This article is Part 2 in a series on Fulfilled by Amazon (FBA) Aggregators. Read Part 1 to learn about this new business model of acquiring successful small businesses selling on Amazon.
For FBA Aggregators, acquiring and operating a growing number of businesses brings along many challenges. During the pre-acquisition phase, the focus is on sourcing, vetting, and closing. Many FBA Aggregators have proven processes in place to streamline buying companies and closing deals quickly.
Post-acquisition, though, the story is a bit different. If the acquirer is just getting started without an operational plan and central system architecture in place, they will need to rely on operators, additional headcount, and resources to manage the newly acquired businesses, significantly adding to operational costs.
Alternatively, businesses that already have a central system architecture in place will need to incorporate new acquisitions into their existing infrastructure. That central system architecture needs to be capable of tackling operational challenges that pose a risk to their business.
Addressing Operational Challenges with Integration
Based on Celigo’s learnings from working with thousands of ecommerce companies, I repeatedly see the types of challenges today’s leading mid-market ecommerce businesses face. What I also see is how they use integration to automate every single business process, eliminate human intervention as much as possible, and leave little room for risk.
Many of these companies use their Enterprise Resource Planning (ERP) system to run their business. They integrate their ERP system with all relevant applications, such as ecommerce storefronts, online marketplaces, product information management systems, third-party logistics (3PL), marketing, and customer service apps to automate underlying business processes.
Order-to-cash, item management, fulfillment, procurement, returns management, and marketing automation are some popular business processes. With integration, these companies centrally manage data across multiple applications from their ERP.
Based on these learnings, here are five top challenges FBA Aggregators need to address upfront and my recommendations on how to tackle them with the help of integration.
1. Delays in post-acquisition integration
First, acquired companies’ operations need to be integrated into the existing system architecture to streamline and automate processes. Integration delays not only result in operational inefficiencies, but they will also negatively impact future sales. Speed of integration will be critical for at least maintaining the current average sales volume.
In this case, having cloneable, pre-built integrations to connect and replicate ecommerce business processes for each acquisition will speed up post-acquisition revenue.
2. Visibility into business-critical data
Next, delayed visibility into product and sales data prevents timely, data-driven actions and decisions. This includes attempts to improve Amazon Best Seller Rank (BSR), which is critical to achieve high order volumes and grow revenue.
As an example, poor visibility into inventory levels will delay inventory replenishment and procurement, resulting in product stockouts across FBA warehouses. Plus, poor visibility into product sales data will prevent FBA Aggregators from taking timely actions to improve product sales performance – and we all know that you need to act fast to stay competitive when selling on a marketplace.
Both situations will lead to deteriorated Amazon BSR. On the other hand, better visibility into inventory levels can also help reduce FBA storage fees and quickly get rid of slow-selling inventory when necessary.
With an integration platform (iPaaS), any ecommerce marketplace, storefront, warehouse management system (WMS), or 3PL can be connected to an ERP to keep inventory levels up to date. Sales data from ecommerce sales channels, landed costs from an ERP, and advertising costs from digital advertising platforms can all be connected to a data warehouse for advanced analytics and reporting to single out unprofitable products and sales channels.
3. Staying compliant with a vast number of regulations and policies
There are various data and tax regulations across the globe with occasional updates. Today, Amazon has more than 16 marketplaces in America, Asia-Pacific, the Middle East, and Europe. Non-compliance with each region’s tax and data regulations across hundreds of seller accounts can result in financial penalties.
For example, new Pan-European value-added tax (Pan-EU VAT) regulations went live July 1, 2021, and businesses will have to adjust their tax collection and reporting for compliance.
Sellers also need to adhere to marketplace policies, since Amazon is very strict with suspending violators’ accounts.
Through automation, repeatable, consistent processes can be rolled out for each business, and human errors can be eliminated. For example, tax settings can be configured to automatically calculate taxes based on pre-set rules, breaking down tax rates within the ERP.
4. Ensuring supply chain continuity
Acquisitions will most likely have existing supplier contracts in place, but we witnessed how a pandemic disrupted manufacturing and logistics in 2020.
That’s why a contingency plan is a must, whether it’s having back-up suppliers or piling up stock upfront. Supply chain management gets tricky when you have to source thousands of products for tens to hundreds of brands across the globe through heavily human-dependent processes.
Using the latest technology for procurement and logistics, such as API-based electronic data interchange (EDI) and API connections from the ERP to multiple warehouses and fulfillment centers can provide businesses with agility. That way they can quickly take action with the click of a button to place orders from different suppliers, switch fulfillment from one location to the other, or move inventory from across locations. Automated, near real-time interactions become even more critical when managing hundreds of suppliers.
5. Scaling operations
Finally, bottlenecks will occur if existing systems can’t keep up with rapidly growing operations. For example, holiday sale prices need to be updated in Amazon before the holiday sales start. Otherwise, delayed product updates across thousands of SKUs, tens to hundreds of seller accounts, and multiple sales channels will translate into lost sales to competitors.
Systems in place need to support processing large volumes of transactions and moving large data volumes across systems. It is essential to have a system architecture that is robust, scalable, and reliable.
To learn more about how Celigo can help you streamline your ecommerce integrations, please contact us now.
Also check out Celigo’s integration solutions for ecommerce automation.
The next part of this blog series will focus on leveraging technology for market expansion.