In the eCommerce industry, a value chain represents the actual set of actions that a company performs to create and deliver its products. The value chain is quite different online than offline. For instance, offline, the value chain includes arranging the product on the shelf and performing in-store marketing operations.
Today, eCommerce companies that sell mainly online offer a simplified value chain that includes components such as catalog management, warehouse operations, online marketing, last-mile deliveries, customer service, and distribution. On the other hand, eCommerce companies that also sell offline need to focus on more components of the value chain, including inbound & outbound logistics, procurement, R&D, technology development, firm infrastructure, and human resource management.
Any company that is able to create for itself an advantage by performing a throughout eCommerce value chain analysis can quickly increase its overall profit and overtake the direct competition. Ideally, the analysis of the eCommerce value chain should help the company identify those areas that need to be improved to gain maximum profitability and efficiency.
Below, we want to take a deeper look at four crucial components of the eCommerce value chain. These are interdependent components that need to be treated as a whole.
1. Production Operations & Studio Shoots
The images of products on an eCommerce platform are just as important as having products displayed in a physical store. 3D images and high-quality photos can emulate the actual looks of a real product. The better the images, the higher the conversion rate actually is on the store.
The production process in an eCommerce value chain, however, has to follow a few strict steps:
Step 1: Retrieve the samples from the warehouse
Step 2: Queue up the samples for studio shoots
Step 3: Take multiple shots and send them over to the marketing/sales department
Step 4: Write descriptions for each product and upload the images on the eCommerce platform
Step 5: Analyzing results/performing SEO for images (alt tags, descriptions, keywords)
This entire process requires the use of custom software that is capable of managing an extended inventory and offering a quick turnaround time for the products that are going online. If the marketing team does not have a proper tool at their disposal, they might face having a whole stock of new products sitting in the warehouse as dead inventory.
2. Catalog Management
Once new products are uploaded to the site, the marketing team has to manage the actual catalogs. This includes ensuring that the list of SKUs (stock-keeping units) is up to date and that the stocks are accurate.
As a rule of thumb, eCommerce technology platforms offer basic catalog management capabilities. However, as the order volume goes up, catalog management becomes an increasingly difficult task. That’s where an upgrade becomes mandatory.
Some of the most important features of catalog management as part of the eCommerce value chain are:
- Bundling: this is the ability to create specific bundle offers, where multiple products can be sold as one.
- Promotions/discounts: the marketing and sales departments can create bespoke offers and offers certain discounts in order to ramp up their sales and grow their ROI. Using these is a must if the retailer has too many stocks and needs to save up warehouse space for upcoming products.
- SKU variations: vendors can change the SKU code of a product from one year to the next. This means that their catalog management engine allows for variations to be created on the original SKU code, instead of creating a new SKU altogether.
3. Warehouse Operations
Warehouse processes and operations can be standardized using a wide range of ERP/WMS solutions. They can normally be divided into 3 main areas: inbound operations, inventory operations, and outbound operations.
Let’s break down below each one of these components:
3.1. Outbound operations: these include all the applications that are used in implementing a QC policy for incoming shipments. Additionally, this component features the business rule engine, which allows for the SKUs or shipments to be flagged in the case of a high QC failure rate.
3.2. Inventory operations: this category of warehouse operations includes aspects such as product damage, cycle count, and returns. The damaged products should be sent to a different warehouse inventory area. The returns should involve standalone processes and a dedicated team.
3.3. Inbound operations: the incoming shipment tracker and the inbound QC are part of this component. Basically, the shipment & inventory team needs to avoid surprise shipments that have incomplete documentation, since they cause storage overruns and bottlenecks.
4. Customer Service
Customer service operations have become mandatory for any eCommerce business that wants to grow and outperform its competition. Even more, flawless customer service has become paramount, especially as customers need to be groomed in the same way as physical stores groom their brick-and-mortar customers.
In the digital sphere, customer service requires the use of chat support, chatbots, CRM technology, and IVR technology. While the CRM is required to manage tickets and store data, chatbots and IVR is useful to reduce waiting times, improve customer satisfaction and skyrocket conversion rates.
The eCommerce value chain is made up of several components, such as catalog management, warehouse operations, online marketing, last-mile deliveries, customer service, and distribution. As an online retailer, your focus should be on the customer service you provide to your end customers, the warehouse operations you have in place, catalog management, and product operations.
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