Save Millions: E-Commerce Best Practices

Do you trust your financial statements? Reconciliation tools for Online Retailers

max@optimalogica.com (Maxim Mironov) — Fri, 23 Oct 2009 15:04:47 PDT

Do you trust your financial statements? Does your cash account in Quickbooks match your bank statement? Would you like to reconcile costs with sales on an order/product levels and see how profitable your business really is?Practically every company I work with desperately needs real time accurate financial data to make best pricing and marketing decisions and Quickbooks wasn`t simply designed to

Competitive Pricing: We win by losing price wars

max@optimalogica.com (Maxim Mironov) — Sun, 02 Aug 2009 11:23:19 PDT

Competitive pricing is great! It drives sales. Competitive pricing is stupid! It kills margins. Which side are you on? Do you know when to stop in order not to lose money on every sell you make?Ask anyone in online merchandising - pricing is Voodoo. Yet, all the different approaches can be grouped into two: "cost plus" and "competitive pricing".Cost Plus PricingWholesale Price: changes every few

Creating a marketplace for unique products sold at 50 % plus margins

max@optimalogica.com (Maxim Mironov) — Wed, 11 Mar 2009 15:29:50 PDT

A few grim facts: US marches into another great recession. Consumers viciously compare prices and switch for a $1 difference. Online retailers dropship from the same established manufacturers selling almost at cost just to stay in business. So, is everyone blind? Why compete with Walmart and Target instead of signing up small manufacturers and selling unique products at a nice margin?There are

Price right your top 10,000 products. Repeat weekly

max@optimalogica.com (Maxim Mironov) — Tue, 10 Feb 2009 16:04:50 PST

Are you making a profit every time someone buys from you? Are your prices too high or too low? Would you like to earn exact margin % over actual product, dropship and freight costs on every sale?I truly believe that cost reconciliation is a cornerstone of any business. One of my past engagements was an inventory program analysis - digging up freight inbound costs, product costs, warehouse order

Magic of Free Shipping

max@optimalogica.com (Maxim Mironov) — Fri, 16 Jan 2009 12:16:34 PST

Free Shipping is one of the common tricks to convert visitors into customers. What I found though is that most of retailers neither have an analytical framework to identify products to be sold with free shipping and nor have tools to evaluate results of the promotion. Here are some of my best practices that you are welcome to try out.Magic of Free ShippingThere are numerous researches on why Free

Customer Returns: 1 % returns = 10 % sales

max@optimalogica.com (Maxim Mironov) — Sun, 21 Dec 2008 21:01:14 PST

Liberal customer return policies drive sales, no doubts. However, how nice is nice enough? Where is the line between generating extra sales and losing money? Here is a a simple framework to evaluate impact of your return policies on well-being of your business.Your return costs = product cost + shipping + marketingProduct costs: half of your vendors don`t accept returns, others charge 15 %

Widening hole in your pocket - shipping costs annual increase

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:29:30 PDT

It`s a well known fact that UPS and FedEx increase their rates every year for 6-7 %. They are not alone in this "beat the inflation game", freight companies do the same plus they have a few more unobvious ways to balloon your shipping costs without you noticing it.Let`s take a look at a typical transportation contract and how LTL companies can charge you more:Base Rate - Freight companies more or

Expedited shipping: extra revenue or disastrous costs

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:29:48 PDT

Economy 101 and common sense suggest that there are people out there willing to pay extra for expedited delivery. But can you profitably sell to these people? Does extra revenue bring you more margin or expose to potential disasters? As Christmas approaches do you want to go extra mile and offer 2nd day, overnight or special services deliveries?In my experience, most of the companies are actually

35 % Margin: Myth or Reality

max@optimalogica.com (Maxim Mironov) — Fri, 28 Nov 2008 09:23:44 PST

Most of the people who started e-commerce businesses were expecting to earn at least 35% margin. The reality is disappointing. To grow you need to price competitively; your fulfillment costs accumulate quickly and actual gross margin drops to low-twenties. But, can you keep high margins and grow?Many product categories can deliver 35% plus margins. For furniture, for example, reasonable COGS is

Effective Return Policies

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:30:05 PDT

Stan`s article on Returns Policies has been featured in PracticalEcommerce (a leading online retail magazine). Here are some of the advices on elements of simpler and more effective return policies...If there is one thing that every online retailer hates and fears, it’s returns. Many great stores fight to keep return rates below 2 percent of total shipments. Those merchants work with the carriers

Cutting cost is better than cutting people

max@optimalogica.com (Maxim Mironov) — Thu, 13 Nov 2008 12:38:09 PST

We are in the recession. Consumer spending is decreasing and many experts expect bad times to last for at least next 12 months. Naturally, companies are looking for the ways to reduce burn and many of them are cutting staff. I want to argue that there is a better way to survive the stormy times and letting people go undermines your perspectives.1. NumbersLet`s say your G&A is 9 % of sales (pretty

Half your damage in transit in just a few weeks

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:30:25 PDT

It`s quite common to think of "damage in transit" is an inevitable part of the business and that little can be done about it. My experience is quite the opposite: 10 % of the vendors are responsible for 90 % of the damage and a couple of simple solutions can half your costs in just a few weeks.So, why damage is a big problem for some manufacturers and is not for others?First of all, much depends

Negotiate FAK or bleed to death

max@optimalogica.com (Maxim Mironov) — Sun, 26 Oct 2008 15:43:47 PDT

If you ever reconciled your shipping costs on a product level - you`ve ineviteably seen situations when Chair A costs you $50 to deliver and Chair B of the same weight shipped from the same manufacturer only $15.These single incidents start happening daily as you grow. Shortly you lose control over your shipping costs and can`t tell anymore if you should be selling this product line at all.The

Goldmines of Invoice Verification

stanley.arul@gmail.com (Stanley Arul) — Sat, 18 Oct 2008 11:29:44 PDT

How can we ensure we are being invoiced accurately at all times, are all the rules and discounts in place? These are some of the challenges every retailer faces, the solution really is to regularly verify your invoices and make sure we are not overpaying the supplier.When a supplier signs an agreement to fulfill your orders, it is important to ensure both parties agree to the set deliverables.

