The Most Important Financial E-commerce Impacts Every Retail CFO Should Consider

The Most Important Financial E-commerce Impacts Every Retail CFO Should Consider

insights |  | 5 min read

The COVID-19 pandemic has caused many brands to reevaluate their supply chain. Prior to the pandemic, brands used to sell products only through brick and mortar retail stores, but now they are also selling on online marketplaces like Amazon or Ebay!

The change in how people buy things means that fulfillment costs should be now considered as one of the most important factors. This is where you need skilled employees who can work quickly with high volumes of orders coming through on a daily basis; if not handled correctly can lead to customer dissatisfaction.

Post-COVID retail looks a lot different than it did before the pandemic. A core shift in consumer behavior has caused many people to prefer eCommerce over traditional shopping. This has led brands to feel the true costs of fulfillment that hit their finances hardest.

With these changes coming into play globally across all industries I'm sure we'll be seeing more alterations within your organization's business model so make sure you stay up on trends!

Shipping Costs in eCommerce

Shipping has always been a significant cost for businesses, but with the advancement in e-commerce it's becoming more of serious concern. Today most customers want their product as soon as possible, they're not going to wait around! Previously, products could be loaded onto pallets for shipment and sent to stores. But now they first need to undergo some processing as all items require to go through an interaction called "fulfillment". It’s a process where teams of employees process orders, pack them and then ship them directly to the customer’s location.

Brands that choose to fulfill their orders through DTC will have a more costly option. With DTC, brands must ship hundreds of products separately instead of sending them all in one bulk shipment which can lead to higher shipping costs.

Apart from shipping costs, sellers have to face other costs as well. For instance, Amazon's strict guidelines associated with receiving inventory can be problematic if a seller chooses to go for FBA. There are various other costs linked to FBA, such as prep fees, returns, repackaging, and more. With a surge in sales and higher revenues, sellers have to face higher shipping costs as well which was comparatively less in conventional brick-and-mortar selling.

Packaging Costs in eCommerce

The first difference between e-commerce and brick & mortar retail is the need for more durable packaging. Products also have to be individually wrapped or packed into boxes so that they can ship them out. It means there's an additional cost of materials plus labor involved in packing up these orders.

Brick and mortar stores have a standard process that involves the product going from the manufacturer, through the packing line then being shipped out to a store where customers can come and buy individual units. There can be up to five touchpoints in this chain for some products but most products only require four or fewer steps before they're reached to customers!

The complexity of e-commerce packaging needs to be considered when designing a product for the web. This is because on average 25 different people will touch your package during its journey from manufacture through fulfillment. So it has multiple chances of being damaged along this process. Therefore, to make the packaging more durable and safe, eCommerce sellers have to face extra costs which is not a problem in a typical brick-and-mortar store.

Brand Protection

The lack of regulations for online sellers means that they can break any rule without fear. Brands have very little chance at protecting their products if the seller has no intention of following guidelines or policies established by parent companies, which is a common practice in today's marketplace. That is one of the reasons why people only trust marketplaces like Amazon, eBay, etc. because they have strict policies when it comes to selling products.

MAP compliance issues used to only affect brands through the erosion of brick-and-mortar relationships, but now it's an even bigger problem for them. Retailers might get undercut by online sellers who buy at lower prices and sell even more cheaply. As a result, customers will never go back again which is why retailers want this law changed! Therefore, the brand's protection is imperative to ensure that a company does not shrink its gross margin until some sort of strategy has been put in place.

Additional Expenses Associated With eCommerce Selling

With the growth of e-commerce, many brands have turned to marketplaces like Amazon. The benefits are great — access millions and you can cut out costly brick-and-mortar expenses! But there's always a cost involved when doing business on these sites. It includes fees for services such as storage or commission rates; it all adds up quickly in terms of increased costs. Also, there are costs associated with logistics providers who handle everything from shipping products straightaway into consumers’ hands.

The cost of storage can end up being one of the most costly expenses for brands. Amazon charges according to size, so larger products have higher rates than smaller ones do. So it means, large items like furniture will be more expensive than small ones. And same goes for fragile goods like wine bottles - which are usually stored in temperature-controlled environments at around 55 degrees Fahrenheit (13 Celsius).

The more inventory a brand sends to Amazon, the greater chance they have of running into problems with tracking and resolving discrepancies; all of which lead to additional costs.

Advertising Costs

As the cost of advertising continues to rise, it's more important than ever for brands and their agencies to not only have experience with digital media but also know how best to utilize these platforms. From Google Ads to Amazon Advertising and social media sponsor posts - each has its own set of advantages depending upon what target audience one desires. There is no single solution that will work across all markets!

The steep learning curve for in-house advertising can be difficult, especially if teams are trying to learn on the go. It takes time and money just getting familiar with new platforms so that your ads perform well which otherwise could lose customers fast!

Final Thoughts: The Ultimate Solution To Rising Costs

Take the example of the banana. This small fruit grows only in certain climates, but can be found at almost every grocery store across America for low prices. Ever wondered why? It’s because of economies of scale! One region specializes in growing them while another produces something else; it's all about balancing what to produce so that you always have enough of everything to sell.

In some cases, brands aren't best-suited to take on the cost of online business. Instead, these costs can be more efficiently outsourced by partnering with a retail partner that solely focuses on eCommerce and fulfillment services.

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