Slowly but surely, many brands are coming up to speed with the benefits of multichannel ecommerce. The secret to success no longer lies in the clutches of one channel, but rather in the marriage of several channels that expand your reach and play their own unique roles.
But as exciting (and easy) as launching to a new marketplace may sound, you'll want to avoid jumping the gun by going multichannel before you're properly set up. It's important to know the true costs of being successful, both in terms of your time and money, so you can put a curb on costs where possible.
Below is a breakdown of eight core aspects of multichannel ecommerce. Keep reading for an estimate of costs and tips for working most efficiently.
1. Personnel
It’s not uncommon for an ecommerce “department” to begin as a one-man team. And sure, this may suffice when you’re starting out with just one or two channels.
But in our experience, having three or more channels is usually the straw that breaks the camel’s back. This, coupled with a sizeable catalog (anywhere between hundreds to thousands of SKUs), is often more than one or two people can handle. Inventory is quick to run amok. Listing is no longer a simple task.
At this point, you’ll need to start building a team. This involves several key roles ranging from content management to finances. Assuming that you already have finances and merchandising/product covered for your larger business, you might be looking to add several new positions that are specific to ecommerce (note: below are median U.S. salaries taken from LinkedIn Salary):
- Director of ecommerce: $130,000
- Ecommerce manager: $65,000
- Web developer: $60,000
- Logistics manager: $66,000
- Digital marketing manager: $70,000
- Warehouse specialist: $16.80/hour
- Customer support specialist: $40,000
This, of course, may only scratch the surface for larger companies. While getting your online business off the ground may only require a few people, growing it is challenging with limited hands.
2. Listing Management
From a tactical standpoint: managing your channels day in and day out gets exponentially harder with every new marketplace you add. Each marketplace has its own rules, interface and quirks to navigate.
Something as simple as categorizing your products could wind up taking hours to figure out. It may require scrubbing through documentation of all the available categories and subcategories on a marketplace to find one that’s both relevant to your product and moderately competitive. And you’ll have to do this for each product. On each channel.
Not only this, but you’ll have to consider what it’ll take to keep up with changing requirements for product data, listing format and more. Marketplaces are constantly evolving their platforms and testing improvements to the user experience. Mismanaging any new change could result in a sudden removal of your listings or a suspension of your account (read: lost sales).
3. Pricing Management
Similarly, pricing is a moving target. There are several channel-specific fees that may impact your item price:
- Insertion / listing fees
- Selling / commission / final value fees (see full chart of commission fees)
- Referral fees based on category
- On Amazon - Closing fees based on category
- On Amazon - Account fees based on seller account type
- On Amazon - Refund administration fees
Aside from developing pricing strategies, you’ll need to constantly monitor your profits while enforcing price parity. Price parity is a best practice among multichannel sellers; it involves keeping your final prices (item price + shipping) consistent across channels, even if it means operating at a lower margin.
The idea is to invest in the long haul (i.e., jump start your own flywheel effect) and adhere to channel requirements. Amazon and Walmart Marketplace, for example, will suppress listings for products that can be purchased at a lower price elsewhere. Keep in mind that marketplaces won’t just monitor your prices. They’ll monitor prices set by resellers, whether they’re authorized or not.
It’s your responsibility to keep your eyes peeled for resellers who might be eroding your prices to win the sale or buy box for your products. You must enforce your MAP pricing, develop a system for monitoring channels regularly and register your brand for greater protections.
4. Sales Tax
It used to be said that if you don’t have a physical presence in a state, then you’re not required to collect sales tax. Now, thanks to the proliferation of online businesses, this 51-year-old precedent has been overturned.
Enter: economic nexus. Most states in the U.S. have enabled economic nexus, requiring online sellers to collect sales tax if you pass a certain threshold for total revenue or number of transactions in that state.
That being said, marketplace facilitator laws transfer the burden from third-party sellers to marketplaces. In other words, Amazon may take care of collecting and remitting sales tax on your behalf in certain states, though you are still responsible for managing sales outside of its platform. Physical nexus may still apply, too, wherever your business is located or has previously performed business.
You’ll need to therefore find the time, resources and/or a system like TaxJar to stay ahead of your legal obligations. Failure to comply can result in a huge price tag. And no, the argument “I didn’t know!” won’t save you.
5. Marketing and Advertising
The “build it and they will come” mentality won’t always cut it in ecommerce. There’s no shortage of options for your customers, especially as they hop from site to site and competition proliferates online. Recent McKinsey data even revealed that customers use up to 12 channels and devices when shopping for an item and before clicking “add to cart.”
