Improve E-Commerce Performance
With Order Management Integrations
IndustryView | 2015
Online retail is becoming an increasingly viable and profitable alternative to traditional brick-and-mortar stores. Software Advice wanted to understand how integrations between order management software and third-party e-commerce applications can impact the performance of online stores.
To learn more, we conducted a survey of small online retailers (those with $50 million or less in annual revenue) who use these systems to help others understand how such integrations can help maximize efficiency and grow sales.
The growth of online retail is one of the most significant effects of the Internet on the modern business environment. Freed from the shackles of overhead costs that accompany brick-and-mortar stores, retail entrepreneurs can launch online stores and grow their operations with lower upfront investments.
Yet even in an online retail environment, scaling up can be a challenge for businesses whose original processes for managing and fulfilling orders can’t handle an increase in volume. In these situations, online retailers typically invest in various e-commerce solutions.
But if these e-commerce solutions don’t work well together, retailers can find themselves back at square one. Using systems that integrate with each other within a single order management platform can help retailers maximize efficiency. This can result in more time devoted to critical business operations, and less time dealing with technological issues or entering data in multiple systems.
To learn more, Software Advice surveyed small online retailers that use order management systems and at least one type of integration to illustrate how these integrations can positively impact retail businesses. We focus on the most common integrations, including those with online stores (e.g., Amazon, eBay), shopping cart services (e.g., Shopify, BigCommerce) and shipping services (e.g., UPS, FedEx).
Before we delve into how integrations impact e-commerce performance, let’s look at how these integrations work.
Essentially, an order management system is the “hub” where data from each critical aspect of the business—the online storefront, the shopping cart, the inventory system and the payment- and shipment-processing platforms—flows in and out of. The order management system is aided by integrations with services and functions in each of those critical areas.
This graphic illustrates the relationship between the order management system and its possible integrations—and how those integrations interact with one another.
First, the order management platform integrates with the users’ sales channels, such as Amazon or eBay. Orders from these channels are automatically entered into the order management platform. The system’s integration with shopping carts then sends customers’ data back to the platform, allowing the user to see what people are putting in their carts, what types of orders are abandoned (more on this later in the report) and so forth.
After an order is processed, the inventory is automatically updated in the order management system, and payments are automatically processed by the system’s accounting software. Finally, shipping labels with the customer’s information are automatically created, or the order is automatically sent to the fulfillment center (whichever is applicable).
(Note that there is a lot of overlap between many order management platforms and the e-commerce services they integrate with. Different platforms may feature built-in inventory management, accounting or shopping cart functionality, for example.)
The first question we asked respondents is which of the three integrations described above—shipping services, shopping carts and online stores—they use. Online store integrations are the most common (74 percent), with shopping cart and shipping service integrations not far behind.
When an online retailer first opens up shop, it typically begins with one sales channel: either its own website, or a third-party marketplace such as Amazon, eBay or Etsy. As the business grows, retailers often opt to sell their products through other channels to increase sales opportunities and brand visibility. (As Entrepreneur notes, expanding online sales channels is a critical move new businesses need to make in their first year.) Thus, it makes sense that online stores are the most common integration type among our sample.
One problem retailers often run into when they expand online is that receiving orders through an additional channel requires manually entering the order, inventory and accounting data back into their main order management system. With a high volume of orders, this process can become incredibly time-consuming and prone to human error.
In order to gauge how integration with online stores can help address these challenges, we asked respondents about how it impacts performance against certain key metrics for online retailers.
Clearly, online store integrations have an overwhelmingly positive impact on reducing order processing time and improving accuracy. For example, take a retailer who sells through both Amazon and eBay, but does not have those channels integrated with an order management system. When they receive orders through those channels, they will have to bounce back and forth between each platform, while also manually updating their accounting and inventory systems. This adds both steps and confusion to the process.
Inventory visibility is another metric users say is positively impacted. If a retailer with integrated systems sells a product through both Amazon and eBay, for example, their inventory levels will be automatically updated across the board.
Other benefits cited by respondents in the open ended response portion of the survey (not listed in the chart above) include being able to tailor their product offerings to each channel based on how well the products are selling.
“It’s just easier to use, because I sell on both Amazon and eBay, so [integration keeps sales] all in one place. ... I can see all of my inventory, and switch it around if I realize I can sell something better on one site over another. It’s just more efficient, and saves me time for just a little money each month,” says one user in our sample.
Free two-day shipping has become the competitive standard set by Amazon Prime (and same-day delivery—once unimaginable—is quickly coming to fruition for Amazon shoppers in major cities across the country). In light of this, it’s critical for small retailers to be able to ensure on-time delivery of their products.
With shipping service integrations, the process of generating shipping labels and selecting carriers is easier than ever before. And clearly, such integrations have a positive impact on online retailers’ operations.
Typically, most order management systems will integrate with FedEx, UPS and the United States Postal Service (USPS). Depending on the type of order and its origin/destination, rates between different carriers can vary. And depending on where they live, certain customers may not be able to receive shipments from certain carriers. It’s thus important for retailers to be able to easily change carriers based on cost or customer needs.
