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Functions of e-Commerce

Why read this? You need more than just a website to make e-Commerce happen. What happens on the e-Commerce website needs to connect with other functions like marketing, finance and supply chain. Read this to learn how to get the most out of these functions of e-Commerce. Drive visits and sales. Manage payments securely. Store and deliver products efficiently. And most of all, keep online shoppers 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 that financial management 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” takes place after all.

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

You need to include three  key other functions in your overall e-Commerce plan – marketing, finance and supply chain. 

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. Activity focussed skills like  communication and digital marketing drive visits to the store and increase sales 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 cost to make sure your store stays profitable. You need financial expertise to drive your online store business model

Each order needs to physically move from where it’s stored to where they buyer wants it. So, you need good supply chain skills and processes to manage orders from the warehouse to the customer’s doorstep. This includes the management of 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 though “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?  

Firstly, 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 that 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

To create this advertising for e-Commerce, it’s likely you’ll have carried out market research. And the advertising should also reflect your brand identity.

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 put in their credit card details though, you need 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’ll need payment gateways so the money goes into your bank account. And, you’ll need a system to confirm payment has been received to notify the warehouse to proceed with the order. 

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

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

So, as you can see, there’s more to managing 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, it’s useful to dig into each of those 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 all the steps together. 

Let’s look at how you can optimise performance and integrate systems at each key step. 

1. The marketing of e-Commerce

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

Market research

Firstly. you’ll have any market research that 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 article on what online shoppers want from e-Commerce.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

It’s likely you’ll carry out some more secondary research. So, 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 need from online shopping is only the first step. You need to build your brand strategy so your brand delivers against those needs. In particular, your brand identity needs to be able to cover the online shopping customer experience

Brand management

So, 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 need to consider 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.

Do you need to evolve areas like the packaging for example 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 we mention in our guide to the e-Commerce planning process, your pricing will be highly visible and comparable online. Consumers can go to price comparison sites to look at price offers, so, you need to consider how this price transparency impacts other channels where you sell.

From a e-Commerce pricing point of view, you can also target sales promotion prices to specific consumer groups 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 do not buy.

(Check out our separate article on whether price discounts are a good idea.)

Promotion

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

Place

Then, there is 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 need to factor in 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?

We answer some of these user experience challenges in our guide to online store websites.

People, process and physical location

Your e-Commerce store then also pulls in broader marketing mix factors like people, process and physical location. (See our article on digital services 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 people to make sure the product moves from the warehouse and is delivered properly. And if there are issues, shoppers will want to speak to a real person to ask questions. 

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

Lastly, there may not be a physical store that 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. Order products need to move from warehouses for example. And someone needs to physically deliver the product to the customer.

Communications and Digital Marketing

So with your market research, brand identity and marketing plan in hand, you then move on to your communication and digital marketing plans.

You would put together a communication brief that 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 communication brief will identify the advertising and media objectives to support your online store activities.

Marketing Communication brief - blank template

As we cover in our guides to advertising and advertising evaluation, you’ll need to create advertising messages that are relevant, impactful and unique.

The creative idea needs to meet the online shopper need. If your online shopper need focusses on price for example, then your advertising message will focus on sales copy and online sales promotion activity.

E-Commerce advertising is usually focussed 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 likely to be 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 consumer groups 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 then purchased. So, digital media impact on e-Commerce is much easier to calculate than traditional media. You can work out your Return on Investment much more easily. 

Check out our full digital media channels guide for all the details. 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 the skill of 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 hone page on a Samsung phone lores

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

Social Media

Social media is another great channel for e-commerce. There’s 3 key reasons for this.

Firstly, most social content is highly visual in nature. 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 that makes your products stand out and look and feel more appealing. 

Secondly, 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” or “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 focusses 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 consumer seeing the advertising, and when they need to do something about it. This time gap leads to people forgetting about the advertising and 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 have already had an interaction 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 anyone who’s totally new 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. The quality of other websites and the media space they offer can be highly variable however. 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 business, 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 attracts people to visit your online store website, you need to create a good online shopping experience for them, so that 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.

And 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 an important function 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 to have 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 you 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, it’s important you 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 we cover in our guide to the order to delivery process, online payments are made though 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 shoppers credit card details are kept hidden (hashed), so they can’t be copied or stolen.

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

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 a genuine card and that it has not 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.

And If the online shopper cancels or queries the payment, they’ll refund the customer. But, the assumption is you are the wrong party, so they pursue YOU for payment. The default position is the shopper is right, and you have to prove otherwise. Even if you have done nothing wrong.

Because, with this set-up, 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

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

While the vast majority of online payments go though with no issues, a small percentage of transactions will have some of the issues like chargebacks and fraud we outlined above. This can vary by category, and typically may only be around 1% to 2% of total sales. But we do know of cases, where it’s been as high as 10% of online transactions.

