Understanding channel management systems

December 06, 2018 Industry news

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In this guest blog, Matthew Ferguson from our partners at Emanaged, explains why you need you need a channel management system for Marketplaces

Amazon has reportedly absorbed another 3.8% drop in traditional ecommerce, and simply seen these sales shift to its platform. Marketplaces are still on a present trend to be over 40% of all global ecommerce by 2025. But marketplaces present problems for sellers.

They have strict logistic, customer service and operational metrics
They demand ongoing accuracy on stock levels, pricing and order updates
They demand no-argument refunds and a buyer-at-any-cost level of satisfaction

A seller managing their own website orders simply cannot absorb marketplaces into their present way of working. Simply put, marketplaces force any seller to shape up their business processes.

The Landscape

While Amazon’s dominance in regions continues like a freight train on steroids with no brakes, their growth is pushing other entities to create marketplaces. Indeed, once a topic dominated by just 2-3 names, marketplaces seem to be popping up everywhere from different profiles; Distributors, aggregators, Brands, agencies, technology platforms… the allure of having your own marketplace is appealing to many.

Some did shut down this year. Tesco, Gameseek, Toys R Us and Full Beauty to name a few. Many of the ones recently shut down couldn’t get their balance of buyers, sellers and back office automation and scale right.

The landscape is growing. More buyers are sitting at home buying on more channels than ever before. There are roughly 450 marketplaces across the globe. Amazon US is now the first-place people search for product, with other regional Amazon’s catching up per country with similar effect.

You can’t escape the need to be present on marketplaces as a Brand or seller. As the market and buyer trends shift to them, you will be at a disadvantage if you delay or ignore the movement of the market.

Get Ready

To run marketplaces well, you need a channel management system. There is no dispute any longer on the financial, operational, accuracy and visibility reasons for needing one. They pay for themselves in all areas.

Full disclosure, I am an Ex-employee of ChannelAdvisor, an enterprise level channel management system. I am also an ex-consultant of Esellerpro, now Volo Commerce, a UK competitor. My view point is tainted further because I co-founded an agency which focuses on helping sellers find the right channel management systems and scale their marketplace operations. Its fair to say my view point isn’t the clinical definition of objective.

But, can you disagree with me? If buyers are moving to marketplaces, if the younger demographics have grown up in a world where marketplaces were always present, if buyers expect 1 day delivery and no-hassle refunds for millions of available product, can you realistically believe your website 3-5 day service and more laborious refund procedure for buyers, along with your ballooning digital market budget to acquire and bring traffic to your website, will really avoid the ecommerce tide?

What they do

Marketplaces are data hungry beasts. You can feed them all the data you have, but they are greedy for more. Managing that data across many channels is a nightmare if you aren’t automating as much as you can.

If you are sitting in a corporate office, killing time reading this before your next management meeting, to discuss a graph that isn’t moving in the right direction fast enough, or at all, you know your time should be dedicated to growth.

If you’re sitting in your home office, or a local office, or a business owner, you usually have the same struggle. You want to focus all week on those growth opportunities or new ideas, but the week becomes a struggle to manage the basics and keep things afloat.

It doesn’t matter who you are, or the size and model of your ecommerce company or department. It will fail on marketplaces eventually if its not as automated and efficient has it can be. If everyone else is getting automated and efficient, its just a question of time before you fall behind.

Where to start?

First, understand there are many channel management systems. They aren’t all created equal. Some are over priced for what they offer. Others under sell themselves.

Second, understand there is no ‘good and bad’ system tally you can google. Reviews and reports can help ensure they are legitimate and help guide you to avoid pitfalls. But what makes a channel management system ‘good’ for you may make them ‘bad’ for another.

Third, understand these tools may promote the same definitions as ‘channel management systems’, but they may define what those three words mean very differently. Having been in this line of work close to a decade, watch out for a few areas which many companies can under invest research and use case needs:

‘Managing your stock levels and orders’ will mean centralising orders and keeping stock levels updated on all channels. Is that all you need? Bigger companies will have nuances, a desire for extra controls and abilities. For example, if you want to leverage FBA, will the system filter out FBA orders from your warehouse? Make sure the strategic goals align with what controls you are offered in this area
‘Managing your listings’ can mean anything. For some tools, this simply means if you make a change on your website, the change will push to all other channels. But that’s rarely good enough for marketplaces, which have specific data schemas and taxonomies. A good tool doesn’t just push data blindly – it actively helps you align that data to marketplace needs, and surfaces what’s missing
‘Connect you to X channels’. Great, but are all those channels viable for your growth needs? Can you sell on them? Expansion ease is great, but you want the right channels on offer. A good system gives you a runway to grow for years

Don’t rush this. Picking the wrong system can be a painful problem when you must exit it or replace it. Its hard to change the tyres on a moving car. We know; we do this for sellers routinely.

The fear of change

Embrace the change, because its coming. Embrace the tools, the efficiency, because you have no choice.

If you can imagine technology and automation will put you out of a job, here’s a news flash – it will. You cannot fight the tide of change, especially when you’re fighting a more efficient more profitable alternative. You need a new job – to run and oversee those new tools and systems.

If you can only grow your business by hiring a ballooning team – stop right now. You are staffing people to fix a system problem. Many sellers fall into this trap. They hire a growing team, increase a large salary-heavy overhead on their ecommerce operation, but none of it makes any sense on the balance sheet.

What a team of 5 might need to manage daily, a new system can automate and run over a few hours per day. What a staff of 1-2 people do well daily, a system might do better in a few hours. If you have a large team running your Amazon or eBay channels, you are not running it correctly.

No company of any size needs a large team to run their marketplaces. If you have several salaried employees working full time to simply ‘run’ your marketplaces, you aren’t scaling this right.

Make 2019 the year you change for better scale. By 2025, it may be too late.

About the author

Matthew Ferguson worked previously for two US retailers as the eCommerce manager, before taking a position at ChannelAdvisor, His team handled some of the biggest names in retail: Quiksilver, House of Fraser, Mothercare, La Redoute and Target to name just a few. Matthew worked as a consultant for Volo commerce, before co-founding Emanaged LTD / RichInsight, part of Edaptive Group.