Streamline your operations, with the best eCommerce platform for B2B. These are the...Read More
How to increase margins, protect working capital, attract big retailers, and make quality time to add new products
By Nick Spooner
CEO at Salesorder.com | Software and expertise for wholesaler optimization
I’ll show you how to:
- Legitimately avoid marketplace commissions to increase margins significantly.
- Reduce card and ACH payment fees to improve margins.
- Spend the right amount on inventory to eliminate lost or back orders and ‘dead stock.’
- Offer big retailers the connections they mandate to do business with you easily.
- Create more time to work on new products.
In January and February 2023, I spoke with hundreds of wholesalers, large and small, who exhibited at Atlanta, Las Vegas, and New York trade shows. If you were one of these friendly folk, I sincerely thank you for your kindness, time, and attention.
Your insights inspired me to think about and solve an endemic problem that negatively affects your margins and limits your opportunities to sell your products to large retailers.
Many of you told me you never have enough time to focus on designing and sourcing new products. I’ll share the solution with you here.
As far as is currently possible, I’ll show you how you can do all of this for the lowest possible cost, time, and effort.
How to avoid marketplace commissions
Short answer: get your own b2b e-commerce store, acquire new customers on the marketplace, and divert repeat orders to your b2b store.
Find out how to do this at the lowest possible cost in the shortest time possible in a moment. But first, there are a few things you need to know (NTN).
NTN #1 Avoid B2B eCommerce add-ons and integrations $$$
We all shop online. We shop from b2c stores on the Internet. It’s the norm. Your customers do the same. For the smallest and even the largest wholesalers b2b e-commerce is rightly perceived as expensive and complicated to implement.
Shopify charges approximately $2,500 a month to use their Shopify Plus b2b e-commerce store. This is the industry benchmark. Furthermore, if you want to build and integrate this type of technology with your systems, the costs will run into tens of thousands.
At this time b2b e-commerce projects are risky and can be very painful. I have first-hand and recent evidence from:
- Attending the BigCommerce Partner conference, a recurring cost-shared with me by b2b e-commerce agencies and customers was $250K.
- Two of my enterprise customers’ encounters with b2b e-commerce agencies pitches.
Use marketplaces to acquire new customers $
Faire is a magnet for your customers. It has the traffic and scale. It’s a great place to get new customers.
Faire is expensive for you, the wholesaler. They charge a 25% commission for new customers, 15% for repeat orders, and 18% if you need immediate payment.
For a $10,000 order from a new customer, you pay $2,500. Depending upon your cashflow requirements you pay $1,500 to $1,800 to Faire. Correction, replace “you pay”, with “Faire takes”.
Because of the convenience, marketplaces attract large volumes of customers. If you sell on a marketplace like Faire, statistically you’ll get new customers. Just like you do at trade shows. They too have high volumes of traffic. This leads me to my next point.
NTN #3 Analyze and compare new customer acquisition costs
It’s good practice and revealing to measure and compare your customer acquisition costs (CAC). You need this important benchmark to measure channel ROI. I’ll explain why this is a deciding factor in creating your own b2b store a little later.
Annoyingly at this point, I cannot offer realistic comparisons between the new customer acquisition costs on marketplaces and tradeshows.
If you have numbers and comparisons, if you send them to me, I’ll publish them without revealing their source. I think it would help everyone in your community to accept or put pressure on the market enablers to give us all a better deal. It would also help with budget decisions, right?
NTN #4 know your legal limitations
In this case, you are not bound by the contract. Check your agreement for ‘keeping transactions on the platform’ or similar clauses.
NTN #5 Evaluate and keep in mind the marketplace ‘extras’
Faire offers free shipping and 60 days terms to their retailers. Check, evaluate, compare, and note what extras the marketplaces bundle into their retailer offers.
For example, shipping is the key variable to evaluate here. You know your shipping costs per order. Your customer either pays it to you at the market rate, a fixed rate, their rate (their shipping vendor account), or you pay it.
Consider sales friction and direct competitors in your cogitation. Are the 20% of the customers who generate 80% of your sales sensitive or not to shipping costs? This could be your north star for your shipping charges strategy.
Whether you charge or don’t charge shipping or both, you need to know what you are paying as a cost of sales, or as income, you are receiving over a defined period.
