Commerce ops: people, product, process, sales
What – in terms of commerce operations – sets up a business for success? Matt Pavlick of WPP’s Wunderman Thompson in the US explains
Successful commerce starts with the people, products, processes and a strategic plan based on knowing your target consumers, where they shop and how to sell to them. But it is so much more complicated than that.
How do you prioritise certain products over others? Which products should be sold on which channels, at which prices and in which volumes? What are the unit economics of each product from both the brand’s and channel’s points of view? What are competitors doing? How should you promote, drive traffic, and ultimately convert to sales? Do you have enough inventory? Do you have the staff and efficient processes in place to fulfil orders ‘defect’ free in a timely manner to meet customer expectations?
All of this can be significantly complicated by the choice of commerce model: direct to consumer, retail, marketplaces, distributors/dealers and so on. There’s nothing simple about commerce. And it becomes even more complicated when individual platforms’ performance criteria are considered too.
So many factors are considered when seeking the best commerce outcomes. And now there is so much more data to both guide and wade through to ensure everything is optimised.
Steps down the funnel
As you get into the specifics – when moving further down the selling funnel – you are presented with more questions and more solutions to find. First comes an analysis of the intended assortment of products on each channel. And then comes a review of the inventory associated with each product.
Then you will ask whether each product is being easily found in search results and are consumers arriving at the product detail page. Is this traffic converting into sales? If not, what are the root causes preventing that? How much leakage of potential sales is occurring at each checkpoint? Are potential buyers just browsing? Do the product images, videos, bullets and description clearly communicate the features/benefits and relevant information to help consumers make an informed buying decision? Is the price competitive? Is shipping too expensive? Is the product out of stock? Is shipping too slow?
This is the type of information that informs conversations with clients. And it means bringing together copious data across many parameters. And just like other diagnoses, outcomes are improved when recommendations are acted on.
Pricing: art or science?
Pricing, for us, is more science than art – after all, commerce is a process-oriented world. At its most basic, pricing depends upon your costs and fees for selling on a given channel, the competitive landscape, target profitability and expected volumes. It’s also about forecasting and demand planning to avoid unnecessary storage fees, avoid markdowns/liquidations if a product doesn’t sell, and about supply chain lead times to remain in-stock if it sells well. And then it’s about monitoring sales velocity to understand how many weeks of supply are available. You then must pair all that information with the work undertaken by media and advertising colleagues who are focused on driving qualified traffic to your products.
So, if that team is running a price markdown campaign, for example, can we expect to see an increase in sales that can be met by existing inventory? If only two weeks’ inventory is available, is the spike in demand commensurate with that level of inventory or will we go out-of-stock and have wasted advertising spend? What do you need to do to accommodate that volume by way of backup solutions such as drop shipping or leveraging distributors/dealers?
For example, a brand could be selling products to Amazon in a first-party model at wholesale cost, operating as a drop-shipper if Amazon goes out-of-stock, plus selling on Amazon themselves in a third-party marketplace model for a different set of products or as a ‘backup’ solution to minimise out-of-stock risk, and potentially even leveraging a third-party reseller to sell to consumers. It’s important to have these types of backup plans in place to ensure product ‘availability’ – without fail – during peak seasons and in case of unexpected spikes in demand.
And let’s say a seller is running campaigns, price markdowns or promos on a specific channel but other retailers pick up on it and want a price match – you now have unexpected demand on these other channels. That brings price erosion and unexpected demand that you didn't plan for. And that could lead to out of stock, missed sales, reduced profitability and poor performance.
So, this is why sellers must have a holistic marketing strategy. It's what maintains pricing, it’s how inventory levels are managed and how high levels of customer service are ensured.
Data data data
While Wunderman Thompson doesn’t own and operate warehouses, nor does it do order picking/packing/shipping for our clients in the US yet, we do collaborate with them and their logistics partners on the importance of leveraging data upon which to base strategy. No one wants products to sit in a warehouse and incur storage costs while the inventory fails to produce a return.
It all goes back to demand planning and forecasting, and about having the right product in the right place at the right time in the right volume. But what does this mean for the busy Q4 shopping season in the US?
It all depends on your selling model. If you’re a big brand or you're selling into brick-and-mortar retailers, your marketing strategy and necessary inventory is already locked and loaded in Q3. If you’re selling on a marketplace or direct to consumers through your own website, you still have some time, but there is a lot of work to do through the end of the holiday season.
But all sellers should take advantage of the calm before the storm to ‘get your house in order’ by making sure all their product pages are correct – including imagery and videos – and make sure your price is consistent across platforms.
You also need to be constantly checking to see if you have enough inventory – and that may mean all the way from early October through late December. Then there needs to be a plan in place for replenishment. And there needs to be contingency planning – that way things are unlikely to go wrong.
For most brands, they will see the hockey stick effect on their sales volumes from mid-October through late-December triggered by Amazon Prime Big Day Deals, Turkey Five – Thanksgiving, Black Friday, Small Business Saturday, Super Sunday, Cyber Monday – and the holiday season which continues until around December 21-23 (which correlates with the last day consumers can place orders and still receive goods by Christmas via overnight or two-day delivery). It’s all about preparation and being match ready.
13 November 2023
More in Commerce
Commerce in APAC: a greater risk appetite
Helen McRae of WPP’s Mindshare in APAC explains how a willingness to try new things has created a standout environment for commerce in APAC
How Black Friday ate Boxing Day
Jon Bird of WPP’s VMLY&R explains why commerce trumps culture across the holiday shopping season
Consumer optimism up, but pragmatism rules
Holiday season 2023 purchasing is looking intentional and practical, says Tyler Murray, US CEO of WPP’s VMLY&R Commerce