1st Principles of Multichannel Merchant Operations


When merchants first start selling products online, typically it begins in a single place - whether that’s a D2C Shopify site, Amazon listings, or even perhaps emailed wholesale orders, it’s rare to start with multiple channels from Day 1.

However, as customer acquisition costs rise in the original channel, and demand increases on other channels that you don’t currently have a presence on, many merchants will consider channel expansion and diversifying where their products are sold.

While channel diversification can be an effective way to increase distribution and bring on additional customers, it requires careful planning and consideration to execute successfully.

Pre-Flight Check

To start, it’s important to consider why you are looking to expand away from your initial channel, and what you are looking to accomplish. Because channel diversification is a challenging endeavour, and one that can significantly increase operational overhead, it’s important to ensure this is the right strategy (at the right time) for your business.

For many merchants, the incentives and goals of channel diversification are twofold:

  1. Increase Sales
  2. Increase Margins

To increase sales, you have to get your product in front of more people, on a platform they are likely to convert. For example, there are many consumers who shop exclusively on Amazon for their online shopping, and therefore there is an opportunity cost if you don’t have a presence on Amazon, as you will never convert this consumer.

Additionally, you can often increase your margins on all products sold by distributing some of the fixed costs of your business across additional channels, and more sales. As an example, any product development costs can be decreased on a per unit basis by simply increasing the number of sales that are made. Similarly, any investments that you’ve made in physical infrastructure for fulfillment like warehousing space can also be distributed across more sales.

However, it’s important to note that it’s only possible to realize these operational efficiencies if the fulfillment processes are common across all channels. As soon as there are custom operational workflows built out for each channel post-purchase, this can quickly snowball into a massive amount of extra work for you and your team.

Core Concepts

Now that you’ve decided that multi-channel expansion is the right decision, and you’ve established the goal that you’re looking to achieve, you’re ready to start listing your products on additional channels. The first thing that these additional channels will be looking for is an identifying SKU code or another unique identifier to treat as the primary key for the listing.

Establishing a consistent SKU structure and naming convention across all channels is the most important step in this process - without it, it will become incredibly difficult to track inventory, manage returns, understand profitability, etc. We recommend having a SKU naming convention that is easily readable, formulaic, and able to be understood by both humans and computers.

For example - a clothing company having a SKU structure of [TEMPLATE] - [COLOUR] - [SIZE] makes it easy to add additional product variants when needed, and still makes it easy for your operations team in the warehouse to identify the product just by looking at the SKU, if needed.

To help develop a consistent SKU Structure, check out this SKU Builder which automatically generates a SKU based on the information populated. Make a copy of the sheet, change the subheadings to what’s relevant for your brand, and easily create your SKUs in bulk.

A machinery loading a container.

Evaluate Ops Infrastructure

There are two key aspects of your Operational Infrastructure that should be carefully evaluated before beginning your channel diversification journey: software and hardware.

Software - To effectively manage selling the same product across multiple channels, you’ll need a software that has robust inventory management and order management capabilities. Without this single source of truth, it will quickly become impossible to track inbound orders, inventory on hand, and outbound customer shipments. Using something like Fulfil’s Listing functionality, you can quickly and efficiently manage a single product across many different channels simultaneously.

Hardware - In addition to the physical infrastructure in the warehouse, this also includes your fulfillment team. If you manage your own warehouse, it’s important to understand the requirements of the additional platforms that you are expanding to. For example, if you are expanding to Amazon and are interested in seller-fulfilled Prime, you’ll need to ensure that you can satisfy the shipping requirements of this program. This may also require you to establish a fulfillment priority amongst your different channels - if everything is a priority, then nothing is, so your warehouse team needs to know which orders to pick, pack, and ship first. Batching Templates can also be used to help manage this prioritization process.

Looking Ahead

If you're looking to expand your sales to multiple channels, it's important to consider why you're doing it and what your goals are. You also need to establish a consistent SKU structure across all channels, and have a robust inventory management system in place. Expanding to multiple channels can be a great way to increase sales and margins, but it's not without its challenges. Careful planning and consideration are essential for a successful channel diversification strategy. Keep your eye out for the next blog post where we’ll cover multi-channel inventory management, and book a demo with our team to learn more about how Fulfil helps multi-channel merchants succeed.

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