How to build a great relationship with your vendors

stanley.arul@gmail.com (Stanley Arul) — Thu, 09 Oct 2008 19:56:59 PDT

Every retailers challenge is to always keep his suppliers happy; the success of your business revolves around the supplier's ability to source products in a timely manner.Signing deal with a new vendor and further steps ahead to set up a profitable relationship requires a well structured set up, there are many ways to make the vendors job easy at the same time obtain the relevant info that you

Two ways to reduce your Lost Sales

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:30:43 PDT

Lost Sales is a bit of an enigma for every company. How can you know for sure how much revenue did you lose due to uncompetitive pricing and operational inefficiency. I want to share our way of addressing both issues.Uncompetitive pricing.COGS and Shipping cost reconciliation will equip you with data necessary to optimize your pricing. In another article on my blog I spoke about some of the

How to define your returns policies

stanley.arul@gmail.com (Stanley Arul) — Thu, 02 Oct 2008 19:36:56 PDT

In any retail business having a concrete policy on returns is very important; this could ensure the loss is minimal due to returns.It is very difficult to consider all aspects of returns in your policies especially when one is selling multiple sku's that are different in nature from one another, there are however ways to derive policies based on the type of return.Returning a defective itemA

6 simple steps to turn around your returns management - (Part 2)

stanley.arul@gmail.com (Stanley Arul) — Thu, 25 Sep 2008 04:21:46 PDT

Returns management is a big challenge for any retailer; you always wonder how to ensure customers don't return the item. Well it's quite possible with a strong process - read on..In this part I want to share a little more specific steps to diminish returns. The aim should be to have a return rate of less than 2% for any type of sku in any given month. I want to discuss three different catogories

Dude, Where`s my margin? (part 3)

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:31:02 PDT

In the second part I`ve argued that most of the retailers call COGS is a sum of actual Cost of Goods Sold and costs of fulfillment inefficiencies (for some of which vendors should issue credit memos). In this part I`ll share some of the benchmarks and cost reduction practices for shipping costs.Shipping costs are likely to be your second biggest cost on P&L statement. They range from 10 % to 25 %

Purchase Orders: small details are important

stanley.arul@gmail.com (Stanley Arul) — Mon, 03 Aug 2009 16:31:56 PDT

Purchase order is a basic component of the retail order flow yet flawless communication between you and your manufacturers is essential to reduce errors and be able to properly reconcile costs with your sales data.The format used to raise PO’s should be carefully reviewed; you could save a lot of steps in re-confirming the details of your order each time to the supplier. Let us look at two

ABC of Inventory management - basic terms and applications

stanley.arul@gmail.com (Stanley Arul) — Wed, 10 Sep 2008 11:24:12 PDT

Often you need to make a decision - buy products into inventory or dropship. In this article I review some basics of inventory management and share a couple of hints to help make this decision.Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. Inventory are held in order to manage and hide from the customer the fact that

Shipping cost reduction strategies: consolidate or shop around

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:32:11 PDT

There are two most commonly used strategies to reduce shipping cost: negotiate volume discounts or shop around each time for the best price. While both strategies produce results consolidation is better one for rapidly growing online retailers.Strategy 1. ConsolidationDo an assessment of your current shipping agreements. Are you shipping on your account? Using vendor`s accounts? Working with a

Best Practices to maximize damage claims recovery

stanley.arul@gmail.com (Stanley Arul) — Tue, 02 Sep 2008 11:03:10 PDT

Claims as a whole could get very complicated if it is not done correctly. When we set up the process for the first time our recoveries were below 20 % of the product value. By identifying specific issues and reworking the process we have increased recovery to 35 % of retail price. Our damage rate was about 4 % of sales, so process improvement resulted in savings of (4 % * (35 % - 20 %)) = 0.6 %

Dude, Where`s my margin? (part 2)

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:32:26 PDT

In the first part we looked at a P&L statement and identified biggest cost saving opportunities. Now is the time to look into Cost of Goods Sold and share some of our best practices making it accurate.Cost of Goods Sold (COGS) - 59 % of salesWhen was the last time (if ever) you compared vendor invoices against the costs in your system? Were your expected costs close to the invoiced amounts? Or,

Retailers and Shippers: Friends or Foes

max@optimalogica.com (Maxim Mironov) — Mon, 03 Aug 2009 16:32:42 PDT

It sounds counterintuitive, but reducing your shipping costs is in the shippers’ best interest. Lower shipping costs allow you reduce prices, your sales increase and so does your shipping volume. As a result, by giving you better discounts carriers increase their sales and total margins.Shipping contracts negotiation is never a zero sum game. It is a great opportunity to understand the other