How 'Catalog Overlap' Creates Margin Points AFTER the Sale
Did you know you can increase your margins post-sale? Well, why not? You use a repricer to win the Buy Box, while selling to customers at the highest possible price. You don’t think twice about driving up your average order value (AOV) and growing your topline. These activities are second nature to you. But the concept of creating margin points after the customer agrees to your selling price … after the topline has been set … might be new to you. Well, we feel it should be just as necessary as repricing or any of the other operations you perform daily.
What Catalog Overlap Is and Why It Matters
It comes down to having 'catalog overlap' - in other words, being able to buy the same SKU from different suppliers in different locations. Having access to many sources of inventory in various parts of the country helps you avoid losing sales to stockouts. It also gives you a chance to save money on each and every order!
All online marketplaces require you to set your selling price before you know where the order is being shipped or where the end customer lives. If you strategically build a supplier network with locations on the East Coast, in the Midwest, and on the West Coast - whether it’s your own warehouses or your suppliers’ - you have the flexibility to route orders to the location closest to the end customer and thus minimize freight costs. Sometimes this saves a few cents per order, but other times it’s a few dollars. In many categories where margins are razor-thin, this cost savings can really start to add up, especially if you’re processing hundreds of thousands of orders per day.
Turning How You Fulfill Orders Into a Competitive Advantage
Here’s how it works. When a customer places an order, check out available sources of inventory at locations closest to the customer’s zip code. Once these candidates are selected, determine how the order is fulfilled from each location. Drop shipped from your supplier’s warehouse? Cross-docked from your supplier's warehouse to yours? Or picked, packed, and shipped from your warehouse? One supplier may charge a $5 drop shipping fee. Another supplier may charge a $3 handling fee. Add up all your costs - product and shipping costs - and make a logical decision based on the lowest total or delivered cost.
Needless to say, the more variables you introduce into the equation - multiple suppliers in multiple locations with multiple cost structures - the more complex and difficult it becomes to manage. When there are multiple line items on an order things are even more complicated. I don't care how good your warehouse manager is, he's not going to make the lowest cost decision 100% of the time. And even if he could, do you really want him rate shopping all day long? The point is, these complexities also create opportunity. If you're able to leverage the right technology to automate the process, you gain a competitive advantage over those doing it the longer, slower way.
Why You Should Prioritize Sourcing Over Selling
Many of our clients are building vast supplier networks so they know where product sits and what it’s going to cost to get it to where they want it to go - all without ever having to touch it. That information is power. That can drive a lot of revenue. If you know where 4-million SKUs are sitting across the country … and you know what they cost … and what it will cost to get it to the end customer … and at the drop of a hat you can rate shop and know how to get it to the customer in the cheapest way possible … that’s incredibly valuable. After that, all you have to do is connect to a source of demand. Just list the products for sale and you’ll know which supplier or distribution center to use to get the highest margin.
What you need to do this is the right technology. Our single integrated platform connects your sources of inventory to sources of demand and automates the process in between. This allows you to focus on finding the right products at the right prices. Then, your sales can be turned on like a tap!
Topics: Etail Vantage Point