ecommerce Overview Top Benefits of ecommerce Investing in the Right ecommerce Solution

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1 CostSavingsofanIntegrated ecommerceapproach July2011

2 ecommerce Overview ecommerce has always been about the general ease and simplicity of being able to browse through thousands of inventory items from anywhere in the world and secure a purchase. The volume of business conducted online has increased so considerably that since the inception of the Internet it is now difficult to think of something that can t be bought online. From sites that sell cars to sites that sell houses, there is really no limit to what is being sold on the web today. The ability to reach an audience at a fraction of the cost of other traditional marketing channels makes selling through an online shopping environment an attractive option for businesses of all sizes. Top Benefits of ecommerce 1. Offering products to anyone in the world 24 hours a day increases your customer reach. 2. Being able to accept credit card payments securely in real time and have those funds properly deposited in a bank account automatically. 3. Streamlining business activities by integrating order processing, shipping, and inventory. 4. Being able to gain insight into how a web store is performing with analytics tracking like page visits and conversion rates. 5. Having multiple shopping sites that help reach a variety of customers, whether it is for other businesses that commonly have repeat purchases or general consumers. Either way, websites can be tailored to specific audiences. Investing in the Right ecommerce Solution When searching for ecommerce solutions for your business, it s important to view it as a selling channel that operates as an integrated component of your business or organization. Companies need to look closely at the entire order process of selling online. Focus should not be placed on the frontend of the website only; it is important to look at the back-end as well and understand order process and fulfillment and how these transactions are recorded into back-office accounting systems. Many times with older, non-integrated ecommerce solutions, orders that are placed online have to be entered manually into an accounting or Enterprise Resource Planning (ERP) system. If a company puts a heavy investment in ecommerce and increases its sales over the web, costs associated with employing the necessary resources for order fulfillment, i.e. the process involved in taking orders from the shopping cart and placing them as orders that are fulfilled in the ERP system, should be considered as well. Software applications without integration between the ecommerce website and back-office accounting software can significantly diminish any return on investment an organization puts towards a new ecommerce website. Cost Savings of an Integrated ecommerce Approach 1

3 Traditional Shopping Carts Pain Points of a Non-Integrated Approach It s important to think of ecommerce and all the points it touches across a business after an order is placed. Consider accounting, order management, warehouse management, billing and shipping activities. There are many more factors beyond just an ecommerce storefront that need to be accounted for. The following are five of the biggest gaps in a non-integrated ecommerce solution that can significantly reduce ROI. 1. Duplicate Order and Customer Data Entry Companies will typically hire workers who are responsible for entering orders from the web into separate back-office systems. Any customer information that is captured on the website will also have to be re-entered back-office. This can result in unnecessary work and duplicate order entry that could be automated as well as errors from keying in wrong information. 2. Lack of Real-Time Pricing, Quantity and Inventory Availability Pricing changes that are made to an item in a back-office database are going to have to be changed online as well. Additionally, customers shopping the site will not be able to see if an item is backordered or out of stock until that change is made through the website, usually involving some sort of batch process. 3. No Instant Order Tracking or Tracking of Shipments Only being able to see placed orders without the ability to check order status online or click on tracking numbers for shipment information doesn t give customers the power to check important information like this at their convenience and usually results in an unnecessary call to a customer service representative. 4. Updating Product Catalog Online Managing large product inventories of 1,000 items or more can be complex. The amount of work needed to reproduce accurate, fully detailed product catalogs internally in an ERP as well as on an ecommerce site can be taxing and take valuable time away from more pressing needs. 5. Lack of Tools to Update Branding of Website Many older ecommerce solutions do not feature the ability to easily change the branding or look and feel of a site. This often leads to hiring a developer or web design firm to help with these efforts. Cost Savings of an Integrated ecommerce Approach 2