To help you get your products front and center, marketplaces offer advertising options. Many like Amazon’s Sponsored Product Ads and Walmart’s Sponsored Products (formerly called Walmart Performance Ads) work on a charge-per-click basis. This means that you’ll only get charged when a buyer clicks on your sponsored listing.
On most platforms, you’ll be able to choose the keywords that you want your listing to appear under. On others like Walmart, ads will be automatically placed for you based on the best location and keywords it determines.
Across all of them, your cost per click (CPC) will vary by category or keyword and the level of competition among other advertisers. However, here’s a short breakdown of average CPCs to get you started.
Average CPC on Marketplaces
- Amazon: $0.97
- Google Shopping: $0.66
- Facebook: $0.70
6. Shipping and Warehousing
Shipping is still top of mind for marketplaces and consumers. Marketplaces are racing to offer shipping at breakneck speed. Meanwhile, shoppers are starting to demand it.
Sellers that offer fast shipping are consistently rewarded with priority in search results or the buy box. Fast shipping, though, requires owning multiple warehouses in key locations. On average this translates to $4 to $7 per square foot, according to Sumo.
Alternatively, you can outsource storage and fulfillment. Amazon FBA is a popular choice, though there are some downsides to be aware of. Cost alone can be daunting.
Amazon FBA Costs
- Monthly fees: $39.99/mo for Professional seller account, or individual seller fees
- Fulfillment fees: starting at $2.41 per unit
- Storage fees: starting at $0.48 per cubic foot
- Long-term storage fees: $6.90 per cubic foot or $0.15 per unit, whichever is greater
- Shipping fees for inbound shipments
- Variable fees: labeling, FBA prep, returns, stock removal
We strongly advise using FBA with caution. Giving Amazon control over your inventory can cause issues when you need to move inventory (removal comes at a steep cost) or are looking to expand to new channels. While Amazon FBA offers multichannel services, many other marketplaces either expressly forbid FBA fulfillment or strongly discourage it. This is due, in part, to the fact that any FBA shipments are packaged in Amazon-branded boxes.
For multichannel sellers, third-party logistics (3PLs) partners are a better alternative. Costs will vary by service, but overall, 3PLs will still take care of warehousing and fulfillment for you. You’ll enjoy greater visibility over your stock and control branding on your packages, among other perks.
Read More: How to Choose a Third-Party Fulfillment Partner
7. Inventory Management
To state the obvious: having more channels means more potential sales. But when you’ve got orders coming in around the clock across various channels, inventory is one of the first things to slip out of control.
Let’s not forget Best Buy’s inventory catastrophe in 2011, when it severely oversold on popular items online and had to cancel 30,000 orders. There’s also Nike’s demand-forecasting failure in 2001, when the company lost $100 million in sales by overstocking on low-selling shoes and understocking on popular Air Jordans.
If these incidents teach us anything it’s that multichannel sellers need a scalable way to track inventory, update quantities and forecast demand. Manual labor won’t cut it; you leave yourself open to human errors and overselling when you rely on employees to update quantities on each channel by hand. This leads us to our next point…
8. Technology: The Unsung Hero of Efficiency and Cost-Savings
Multichannel merchants rarely deny the need for automation and software. It often comes down to exactly what needs to be automated and how. We can’t count the number of times people have tried to patch together niche programs, or purchased the cheapest or most flashy product on the market—then wind up re-platforming in few months’ time.
Ecommerce automation tools today range from $50 a month on the low end for basic listing software to tens of thousands of dollars a month for the oldest multichannel system out there. The difference boils down to your budget, goals and quality of the product. Are you looking for a quick-fix, temporary solution at the expense of flexibility and longevity? Or, are you looking for a long-term solution with breadth and depth in functionality, though it might be a greater investment?
Shameless plug: Zentail’s commerce operations platform is consistently rated five stars for its reliability, user friendliness and overall value. It offers a custom workspace, where you can centrally manage all of your core sales channels and apps. Zentail leads the market with its AI-driven listing solution, SMART Types, which automatically maps and categorizes products across multiple marketplaces (while keeping you compliant with ever-changing requirements). The platform will also sync your inventory, so as orders come in, your other channels will reflect the right available quantities.
On average, Zentail saves businesses nearly 100 hours per month through automation efficiencies and $100:1 return on investment. Talk about cost saving, am I right?
See Also: Zentail vs. ChannelAdvisor
In Closing
While the barrier to entry is relatively low in ecommerce, you’ll want to keep an eye out on the real cost of multichannel selling. Don’t let these become runaway costs. Plan for them ahead of time and, of course, feel free to holler at our team for additional insights or questions.
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