Author: Extensiv Feb 01, 2024 7 Min READ

How to Scale an Ecommerce Business

7 Min READ
How to Scale an Ecommerce Business

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Mastering Growth: How to Scale Your Ecommerce Business

Scaling is key to growing your ecommerce business. With the right planning, tools, and support, you can set the stage to rake in the benefits of exponential growth, increased profitability, and set yourself apart from your competitors—all without overextending your finances or hiring waves of new employees.

Grow your ecommerce business with Extensiv

With the right forethought and planning, you can take your ecommerce business to the next level, overcome common challenges, win new customers, and increase your market share in a methodical, goal-oriented way.

When should an ecommerce business scale?

Scaling is a dream most ecommerce business owners envision. It’s why you started your company in the first place, right? Yet, many owners don’t know when it’s the right time to push forward. If you grow too fast too soon, you may overtax your resources and end up with unhappy consumers and an inability to meet growing demand. Conversely, if you wait too long or scale too slowly, competitors may zoom ahead, gobbling up market share, and making it increasingly difficult for you to scale in the future.

So, how do you know when it’s the right time to scale your ecommerce operations?

You’re experiencing increased demand

One of the most obvious indicators that it may be time to scale your business is when the demand for your product line or services is greater than your supply or your ability to keep up. This generally means you’re doing the right things to market your products and ensure customer satisfaction, which makes it a great time to capitalize on growth potential. Failing to do so may mean you can’t successfully manage all of your ecommerce fulfillment responsibilities, which may make your customers unhappy and ultimately lead to lost ecommerce sales and a negative impact on your bottom line.

There’s market opportunity

Even if you’re managing your sales funnel and order processing with few ecommerce challenges, it might be time to scale if there is a market opportunity that’s open and fits your business model. Doing so before others can give you a competitive edge and may allow you to introduce new products or services to the market, further solidifying future opportunities for growth.

You want to improve customer experiences

Scaling an ecommerce business will help you meet increased customer demand, but it may also create an opportunity for you to enhance your customer experiences. For example, if you scale your order fulfillment operations, you may have more inventory in stock (so there are no order delays). With more outgoing orders, you may be able to negotiate cheaper shipping rates, reducing costs for you and delighting your loyal customers. And, with more product going out, you may also have shipping and freight alternatives you didn’t have before. This may enable you to also get your products to your consumers faster, further enhancing customer service.

The most common mistakes in scaling for ecommerce

While there may be many reasons you want to grow, scaling your ecommerce business isn’t without its fair share of challenges and roadblocks. Here are some common issues ecommerce businesses face and why some fail to scale:

Rapid expansion without planning

While trends might indicate it’s time to expand operations, doing so without careful planning can have catastrophic consequences. Sometimes, ecommerce brands jump in headfirst hoping the momentum they have now will continue to propel them forward. But that’s the thing about trends: they rarely last. When ecommerce businesses grow without a strong foundation to support that growth, they can experience inventory stockouts, frustrating consumers who want to purchase from you. That might not just cost you business, it might create new revenue opportunities for your competitors who can fill the gap when you can’t.

Growing too quickly without preparation often uncovers a lack of infrastructure planning, meaning you won’t have everything in place to support your growth. You may create a logistics nightmare for yourself. For example, let’s say you expand into additional sales channels and you create more opportunities for more customer engagements. That results in more sales. That means there are more orders to fill, but if you don’t have enough employees to keep up with order processing, inventory management, shipping, tracking, and returns, you’ll not only negatively impact customer satisfaction, you’ll also frustrate your employees. If you’re working with a third-party logistics (3PL) provider, and you didn’t include them in your expansion plans, they might not be able to keep up, further negatively impacting customer experiences and bruising your relationships with your external partners.

Additional technological problems may also occur. For example, you could get such a rapid influx of potential customers you overwhelm your website or online store. Or, you could get so many customer inquiries across all of your sales channels that you can’t keep up and respond.

Underestimating operational costs

When you’re thinking about all the great things about growth, you’re probably thinking about all the money that’s going to come in with all the new revenue you’re going to create. While that may happen, you can’t overlook increased operational costs that may cut into your cash flow as you build strategies to support this growth.

It’s not uncommon for ecommerce businesses to budget incorrectly if they aren’t accurately tracking their cost of goods sold (COGS). They may end up losing money or having to push the pause button because they don’t have the funding to support scaling like they thought they would. And, like with many new initiatives, there are also often hidden costs that can be overlooked in the excitement of scaling. Failing to appropriately plan for additional costs such as potential infrastructure expansion, more hardware and software, and larger sales and marketing budgets can rapidly cut into your bottom line, putting the growth you hoped to achieve right out of reach.

Inventory and warehouse management horrors

More sales likely mean you’ll need more inventory in stock to meet demand. If you’re a brand managing your own warehouse operations and you’re not already using a warehouse management system (WMS), you may not have insight into your current inventory needs. Any smaller-scale problems you have now will only snowball into inventory and warehouse nightmares for your employees and outsourced logistics partners. You might also find you’re overly-optimistic, resulting in overstocks–which in turn increases inventory holding costs and takes up valuable warehouse space. These inventory and warehouse issues can rapidly reduce the profits you’re hoping to generate with growth.

No data insights leads to poor business decisions

Many smaller ecommerce businesses haven’t yet invested in inventory management or order fulfillment software. Often, they’re still managing all of these processes manually on paper or spreadsheets. Or, in the cases where they have implemented software, traditionally these solutions silo data leaving almost as many blind spots as a paper trail. Without a WMS that integrates with your other key operational systems, you may still be throwing a dart at a board when you’re making estimates and projections. And, if you can’t access or see your data, how can you make informed business decisions? Failing to use data analytics and demand forecasting tools is a sure way to stumble, and maybe even fail, on your path to expansion.

