do they try to deliver again the next day, for example? Or, is it sent back to you? These are all extra “touches” that add costs. Those costs will eventually come to you. 

It’s vital your supply chain and customer service systems can efficiently handle delivery challenges. You should train, manage and empower staff involved in implementing them, so they know how to keep customers happy. You also need good IT skills to set up the right systems and processes. 

Product-specific storage and delivery challenges

Some categories come with extra challenges to store and deliver goods. These can add more costs. 

For example, if you ship food products, does the product have a shelf-life? If so, how do you check that you don’t ship any expired shelf-life products? 

Could the product be affected by extremes in temperature, if you live in a very hot or very cold country?

In this case, how will you keep the temperature constant at each stage of the supply chain? For example, how do you stop an ice cream delivery from melting in a hot country? Or, keep liquid products from freezing in a cold country?

Hand holding a small wrapper package marked fragile

If you sell high-ticket items, how do you reduce the risk of theft? For example, do you hide it in plain packaging? Or, do you only ship with premium delivery options such as tracking and signature on delivery?

Supply chain management is a significant skill in its own right. But, when it comes to online selling, it requires new and different levels of expertise. The relative complexity of shipping small items to multiple diverse locations, and the large amount of things that can go wrong can be a challenge.

From an e-Commerce management point of view, it’s important to understand all these considerations. They impact greatly on your customer experience and your store costs. That’s why supply chain is such an important part of the functions of e-Commerce.

Conclusion - functions of e-Commerce

There are 3 key functions of e-Commerce – marketing, finance and supply chain which have to integrate with your store website. You can’t do e-Commerce without marketing your store, managing payments and managing deliveries. 

Each of these functions of e-Commerce has challenges. Online store managers must understand those challenges and work out the best way to deal with them.

You choose whether to manage these functions of e-Commerce in-house or partially / fully outsource them. Going in-house gives you more control but also more complexity. Outsourcing reduces your control, and you have to factor in more costs and fees. But it can significantly reduce complexity. It’s your call to decide how much control you want versus how much complexity you can handle.

Three-Brains and e-Commerce

We’ve worked on many e-Commerce projects and have great experience across e-Commerce strategy and planning, working with online retailers and setting up online stores. We can help you optimise these activities to drive your e-Commerce growth. Get in touch to learn how we can support you with our coaching and consulting services.

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