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. To manage refunds for example. Or 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 requirement to manage your finances as you would with any other part of your business.

This usually focusses 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 go through a full, line by line profit and loss 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 the purposes of 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 that 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 the delivery charge. 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 is a question of whether that is 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 D2C financial modelling, and how it 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

Firstly, 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.

It’s also usual that the payment gateway provider, 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 are 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 cost 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 guide to the online store busness model, the cost of delivery of a single item can be much higher than the delivery costs associated with delivery to a retailer. The delivery charge to pick, pack and deliver is usually a much higher percentage of the sale, when selling online. In particular the last mile costs are high. 

It’s much 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 that are fragile or temperature sensitive for example, will require additional 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 stores sales need to cover. 

There are also a number of other operational fixed costs to consider. 

For example, do you own the warehouse where your goods are stored? 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 on-going 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 need to consider costs to generate content. If you need to create photography, video or write sales copy, each of these takes time and money to produce. That doesn’t even take into account the time and effort to set up and design the website in the first place. 

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. At the simplest level 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. 

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

3. The supply chain of e-Commerce

Supply chain (sometimes called logistics) is the system that stores and delivers your products to the end buyer. It usually also includes customer service teams who will respond to any issues that come up the delivery of goods. 

Storage

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

Who will store the products? 

Unless you manufacture to demand, it’s likely you’ve 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.

Often delivery companies like DHL and Fedex will manage the whole storage and delivery system for you. But, obviously they 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 guide to the e-Commerce planning process, one of the benefits of e-Commerce is access to global customers.

But that means you need to consider where where best to store your products depending on where your orders come from. The closer to the customer, the better. 

The further the distance between the storage location and the customer, the longer the delivery time will be. This can lead to lost sales, if customers don’t want to wait. But if you store your products near your customers, this can lead to faster deliveries. That can mean more sales.

It’s a fine balance to match the delivery time needs for the sale, and the costs associated with where you store the goods.

How will you store the products?

You need to make sure you store products appropriately in the warehouse. They need to 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 we mentioned in the finance section above, all costs associated with storage and delivery need to factor in to 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 consumer

From when the product first moves off the shelf in the warehouse, to when it arrives 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 along the way. At the most basic level, this is the wages of the person who picks it from the shelf, and the one who delivers it to the customer.

But depending 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 in to 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 there are a number of things that can and do go wrong. It’s important to plan for those. You should have customer service systems and processes set up to respond to 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. Preparation for these scenarios is hugely important.

Scenario preparation

If you have a tracking number for example, the delivery company should be able to provide more details of where and when the product was delivered, or wasn’t. 

Often, they’ll take a photo of the delivery to ‘prove’ that it was delivered for example. Or, if you make it that a signature is always required for delivery, this reduces this number of items which go missing. It’s also common to request “permission to leave” the package, or an alternative address to deliver if the customer is not at home. This puts the onus on the shopper to manage the delivery at their end.  

If the driver can’t deliver the product for example, you need to agree with the delivery company how that 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, and those costs will eventually come to you. 

it’s important to have supply chain and customer service skills to develop these systems and processes to respond to delivery challenges. You need to train, manage and empower staff involved in implementing them, so they can work 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 product categories come with additional challenges to store and deliver goods. These can add more costs. 

So, 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 value items (see our separate article on selling high value products online), how do you reduce the risk of theft? Do you hide the fact that it’s high value for example by putting 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 relatively 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 three key functions of e-Commerce – marketing, finance and supply chain – which sit outside the set-up of the e-commerce website itself. You cannot do e-Commerce without marketing your store, managing payments and managing deliveries. 

Each of these functions of e-Commerce come with their own set of challenges. So, the online store owner needs to be able to both understand those challenges and identity the best ways to solve them. 

You can choose to manage these functions of e-Commerce in-house, partially outsource them or go fully outsourced. The more in-house you manage these, the more control you have. But, you also then have to factor in the level of complexity. 

Outsourcing gives you less control, and you have to factor in more costs and fees. But it can significantly reduce the amount of complexity involved. 

It’s your call to decide on the level of control you want and the complexity you can manage. 

Three-brains and e-Commerce

We have worked on many e-Commerce projects and have good experience across e-Commerce strategy and planning, working with online retailers and setting up online stores. We know how to connect these expertise areas back into driving your brand marketing and growing your sales. if you want to grow in e-Commerce, we can help you figure out the right level of control, and how to manage complexity.

If you want to know more about how we can support your e-Commerce to grow your business through our coaching and consulting services, contact us to see how we can help you. We can help you to boost your e-Commerce game.

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