Some other common roadblocks that can hinder growth

  • Not utilizing the primary sales and communication channels your customers are or that they want (for example, social media, mobile apps, email marketing, in-store digital engagements, and personalization)
  • Trying to engage all sales channels without research into your target audience’s behaviors—for example, adopting all of the social media platforms you can without analyzing a potential return on investment (ROI) or understanding if your market engages with those platforms)
  • Building partnerships with influencers that can damage your brand or don’t offer tangible value
  • Gathering too much data without actionable insights (because not every measurable data point is going to help you plan for the future)
  • Not listening to what your customers tell you
  • Ignoring what your competitors are doing
  • Not tracking market changes
  • Not anticipating potential disruptions (for example, supply chain issues or natural disasters that prevent your business from operating)
  • Not implementing proper cybersecurity controls, which can result in a breach that could cost you millions in fines and penalties, disrupt operations, and damage your brand reputation

7 tips to scale your ecommerce business in 2024

While there are many ecommerce solutions that can help your company master the art of scaling–leave the awkward growth phases to the teenagers–these 7 tips are the most reliable and impactful:

1. Establish growth goals and develop business plans

Clearly define your desired outcomes with quantifiable metrics and key performance indicators (KPIs). Utilize sales forecasts and inventory reports generated by your ecommerce technology systems to inform realistic targets and resource allocation.

2. Know your market and target audience

Analyze customer demographics, purchase trends, and website and other behaviors within your integrated software platforms to understand your audience preferences. Leverage customer segmentation to personalize marketing campaigns and product recommendations to boost conversion rates.

3. Embrace automation

Reduce manual tasks in your warehouse and distribution centers. Automate order picking, packing, and shipping processes with a WMS to free up staff for strategic initiatives. You can also increase efficiencies with WMS-enabled barcode scanning and batch processing to minimize errors and expedite order fulfillment.

4. Partner with a 3PL or 4PL

Expand your fulfillment capacity by using the expertise and infrastructure of a 3PL or fourth-party logistics (4PL) provider to manage increased order volume and expand geographic reach. Ensure seamless data exchange between your technology stack and your logistics provider’s systems for real-time inventory visibility and order tracking.

5. Optimize your website and ecommerce store

Customers want a seamless user experience from your brand across all engagements. Make sure your website–especially your landing pages, product pages, and digital storefront–are mobile-friendly and easy to navigate with clear product descriptions, pricing, and high-quality images. Streamline product updates and availability information by syncing your fulfillment software with your online store and inventory processes.

6. Focus on customer support

Offer multiple communication channels across the entire customer journey to build trust with your brand and increase retention. Consider developing customer loyalty programs. Leverage detailed order data saved in your ecommerce technology stack from past transactions to personalize customer interactions and address concerns. Compare customer reviews with order, inventory, and return trends highlighted within your WMS to identify areas for improvement and deliver excellent customer service.

7. Put your data to work

Analyze purchase histories, website behavior, and customer feedback to uncover insights that can drive customer segmentation, personalization, and optimization. Utilize your ecommerce technology systems to track key metrics, identify trends, and generate actionable insights to inform better business decisions and fuel cost-effective scaling.

Supercharge your ecommerce growth in 2024 – click here to learn how Nomad Goods  streamlined their inventory management with Extensiv!

Easily scale your ecommerce business with Extensiv

Extensiv is the perfect partner to help you scale your ecommerce business using existing resources and optimizing existing processes. Here are a few examples:

Eliminate stock outs, overstocking, and other inventory issues. Extensiv’s warehouse management solution for brands handling their own fulfillment operations tracks every item, from arrival to shipment, giving you real-time inventory visibility and intelligent forecasting. With this platform, you can optimize storage, prevent costly errors, and streamline fulfillment.

Bridge the multi-channel gap. Extensiv's order management solution for ecommerce merchants integrates seamlessly with platforms like Amazon and Shopify, streamlining orders, automating tasks, and providing a single pane of glass for all your e-commerce channels. Equipped with a robust sales analytics dashboard, Extensiv’s order management platform allows you to consolidate insights across all sales channels to develop data-driven sales and marketing strategies.

Outsource your logistics operations to the experts. Extensiv’s unrivaled network of 3PL warehouses and 4PL networks can confidently command your fulfillment operations—so you can focus on tackling the other challenges that come with scaling your business. Visit Extensiv’s Fulfillment Marketplace to get started finding a logistics partner.

FREE REPORT Time to Expand Your Ecommerce Warehouse?  Best Practices and Tips for Brands & Merchants.  

How to scale an ecommerce business FAQs

How can I prepare my ecommerce business for scaling?

There are several ways to prepare your ecommerce business for scaling. ­For example, you can ensure your website and online storefront are optimized for increased attention and business, and you can adjust your marketing strategies to support business growth. If you handle your own logistics, be sure you have the right amount of inventory in stock. Depending on how much you’re scaling, you may find it beneficial to start working with a logistics provider for order fulfillment and warehousing. Also, if you work with a 3PL or 4PL, ensure they know about your growth plans and have a strategy to scale with you.

What role does technology play in scaling an ecommerce business?

Technology plays many roles in scaling ecommerce businesses. For example, you can automate many of your manual, repetitive tasks, you can use artificial intelligence (AI) and machine learning (ML) for enhanced predictive analytics, or you could use technologies to handle other aspects of your business, like customizing a chatbot to help manage customer inquiries.

Should I consider outsourcing some aspects of my business to scale?

Depending on how much you’re growing, it may be a good idea to outsource some of your order fulfillment and logistics responsibilities to a 3PL or 4PL. For those who don’t want the hassle of managing your supply chain, partnering with a logistics provider can alleviate those burdens from your daily operations.

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