Calculate it as a % to be deducted from your direct margin. You’ll need this to evaluate if doing B2B eCommerce directly is sufficiently profitable for you.
The solution and costs
The answer is to get yourself a system with seamless or native b2b ecommerce. In other words, a b2b ecommerce that’s included in your core system is the best outcome.
Salesorder.com contains a multi-storefront b2b ecommerce ‘portal’. You can embed this into your current website.
We call this the TAP or Trade Acceleration Portal. Behind a secure login, you can present your product catalog and real-time stock levels. Your customers can shop, track every step of their orders, and view and pay their invoices.
And on the subject of cutting payment fees, in the next section, I’ll tell you how to get the lowest card payment fees. But first, I want to give you a few tips on how to get customers to shop in your b2b store and spread the message.
1.Build a ‘remarkable’ direct online offer. Think about what you can offer your customer if they buy online from you. Remember you are saving time and effort if they do this (no more phone calls, emails, order entry, etc). Calculate the actual monetary savings, then decide if or what you might apportion to buyer incentives.
On this note, this is a worthwhile exercise – read or listen to ‘The Purple Cow’ by Seth Godin. (love Seth’s narration). You want buyers to talk to other buyers about you right? You want to be remarkable.
Whilst at the Atlanta Mart, I met many buyers in Ted’s Montana Grill. All of them remarked about what they did and didn’t like about the wholesalers they worked with. Whilst they talked a lot about Faire (and other marketplaces), there was a balance of positive and negative remarks.
2. Build a relationship first, then divert repeat buyers to your B2B store. Acquire new customers in the marketplace(s). Create a relationship with the new customer and ask, not tell them about your b2b store and your offer.
3. Tell your audiences about your B2B store. If you have a mailing list send the message and the offer. Same for Instagram and Facebook etc, and of course on your home page and business card.
4. Do video marketing by email. Ana is our marketing Jedi. We’re experimenting with software that can create personalized videos at scale. I’ll be writing more about this in another post soon.
You haven’t got time to do this or even think about it? In the last section, I’ll share with you how the right software can make time for you to do this.
How to reduce card and ACH payment fees
Without exception, everyone I talked to at the trade shows had very strong opinions on the fees they are charged by Stripe, Square, and others. The figure of 3.4% came up time and time again.
Shopping around for lower fees is difficult. It’s both confusing and consumes time you just don’t have. Because there are hundreds of providers and the way the payment processing providers market their services the answer you seek is most often conspicuous.
You want to make it easy for your customers to pay you wherever they buy, get paid immediately, and know you are getting charged the lowest possible fees.
Over the years, we’ve worked with wholesalers and integrated their choice of payment provider. These are names you’ll know. Providers like Authorize.net, Stripe, Square, etc have great marketing.
We’ve seen the same problems over and over again, poor and time-consuming customer service, and a lack of transparency about fees to name a few.
We’ve done the research for you. We specifically looked for a solution that not only offered the best rates but also offered the best customer services and the fastest turnaround time for account setup.
Because I know you want to take payments in any situation, in the office, online, and at trade shows, we sought a payment provider who could offer a solution for any of these scenarios.
Our business relies on card and ACH payments, we’ve hundreds of wholesalers of all of the sizes you can imagine. We ask for, not take their payments monthly. So it’s in our interest to minimize the payment fees.
One payment provider stood out. They are a payment processor, they work directly with over 200 US banks. So they can definitely offer the best rates and customer service. We got to know all of the decision-makers personally. Unlike many other new providers they have been around for 20+ years, and they are privately owned.
Their onboarding process is fast and straightforward, and their technology for all of the payment capture scenarios is tried and tested. Better still they work with large numbers of wholesalers. Like us, they know wholesale.
Because of this, their technology is baked into our software for wholesalers. You can talk directly with them at any time, and their approval process takes up to 5 days.
They work hard to give you the best possible rates. All you have to do is call them and share your costs from your current provider. You also need to tell them where you want to take payments and they’ll provide you with the right hardware or software connections that work with Salesorder.com.
It’s a very straightforward, fast, and simple process. And we are confident they’ll give you the lowest possible fees.