4 Cost Savings with an Integrated ecommerce Approach There can be a lot of planning and complexity when it comes to the idea of trying to integrate an ecommerce solution with an ERP system. At the same time, there can be a tremendous return on investment that can result as well. An approach that combines ecommerce and an ERP system together can play a huge role in facilitating the business processes as well as increasing your ability to sell online. Nowadays it is not uncommon for customers and suppliers to request the same type of information employees have access to through their company ERP system such as payment history, order status, and inventory catalogs. The only catch is they want access to this information anywhere at any time. This is where an integrated ecommerce platform can help suppliers, customers and internal employees see product catalogs, place orders, and check transactions anytime over the web, providing better ease of use and efficiency for all. Typical Scenario for a Small to Mid-Size Company Taking Online Orders Take for example a company that has three staff members who are responsible for data entry tasks as well as managing information between the accounting system and the web store. The tasks that they typically handle include making sure orders are fulfilled in both the web store and accounting system environments, updating inventory/pricing across both systems and updating customer account information. On the following page you will be presented with data that provides a cost estimate of a nonintegrated ecommerce approach. Download the Cost Savings Excel Calculator and see how smaller or larger inventory levels can affect your overall cost for a non-integrated ecommerce solution. Download the Calculator Here. Cost Savings of an Integrated ecommerce Approach 3

5 Non-Integrated ecommerce Cost Calculation (This shows what it would cost if you didn't have an integrated solution) The following scenario assumes a company with about $250,000 in annual revenue that is selling around 500 items. Companies that deal with larger inventories will require longer hours of order entry and payment processing. Inventory Items: 500 Cost of Entering Sales Orders Into ERP Accounting Systems Hours of Manual Order Entry/Week 10 Cost per Hour for Data Entry Staff $20.00 Total Sales Order Entry Cost/Month $ Total Sales Order Entry Cost/Year $9, Cost of Processing a Payment in Merchant System and Applying Payment in ERP Hours Spent on Processing Payments and Reapplying them in ERP/Week 8 Cost per Hour for Employee to Make Updates $20.00 Total Payment Entry Cost/Month $ Total Payment Entry Cost/Year $7, Cost of Managing ecommerce Website Number of Hours/Week Spent on Website Updates 10 [Includes Pricing Changes, Updating Inventory Online, Synchronizing Shipping Info] Cost per Hour for Employee to Make Updates $20.00 Total Webstore Management Cost/Month $ Total Webstore Management Cost/Year $9, Cost of Updating Website Design, Modifing Layout or Adding Content Cost of Hiring External Web Design Contractor/Firm for Branding Change $2, Number of Updates/Branding Changes Per Year 3 Total Website Design Cost/Year $6, Total Cost/Year $32, Cost Savings of an Integrated ecommerce Approach 4

6 Cost Comparison The following chart shows the cost of deploying an integrated ecommerce solution vs. the cost of using a non-integrated approach over three years. Numbers are based on the calculation from the previous page. The cost for an integrated ecommerce platform in this scenario are typical for a single business-to-business environment with annual support and enhancement costs that incur yearly. With an integrated ecommerce solution you would save approximately $58,390 or as much as 145% in costs over three years. Cost of Non-Integrated ecommerce vs. Integrated ecommerce Approach $120,000 $100,000 $80,000 $60,000 $40,000 Integrated ecommerce Investment Non-Integrated ecommerce Investment $20,000 $0 Year 1 Year 2 Year 3 Total Year 1 Year 2 Year 3 Total Integrated ecommerce Investment $30,750 $4,750 $4,750 $40,250 Non-Integrated ecommerce Investment $32,880 $32,880 $32,880 $98,640 Cost Savings Over Three Years $58,390 or % Conclusion Companies can experience a significant cost savings mainly from the amount of labor saved from unnecessarily entering data multiple times across different platforms. Freeing employees of these tasks can allow organizations to focus their time and energy on more vital matters that help grow the company. In addition, information from inventory, customer account info, billing and pricing can become more easily accessible and transparent across an entire organization and its customers. Cost Savings of an Integrated ecommerce Approach 5

7 About k-ecommerce k-ecommerce is dedicated to developing integrated ecommerce and epayment solutions for Microsoft Dynamics AX, GP, NAV and CRM as well as SAP Business One. We develop fully integrated B2B, B2C, Sales Portal and mobile-optimized ecommerce websites. Our solutions are quick and easy to deploy on premise or in our private, PCI Certified cloud. k-ecommerce also provides secure PA-DSS certified credit card/ach processing and an online bill pay portal. For more information: Integrated ecommerce Responsive Online Experience Omni-Channel Solution