One benefit of shipping service integration is the ability to automatically generate shipping labels with the name and address provided by the customer. This helps increase accuracy by ensuring shipping information appears exactly as the customer entered it. It can also save retailer’s time, especially when processing high order volumes.
Bulk orders can add another layer of complexity to an online retail operation—not to mention additional opportunities for inaccuracies. Here, shipping service integration and the automatic generation of bulk shipping labels can be particularly helpful for retailers who need to ensure they can quickly and accurately ship large order quantities.
“Due to the software integration with the shipping service, I have been able to handle bulk orders without much confusion, since inventory requirements are also tracked,” one user in our survey sample explains.
Lastly, shipping service integration displays all carrier rates in one place within the order management system. Without this, retailers would have to manually log into separate accounts for each shipping carrier to determine the most cost-effective rate. Even a difference of a few cents between rates can amount to hundreds or thousands of dollars for retailers that process high order volumes, making it crucial to find the best price. Saving time on rate calculations can also translate to faster order processing and delivery times.
Finally, we asked respondents about the impact of shopping cart integrations, which relay data in customers’ shopping cards to the order management system. According to our sample, one of the biggest benefits of this integration type is its impact on inventory visibility, which can help retailers forecast sales.
“I can see what people are looking to order, then from there, anticipate what I will need to re-stock,” says one user.
Our respondents say that shopping cart integration results in more accurate orders that are fulfilled more quickly. Without this integration, users would have to manually process orders from whichever sales channels they came from and ensure the data was accurately reflected in each of their accounting, inventory and shipping systems.
As previously mentioned, it’s not just the order management system that integrates with the various e-commerce services—these services can also integrate with one another. For example, shopping carts can integrate with shipping services to provide customers with real-time shipping rates before checkout.
This integration allows retailers to see whether high shipping rates, one of the main causes of shopping cart abandonment, are dissuading customers from completing purchases. Given that around 68 percent of customers abandon their carts, retailers miss out on approximately two out of three opportunities to make a sale.
If a retailer notices customers are abandoning carts with higher shipping costs, they might try lowering these costs and adding the difference to the original product price(s). Though the customer may still pay the same price (or perhaps even more) when all is said and done, this psychological trick is used frequently in online retail to increase sales completion rates.
Alternatively, the retailer can simply reduce or eliminate the shipping fee altogether. Some retailers even offer these customers digital gift certificates in an attempt to lift their shopping cart out of e-commerce purgatory.
Finally, we looked at which order management systems our survey respondents mention most frequently, and which integrations these systems support. In most cases, users are able to integrate their order management system with other services by simply syncing the two accounts together and transferring data between them. Generally, the syncing process is instantaneous, and the user can set their order management system to automatically sync all orders from their various channels on a periodic basis.
While some order management systems support more out-of-the-box integrations than others, it’s important for prospective buyers to consider which integrations they actually need. Some vendors target different industry niches, such as fashion or electronics, and thus tailor integrations towards what their target audience wants. For example, some vendors have more powerful offerings for retailers who rely on third-party warehouses to fulfill the orders. Other vendors also seek feedback from users about the integrations they want, and are constantly adding new ones.
Below are the most popular order management systems used by our respondents, and the top integrations they support (note that this chart is not exhaustive):
The tremendous growth in online retail has no doubt driven significant competition in the market for order management systems. Indeed, a good chunk of the biggest vendors in this space have been around for less than five years.
This has benefits for smaller online retailers: Not only are many of these platforms competitively priced, vendors also have a strong incentive to make their platform “play nice” with the other e-commerce services their customers use.
Online retailers today use a variety of platforms that facilitate e-commerce, from Etsy to Shopify to Volusion to eBay. Based on our research, users can expect the following benefits from deploying an order management system that integrates well with the other e-commerce services they use:
Business visibility. Streamlining orders from multiple channels into one platform provides retailers with a high degree of oversight into their businesses’ overall performance.
Task automation. Order management system integrations automate many tasks and reduce the amount of manual data entry that the user has to perform to fulfill an order.
Order accuracy. With an order management system that is fully integrated with other e-commerce services, users are less likely to get an order wrong.
Turnaround time. Ultimately, integrations save users time—and time-savings are passed on to customers in the form of quicker order processing and turnaround.
Our survey respondents are primarily very small online retailers. Two-thirds of respondents generate less than $100,000 in annual revenue, and 57 percent of respondents process less than 250 orders a month. Inventories are similarly small, with 54 percent of respondents selling fewer than 100 “stock keeping units,” or SKUs.
To collect responses for this survey, we emailed survey invitations to order management software users in the United States who operate online retail stores with annual revenue of $50 million or less. This resulted in 121 completed surveys.
Results are representative of our survey sample, not necessarily the population as a whole. User commentary solely represents the views of individuals. Chart values are rounded to the nearest whole number.
If you have comments or would like to obtain access to any of the charts above, please contact email@example.com.