How to forecast, so you have the right inventory at the right time and protect your working capital
I just watched a Netsuite testimonial. Their reference customer shared, “It used to take us five days to create an inventory forecast, It now takes one day”.
What I am about to share with you takes a few minutes. It’s part of our software for wholesalers. Every day, it does all of the forecast analysis work for you; it even creates the Purchase Orders.
All you have to do is review the Purchases order(s), and with a few clicks, you can email them to your supplier(s).
Here’s the cool part!
This is what we call the ‘gold brick’. It is always up to date and takes a single click to display.
Here’s what the numbers mean.
Current availability of products: This number shows your current availability of products and the percentage of those products available for sale, which also indicates how many of your products are not for sale.
The lower the number is the bigger problem you have. The difference between 100% and this value represents the lost opportunity. 100% means that everything your customers need to buy is available in your inventory.
Lost monthly revenue: The second line translates current product availability into value, showing you how much money you’re losing in lost revenue each month.
Monthly lost sales are a valuation or potential of your current stock unavailability. It is the potential you could achieve in addition if you had the right structure and amount of inventory.
Inventory reduction potential: This shows you how much money you have in Overstock. It shows you the opportunity to reduce your inventory in value. Remember that this is calculated based on your own data, so once you improve those numbers, you‘ll see the progress in the app. You can watch as the value of your deadstock decreases over time.
Our forecasting tool gives you a real-time snapshot forecast. It will help you make the best possible use of your working capital, help you eliminate backorders and customer disappointment, and save you days every month.
How to make it easy for big retailers to do business with you
Buyers are time-poor, if they choose your products, they want to know they can start sending you their orders immediately. They want to expend the minimum amount of effort to get up and running.
At their end, they have enough to do with getting your product into their stores. They just want to know if you can supply when they or their customers need your products.
So you’ll need to have the right stock at the right time, so you’ll definitely need the inventory forecasting I shared with you in the previous section. You’ll also need to provide them with a frictionless and convenient method to send you the orders, and know you are going to deliver.
For as long as I can remember, big retailers have used a technology called EDI (electronic documents interchange) to automate the process of sending orders to their vendors. They also use this technology to get acknowledgement that the order has been received and shipped.
When you’ve shipped their order(s), they’ll want to receive your invoice(s) using EDI.
If you are already trading with a big retailer and your software is not directly connected to them, you’re probably logging into a web page, opening the order, and re-entering it into your system.
It’s a pain, right? It takes valuable time and effort your salespeople could be spending on selling, or doing other things that contribute to growing your business.
You may have already explored connecting your software to the retailer’s software using a method called EDI Automation. Your retail customer may have already they would prefer you to do this.
Subsequently, you may have talked to the EDI provider’s salespeople. And no doubt they told you it’s thousands of dollars and weeks to get you connected. I’m specifically talking here about the big EDI provider brands like SPS Commerce, True commerce, etc.
Not affordable right?
We have heard this so often. And if our customer has decided he has to afford the costs, the whole implementation process takes weeks, and the EDI provider goes at their pace, and their customer service to us and you is frustrating and just makes everyone angry.
We decided we’d had enough, and we couldn’t let our customers suffer any longer. Equally the working capital upfront expense and the ongoing costs were not fair and not acceptable.
As for the time it takes, it just frustrates the hell out of you and makes your customer unhappy. Your precious and potentially game-changing buyers have chosen your product, they just want to get started.
We spent weeks researching over a dozen solutions, and we talked to the big EDI vendors, but they were not helpful. So we dug deeper, because we are software engineers we imagined how we might solve this problem. This exercise changed how we thought about we searched for a solution. We found one!
For a cost to you of $400 and just a few days or less if they’ve already made the connection, the software vendor we discovered can provide you with a game-changing solution.
It’s now built into our software for wholesalers.
Because of the speed and economics of this solution, this means you can be a dream supplier for the retailer. Just like their bigger vendors you can say “We can get up and running in days”
Fortune favors the bold right? As part of your sales strategy, you can promote almost instant connectivity to your target customers, and it will cost you a few hundred bucks.
To find out more about who we are already connected with, or to get started go here.
How to create more time to work on new products (and sales)
If you’ve read the preceding sections, you are probably already seeing opportunities to reduce the amount of time and effort you spend on tasks that can be efficiently done by software.
