If you are starting an online business and you started running the operations numbers, you have probably noticed that they get pretty big pretty fast. It gets expensive to get things from Point A to Point B.
E-Commerce Fulfillment Providers are designed to take the friction out of order fulfillment. You will, of course, pay for that service but you may also find that removes a component of your business that is not your core competency.
Mark Ayotte is the owner of Yugster.com, an e-commerce site that offers a daily special item for sale each day and he has written an article on EFP’s:
“There are several EFPs. Yugster.com uses Webgistix. Amazon is actually the largest EFP, although most people think of Amazon only as a retailer. These two companies take different approaches to fulfillment services. Webgistix offers a customizable solution that is integrated with a retailer’s order-entry system. Amazon offers a self-serve solution that allows retailers to plug into Amazon’s fulfillment infrastructure. Other EFPs, such as WeFulfillIt, are also emerging as demand for these services continues to rise sharply.”
You need to get references if you are planning to do this though. It’s not that these companies are disreputable, they are quite reputable, but you will need to calculate the numbers for YOUR business and also hear firsthand experiences from their customers who ship a similar product line as the one your are considering. Mark Ayotte mentions scalability in his article and that is a critical component that any business owner will want to keep in mind. In good times or bad, scalability is key.
Where should I spend my money; spend it on marketing or on making the store nicer?
Obviously we need both but historically companies have focused on buying more traffic, buying more traffic, buying more traffic. And while we need to drive traffic to the store. we also need to convert shoppers once they are in our store. Lead generation, fundraising, recruiting, sales; all of these can be measured in terms of conversion. So when we talk about conversion, that’s what we’re talking about.
The secret here is to look at Return On Investment (ROI) as a percentage because it shows us that simply buying more traffic is not always the wisest business decision (all this coming from an old advertising guy, no less).
Here’s why: Let’s say, for illustrative purposes, that our traffic generation programs yield an ROI of 100%. Every month we spend one dollar to make two dollars. We know what we can expect month-over month.
It looks like this:
But let’s say we have a sales conversion rate of 2%, so for every 100 people who come to our site, 2 of them buy from us.
Now let’s suppose we improve something on our site, say, the checkout process and we increase our conversion rate from 2% to 2.3%.
It doesn’t seem like a very big lift, does it?
Here’s the big a-ha moment: the traffic percentage is for a single month. The conversion percentage is 2.3% of an ever-increasing, month-over-month number. Unlike traffic percentages, our conversion percentage increases:
Buying traffic is a one-time cost with a one-time benefit. Increasing our conversion percentage is a one-time cost with an ongoing benefit that increases month over month. It is entirely possible to see a yearly ROI of over 1000% from conversion optimization and that is why we continually look for ways to improve the customer experience. It’s not just a buzzword, it’s good business and it can tell us where to put our money when budgets are tight.