The True Cost of ‘Inexpensive’ Ecommerce

Some websites look nice, receive orders, and hit softly on the budget. But the lack of integration makes everything after that costly.

The Ecommerce Value of Product Information Management (PIM)

A Product Information Manager, or PIM, can greatly reduce the processing time and cost associated with orders.

The PIM serves as the central electronic repository for product information. Product Information Management systems centralize vital product information in one electronic location, providing staff and customers alike with real-time, accurate, complete product information. The information can include product descriptions, product images, customization rules, business rules, sales tax jurisdictions, and more.

Integration then allows information from the PIM to flow out where it’s needed. Add or update information in an integrated Product Information Management system, and it’s automatically retrieved and displayed by all the systems that need it. For example, products updated in the back office are automatically updated on the ecommerce website, without re-keying or trying to make the website and the back office "match.”

Since product information resides in a single location, there’s less time spent searching for information that may otherwise be scattered throughout an organization. Conflicting product information is eliminated and there’s little question about which product information is correct. Post-sale mistakes are reduced and fewer customers receive inaccurate information or orders, because the information is stored in a single, central, integrated repository.

When a PIM is integrated with ecommerce websites, product information is accurate, centralized and can be automatically published to the websites. This greatly increasies the efficiency and reduces the processing labor associated with ecommerce.

Learn More

When it comes to creating an ecommerce website, some people have a "Field of Dreams” mentality: Build it and they will come.

The perception is that you can build a good-looking $10-50 per month website with a common, popular content management system and then watch millions of dollars of sales roll in.

The reality is there is much more to a successful ecommerce company than just a pretty face. Even if the inexpensive, aesthetically pleasing website were to generate millions (or even hundreds of thousands) of dollars in orders, it would quickly become virtually impossible to manage those orders cost-effectively without integration.

Between the manual work for data re-entry and managing fulfillment, shipping, billing, and more, either the lack of labor or cost of labor will quickly erase any of the savings from the "inexpensive” website. The reality is the inexpensive website winds up being very costly.

It takes manual work to re-key a shopping cart into a Purchase Order to the Suppliers. The lead times and minimum order quantities (such as a customer not wanting to wait 2 weeks for a thousand pens) quickly open discussion of managing inventory and handing fulfillment.

Companies often want sites to have promotional codes, budgets and gift certificates. Customers want net terms. You want credit card payment. The integration with accounting to manage budgets, cost centers and billing terms require many eyes and many hands. Charging credit cards opens up a whole range of PCI and security considerations.

There’s simply no way the the $10-$50 per month website can support a large volume of sales if it’s not integrated – no matter how good it looks.

Corporate customers are dictating enterprise ecommerce features that support and automate enterprise billing requirements, which are critical to meet customer expectations and control costs. A common trend is that the seller is going with a cheap site, adding a $10 plug-in app that superficially meets the corporate customer's needs but also creates significant labor for the seller to manage.

The seller naïvely thinks they have a great solution that cost around $100 a year not realizing it cost thousand of dollars in labor and doesn't provide the level of reporting and auditing expected by the corporate customers. These solutions are ticking timebombs that not only become costly down the road, but sets up the situation where the corporate customer ultimately leaves.

The Cost of the Common, Dis-Integrated Website

Order processing time can be considered the time between when the customer places the order and receives it. Processing time can vary widely, but in general more processing time, and specifically more processing labor, equals more cost. Adding even 15 minutes to processing labor on each order, such as for data re-entry for sales orders, purchase orders, and invoices, quickly erases the savings from an inexpensive website with significant order volume.

If the processing labor costs $15 per hour, and each order has 15 extra minutes of processing labor, then everyone four orders represent an extra $60 in costs. Every 40 orders would represent $600 in extra costs and every 400 orders would represent $6,000 in costs. And that’s presuming that all of the manual data re-entry didn’t lead to any errors that backup orders and lead to even more time, labor, and costs.

Maybe that $10-50 per month site isn’t so cheap after all.

Amazon didn’t become a trillion-dollar business because of its website. It became a trillion-dollar business because its website – all of its technology, really – is so tightly integrated with order management, payment processing, inventory, fulfillment, accounting and other logistics that it can get an order to a doorstep before some companies can even key the order in.

They only viable way a company can afford to offer ecommerce is if the website is integrated with the ERP, the back-office business management system. Online carts need to flow automatically into back-office orders without any manual re-keying of data. Inventory, Fulfillment, and Accounting need to seamlessly work with the website to share information effectively and efficiently without manual intervention. Every time you touch your keyboard after the customer has placed an order, you are losing money.

Integrated Ecommerce Represents Top ROI

With ecommerce websites, as with many investments, your return is relative to what you put in. The notion of building a site at a low cost and having it be capable of handling a millions of dollars of orders is a stretch. Even if the site could handle the load, the time and labor costs from managing all of the orders manually would quickly outstrip many if not all of the gains.

Integrated ecommerce websites – integrated with the back-office, integrated with buyers, integrated with vendors – do require additional investment. But integrated ecommerce websites also wipe out huge swaths of the time and labor costs that otherwise would begin immediately upon cart submission and persist throughout the entire transaction lifecycle.

Yes, you can have a cheap website that looks good and takes orders. But what comes next? It’s critical to have an ecommerce website that handles not just the point of sale but automates, integrates, and handles everything that comes after it.

Ultimately, it can be a "Field of Dreams” mentality. But it’s not a matter of building just a website – it’s a matter of building a website that rests on integrated infrastructure that can efficiently manage a website that brings in the order volume you’ve dreamed of.

NEXT: 15 Costly Consequences of 'Low-Cost' Ecommerce Websites

powered by Essent® • SiteBuilder Pro