You are in a creative industry right, you are either a creator or you are spending time researching products and their suppliers. Tens of exhibitors I spoke with at the trade shows told me they would rather be doing this important task than working on the administration of their wholesale operations.
The problem they all cited is “I never have enough time to do this well, and I actually love doing it. It is who I am”.
So let me introduce you to the ‘icing on the cake’. It’s called software automation. You are using a good example of this every day if you use voice search on your phone.
Software automation is honestly very simple to understand. Every repetitive task you do begins with a trigger. A call to action if you will. For example, you use your thumb to scroll. Your phone detects the thumb movement, and it takes action to scroll.
How far it scrolls is determined by a rule, for example, go this far on your screen. Voice search works in the same way, “OK Google find me a restaurant near me”.
The rule ‘restaurant near me” is translated by Google into these steps (in the blink of an eye).
- Determine where you are using the Location tracking”
- Search for restaurants near your location.
- Display them on the screen by distance.
Cogitate for a moment the ‘rules’ you follow when you manually process a customer order.
They might be:
- Find the order(s) with a status of New or Open
- Determine the customer.
- Determine the date they need it.
- Determine if what they need is in stock.
- Prioritize the order.
- Allocate the stock.
- Send it to picking.
- Confirm the order to the customer.
You get the general idea. These are rules for a task you do over and over again. And if you are fortunate to have tens or even hundreds of orders, you’ll spend hours even days getting this done.
Software can follow rules and do the work for you. You can ‘codify’ and automate the task, and the software can do this a significant order of magnitude faster. It doesn’t need a coffee break, it doesn’t need time off, and its cost is fractional by comparison to that of someone you pay to do it.
Before you read any further, just do a simple calculation of the number of hours a day you spend on order processing, or with spreadsheets, or with the system you currently use. Perhaps you are using QuickBooks and or Shopify. It’s a lot of time right?
Add b2b ecommerce where your customers, or even EDI where your customers push the orders to you. Now add the automation. How much time would you get back per day, month, or year?
We’ve built automation into our software for wholesalers.
If you want to know more just go here to talk.
Conclusion and final thoughts
Here’s a reminder of the benefits I’ve discussed.
- Significantly increased margin,
- Labor-saving ecommerce,
- Elimination of lost orders and wasted capital on the stock you can’t sell,
- Better use of working capital,
- An attractive incentive for retailers to work with you,
- Affordable, easy, and efficient way of working with big retailers,
- Automation to reduce repetitive work and free up your time to focus on products.
I hope I have not overburdened you with detail, but the descriptions are long because I wanted to head off any obvious questions. So thank you for reading and bearing with me. As always I’m just trying to get the best for you and your business.
On this note, I just wanted to remind you our only focus is wholesalers. Our vision is simple, we want to optimize the operations of every wholesaler we work with.
Here are some more benefits:
- Learn in days: Time and time again I hear, “Your system is so simple to learn and use”. From the moment you talk to us you’ll have free access to everything you need to know about our software, and you’ll have free access to our expertise.
- Implement in weeks: We are laser focused on making the journey from your current system as economical and efficient as is possible. Time and time again, we’ve implemented our benefits in less than a week.Here’s a great customer sharing with you how they deployed our software in 4 days in their busiest-ever trading period. Watch the video.
- No upfront fees: Unless you elect for us to do all or some of the implementation for you, there are zero upfront costs. This is in stark contrast to other software vendors in our space, who charge tens of thousands in professional fees.
- Affordable by every size of wholesaler: Our costs to you are one-third of one percent (0.33%) of your revenue monthly in arrears. We ask for this, we don’t take it. So you don’t pay us until you earn. The real point here is if we help you increase your revenue, we like you get value in return.
- Dedicated expert and account manager: We’re honestly interested in everything you do and every challenge you have. We are problem solvers, your problem is our problem. We are always here by appointment.
One more thing, I have even more ways to help you to optimize your operations. I just thought this post was getting a bit too long. So look out for more advice.
If I’ve got your attention, and you’d like to talk to me in person, then hit me with an email – nick.spooner at salesorder.com or call me at +1 312 469 0320.
I’m here to help!
Thank you for reading and I wish you well.