Managing inventory

One of the biggest headaches for an online retailer is handling inventory levels in a way that’s least disruptive to both you and your online customer. At the heart of the matter, you need to make sure that your online store can communicate with your existing inventory system.

Here’s an example of what typically happens when you have a kink in your inventory management. A customer goes to your site, places an order, pays for the order, and then expects it to be delivered according to your shipping policy. You receive the order and start filling it, only to find that the item is out of stock. Now you have to communicate with your customer to tell him or her that the product is on back order. As you know, this situation isn’t ideal. For a better alternative, implement a system that communicates inventory levels with all your primary points of operations, including

• Point-of-sale system (your retail location)
• Online shopping cart
• Call center
• Warehouse

When investigating these different operations, make sure to determine whether each one can work with your inventory-management system. The best solution allows any (and possibly all) of these operations to communicate directly with your software inventory-management system to allow for a real-time updated tracking system of what you have in stock and what you need to reorder.

Fulfilling and shipping your orders

Chances are good that your store has already encountered the need to package an order and ship it somewhere. Depending on what type of store you have, you may do these tasks regularly (with catalog or telephone orders, for example) or only occasionally. But imagine that you suddenly have to ship out anywhere from 10 to 100 different packages every day. How does that affect your already hectic schedule? Do you have employees who can be dedicated to handling the process? Or does the idea of shipping orders evoke the image of you staying up late at night, digging for boxes, printing labels from your computer, and trying to meet last-minute pickup schedules?

Another concern with an increased number of shipments is space. Think about your existing location. Do you have dedicated space for packaging? If so, can in-store customers see the space or is it in a separate offsite warehouse? Regardless of where you ship the product from, how do you confirm that an order has gone out? Does computer software display that information, or are you keeping a manual checklist?

As you can see, you have a lot of questions to consider for what seems to be a simple process. Placing one of your products into a box and shipping it out to a customer isn't difficult but is more time consuming than you probably think.

One solution is to outsource the shipping-and-handling portion of the operation. Another option is to have many of your items drop-shipped to customers from your suppliers. However, you can also keep this function in-house, if you want. Check out Book 4, Chapter 7 to find out more about your shipping options.

Tracking your orders

You may already have internal systems for tracking customer orders. But now that you’re selling online, you need to provide your customers with direct access to the status of their orders, particularly after those orders ship. You can minimize the number of calls and e-mails that you receive from customers by allowing them to directly check on a delivery. Anything that helps reduce your workload is a good thing! The truly good news is that the major shipping companies provide free online order-tracking tools for you to incorporate into your site (and many e-commerce solutions come with advanced shipping functionality already integrated and ready to go!). Here are the main shipping companies you’ll want to work with for order delivery and tracking:

• DHL (www.dhl.com): As a registered customer, you can use the DHL tracking tools and send automated e-mail messages to customers. The messages include information so that customers can track the status of their orders. DHL also offers a complete e-fulfillment solution for multichannel (online) retailers. You can get the scoop on all its e-commerce services at http://dhl.com/en/logistics/supply_chain_solutions.
• FedEx (www.fedex.com/insight): Use the FedEx InSight tool to track shipments. You can see all your inbound and outbound shipments and get real-time updates of any potential delays. To let your customers track and manage their orders, encourage them to sign up for FedEx Delivery Manager. You can access other tools and resources at the FedEx Small Business Center at www.smallbusiness.fedex.com, which includes a section for e-commerce.

• UPS (www.ups.com): UPS also offers online-tracking tools for your customers. The delivery company has developed a set of applications that you can integrate directly into your website. By using UPS, you don’t need to send customers e-mail messages with directions on order tracking or direct them to another site for tracking. Customers can check the status right on your site. You can check the list of approved vendors, including Amazon, eBay, GoECart, GoDaddy, and dozens more, as part of the UPS Ready Program. You can also learn more about its e-commerce tools and solutions in the UPS MarketPlace Providers list. Find all these resources (and more) at www.ups.com/smallbusiness.

  During the 2013 holiday buying season, extreme weather conditions across the United States wreaked havoc on shipping companies and prevented many online retailers, including mega ones such as Amazon, from making good on the standard holiday delivery promise, “Guaranteed to arrive by Christmas Eve” (when ordered by a certain day and time). Customers without gifts under their trees were furious, to say the least — but it was a problem outside everyone’s control. Since then, the increasingly busy holiday seasons for online retailers have seen their fair share of weather woes to varying degrees. To address the concern of blizzards and extreme weather conditions that bring even UPS to a halt, e-tailers have updated their shipping and delivery policies. During the holiday rush updated polices are clearly displayed across their websites to note that they are not responsible for problems causing delayed deliveries that may occur on the shipper’s end. We advise you to follow suit and add similar caveats to your shipping and delivery policies.

Maintaining site performance

Before you decide to sell your inventory online, you may already have some type of website. Sure, it’s probably more of a basic site that shows off your logo and maybe a photo of your retail location and offers prospective customers a map to help them find your store. Perhaps there are even a few photos of sample inventory, but no way to actually buy it online. If that’s the case, your site probably doesn’t see a whole lot of traffic. And even you probably don’t look at it that often. Well, after you enter the world of e-commerce, that situation is likely to change.

