E-commerce outsourcing, re-launch is just a click away

e-commerce
Michele Caprini
28 Jul 2020

E-commerce and outsourcing is an association of words that from the lockdown onwards has been virally spreading. The numbers from the American market, almost always anticipating our trends, help us to better assess and understand our possible immediate future.

THE SHOPIFY BOOM

Shopify, which has an advanced e-commerce outsourcing platform (for which the Canadian company likes to call itself the ‘operating system’ of e-commerce), enjoyed an unprecedented growth in the United States during the lockdown.Suddenly forced to face the digitalisation of commerce to remedy the sharp slowdown caused by the pandemic, in the six weeks up to 24 April about two thirds of new stores proposed themselves on the platform.

In 2019, Amazon accounted for around 37% of all e-commerce sales in the U.S., followed by Shopify just under 6%, in front of eBay, Walmart, and Apple. However, in the first half of 2020 Shopify achieved a CAGR of 50%, with its shares value witnessing a three-fold increase. This in perspective of an overall online spending by American consumers of $710 billion in 2020, i.e. a 14.5% share of the entire retail market (eMarketer estimates).

PRE, DURING AND POST-LOCKDOWN

Before the pandemic, e-commerce purchases were largely limited to certain product categories and in Italy, in particular, leisure and tourism accounted for almost 70% of the total (Casaleggio & Associati estimates). Now, however, also the purchase of basic necessities is rising steadily and becoming increasingly important.

If the importance of e-commerce is a primary feature of recent weeks, outsourcing is potentially the safest and most profitable solution for companies that do not have adequate technological infrastructures and governance resources. It is not easy to improvise as trader, and it is frequent the limited (if not distorted) use of the website as a simple showcase whose visits could achieve, at most, some promotional benefit.

INSOURCING?

The opposite e-commerce model, insourcing, has great advantages, but only for enterprises with a solid technological structure and consistent investment capacity. Furthermore, there is a specialization space usually taken up by external suppliers (web design and digital marketing, for example), with the exclusion of the typical processes.

These companies govern the entire chain and capitalize on the direct contact with the consumer, where e-commerce insourcing represents for them a decisive value: full control of technology, order management and logistics, full visibility on costs, faster operating times.

E-COMMERCE OUTSOURCING

In this option, the development and management of e-commerce are entrusted to a single external supplier, whose services cover the entire cycle, from its conception and start-up phase, to the management of orders and returns, payments, inventory and inbound and outbound transport, merchandising and promotions.

However, e-commerce outsourcing can represent a real competitive advantage only if tied to clear strategic prerequisites.

The first thing is to assess the impact of e-commerce on the internal structure in all its managerial and operational aspects. The distribution of tasks and skills across multiple lines of business and service risks in fact to be fragmented and leading to bad results. A single and reliable external partner with full autonomy in every area of ​​operations, can, on the contrary, render the commercial action much less complex and more effective.

The reduction of fixed costs is an additional advantage, as personnel and infrastructure costs are borne by the supplier. Furthermore, this model, supports the optimization of execution times, typical of a supplier having the specific tools and skills, useful also for obtaining the highest quality of customer service.

THE SUPPLIER

The choice of the best supplier is, as usual, fundamental, and the sure benefits must be weighed against the possible risks. These include the loss of direct control and the lack of proper evaluation of the partner’s performance. In this respect it is important to establish useful measurement units and identify internal resources capable of understanding and applying them, as also essential is to observe the ROI so as to maintain control over costs.

In the long term, e-commerce outsourcing presents the risk of losing specific and autonomous expertise if this is completely outsourced over time. It is also indisputable that constant and indispensable innovation for a strong commercial presence on the web requires adequate and continuous investments in training and updating, typical, however, of the services provided by a qualified partner.

On the other hand, it is possible to decide on the scope and scale of the mandate by allocating only parts of the business lines and service areas to outsourcing. Regardless of the forms and extend of the outsourced service, today this represents a choice option that requires the attention of companies who have re-launch and innovation as their immediate goals.