Now that you’re an official online retailer, you need to understand your site’s performance capabilities. For example, how much traffic can the site handle? If you exceed a particular limit of bandwidth usage, does your monthly hosting fee increase? What about the site design? Is it optimized for the best viewing in varying screen resolutions? Can a customer using a slower Internet connection shop your site as easily as a customer with a broadband connection? How well do product images load? These questions are just a sampling of the site performance issues that can surface as you begin selling online.

Buy now, pay later

Extended payment terms, deferred terms, or instant credit — call it what you like, this payment option is a popular alternative online payment solution. This type of credit basically allows customers to delay paying cash out of their pocket at the time of purchase. E-tailers offering flexible payment terms have seen as much as a 17 percent increase in sales, according to some retail industry reports.

Deferred billing is the same as the offline promotion of “90 days same as cash.” Allowing customers to take advantage of this type of payment can truly help your business if you sell higher-end items or want to increase your per-customer average sale. Customers often seek out this option during the holiday season, when they’re already in a cash crunch. To set up a deferred billing arrangement, start by talking with your bank or merchant provider.

Another option that’s exceeding expectations for online retailers is the deferred payment program offered by vendors such as FuturePay and PayPal Credit (formerly known as Bill Me Later). These programs act as a fast and secure way to buy online but customers pay in the future. Plus, customers can take advantage of special financing options to spread out payments without penalty or interest. Your customer gets approved for a certain credit limit and then receives a billing statement. You receive the full payment amount in the short-term, regardless of the customer’s payment plan. Customers like this approach for the following reasons:

• Speed: At the time of purchase, your customers are usually asked for a few items, such as their date of birth and the last four digits of their Social Security number. (The vendor’s banking partner uses this information to make a quick credit check.) Approval is returned in a matter of seconds, in most cases. Customers may also apply directly on the vendors’ websites before shopping with you. In that case, they come to your website, preapproved to spend.
• Security: Because PayPal Credit and FuturePay don’t require giving out extensive information or using credit cards, some customers view it as a safer way to make a purchase.
• Linked to PayPal: With PayPal Credit, customers can link their deferred payment account with their PayPal account, giving them a hassle-free, alternative form of payment during checkout at your site. It also doesn’t hurt to have the name recognition of PayPal to instill confidence in your customers so they are comfortable using this alternative payment arrangement.

As an online retailer, you’re bound to like this alternative payment solution for these reasons:

• No risk: PayPal and FuturePay accept all the risk when extending credit to your customers, so you don’t have to worry about losing anything if a customer doesn’t pay.
• Affordable: When we last checked, the processing fee was still slightly less than for most credit cards.
• Sales boost: Online merchants are experiencing both higher ticket averages (customers spending more per visit) and increased repeat purchases from existing customers using the service.

Consider offering additional payment options, such as V.Me (www.v.me), established by Visa. Although V.Me doesn’t offer a line of credit separate from the credit already extended through Visa, it is a fast, secure way to pay. And V.Me allows customers to link any other credit or debit cards to a V.Me account — again, as a means to provide more secure shopping.

Check and cash alternatives

Millennials make up the largest generation since the Baby Boomers, and they are influencing almost every part of society, including online shopping. Born after 1980, these 20- and 30-somethings are very different from previous generations. Why does this matter when it comes to offering alternative payments in your online store? According to a study from BankRate, 63 percent of millennials do not own a credit card (nor do they want one). Even though this generation is at ease shopping online, even through mobile devices, they prefer not to pay with a credit card. That adds up to a lot of potential customers that may not be able to buy from you online if you accept only the standard credit card options for purchasing.

To get around the no credit card dilemma, another payment method involves your site accepting various forms of checks, or even money orders. With Internet checks, you work through an independent processor that accepts money from a customer’s bank account and then deposits it into your merchant account, usually in fewer than 15 days. You can check with your payment processor to find out whether it offers this type of service. An even easier check solution is offering Automated Clearing House (ACH) processing that transfers money directly from a customer’s checking account to your merchant account, usually within 48 hours. Many vendors offer eChecks, or ACH processing services, for your e-commerce site. Most charge a monthly fee, plus a small transaction fee each time a customer uses the service (similar to but often much lower than a credit card processing fee). Check out various monthly plans for ACH transactions from vendors such as Forte (www.forte.net) and VeriCheck (www.vericheck.com).

An alternative payment solution that popped up as a payment alternative (to standard currency) in the online world is Bitcoin. This Internet-based currency is, in general, an alternative to cash. Bitcoins are stored in virtual wallets — the equivalent to online banks. Where do they come from? Without getting too technical, bitcoins are virtually mined (like you might mine for coal, but using a sophisticated computer program). You can also buy bitcoins (using real dollars) on an open market, similar to the stock exchange market.

Because bitcoin is a digital currency, it is not backed by the Federal Reserve or any other institution. Bitcoins were designed to increase in value over time because a limited number are available, and they get more difficult to obtain after time. In other words, you need more computing power to mine for bitcoins as time passes. Why are we bothering to tell you all this? Bitcoins have become a recognized form of online payment, even by large online retailers such as Overstock. That said, bitcoins remain a novelty and the risks of accepting them as an alternative form of payment are different from accepting eChecks and delayed billing options such as FuturePay. For these reasons, we don’t recommend adding bitcoins to your list of alternative online payments, just yet. But we do think it’s worthwhile to be aware of how this virtual currency progresses in the world of e-commerce.