Black November puts e-commerce operations under pressure

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JEREMY MAGGS: Now, Black Friday, just around the corner, is no longer just about bargain hunting. For South African retailers, the real danger may be getting more business than they can actually handle. Let me explain.

As promotional activity stretches across the month, the surge in orders can expose serious weaknesses in stock management, payments, deliveries and customer service.

So record sales don’t necessarily translate into record profits.

Let’s discuss this in a little more detail. Anita Erasmus is with me, chief executive officer of the e-commerce company Bob, and argues that businesses need to prepare for the consequences of success and not simply chase higher sales. Anita, welcome to you.

This is an interesting take on Black Friday. Your suggestion is that businesses can sell too much and end up worse off financially.

ANITA ERASMUS: Thank you for having me, Jeremy. Yeah, I definitely think Black Friday, Cyber Monday is probably one of the most difficult times for retailers, especially in e-commerce, and a lot of the times I think they think they’re going to be chasing profits and then they end up actually realising that the business might be in a worse position after Black Friday than before it.

JEREMY MAGGS: So retailers, if I’m hearing you correctly, put too much emphasis on attracting customers and maybe too little on fulfilling promises, but I guess it’s human nature to chase the money, right?

ANITA ERASMUS: Yes, I think it’s human nature and there is a lot of benefit when it comes to Black Friday, but I think it’s important to not just think about how you will attract the sale or increase your orders.

But once you’ve received that order, how will you get it to your customer?

That if you want to take part in Black Friday and Cyber Monday, that you can’t just think about the discounts. You need to actually take it through the whole fulfilment process.

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How will you pick and pack the order in a very high stress, increased volume environment? How will you get that order to your customer?

If you think about it, some of these small e-commerce merchants, they might do, let’s say, 10 orders a day.

Now suddenly they’re doing 50 orders a day, and they just need to make sure that they actually prep and plan for the whole process and not just think about the sale.

JEREMY MAGGS: Let’s talk about prep and plan. I guess it all comes down to a good projection strategy. How does a business establish exactly how many orders it can realistically handle? Obviously, it differs from business to business, but is there a formula?

ANITA ERASMUS: I think if there was a formula, we probably would have been making a lot more money than what we are making.

JEREMY MAGGS: Yeah, we wouldn’t be having this conversation, right?

ANITA ERASMUS: We would not be having this conversation. It is extremely difficult to forecast, but I think there are some basic things that you can do as an e-commerce merchant, and it starts with just automating your process.

So during a time of such high volumes and so many orders, you can’t be writing down things anymore.

You need to make sure that you’ve got integrated systems, and you’re using software or platforms that can make it easier for you.

We are living in the day and age of technology, so I think there are so many options for e-commerce merchants. Just make sure you use them.

I often use the example – and maybe Excel is not the right software to use anymore – but you get people who can use Excel and then you get somebody who can really use Excel.

I think that’s an example to say, make sure that whatever system you’re using, you actually know how to use it and you optimise it.

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Can you scan, pack and fulfil your products to get them out of the door? So yeah, I think that’s very important. First of all, make sure you use technology and you use it optimally to be able to get those products through your warehouse quicker and out the door to your customer.

JEREMY MAGGS: Do you think smaller online retailers are more vulnerable, or could larger retailers be equally exposed to this problem?

ANITA ERASMUS: Yeah, Jeremy, I think the reality is small e-commerce merchants are more vulnerable. They don’t have the bigger teams, they don’t necessarily have the capacity or the cash to be able to scale so quickly.

It’s not impossible but I do think for the smaller ones, they probably need to plan a little bit more and make sure that they invest in their inventory, for example. Do you have enough stock to be able to fulfil the promises that you made at checkout?

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Also, do you have, as I mentioned, the technology, and then do you have the fulfilment providers, or courier partners to be able to get those products from yourself to the customer in a time when you are maybe one of their smaller clients, you’re not one of their bigger clients.

I definitely think it’s more difficult for smaller e-commerce merchants, but it’s not impossible.

JEREMY MAGGS: What happens then, and you talk about fulfilment partners, what happens when a retailer sells stock that it actually doesn’t have?

ANITA ERASMUS: I think you end up with an unhappy customer. I would really advise e-commerce merchants to make sure, especially for Black Friday, you do see a lot of them where they basically sell a product on their website, but they don’t hold the inventory themselves.

The problem is then they rely on their suppliers to get that inventory to the merchants and then from the merchant to the end customer.

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So if you do want to run discounts on certain products during Black Friday, I would advise merchants to have that inventory in stock, so that they can actually fulfil it quicker and get it to their end customer.

That might not be a model that you follow throughout the year, but to make sure that those products that you do have those big discounts on, that you have those products in stock is extremely important.

JEREMY MAGGS: Of course, it’s not just Black Friday anymore, is it, Anita? Turning Black Friday into Black November, I’m assuming, has made these operational pressures significantly worse because of all of the consequent hype, which we’re already starting to see at the end of October.

ANITA ERASMUS: I don’t know if it’s just a way for marketing to spin it a little bit differently, Black November, it sounds very dramatic.

But yes, we’ve been operating as Bob and in the last 10 years, we’ve seen how Black Friday increases, and assisting small-to-medium merchants with that.

But yeah, we can definitely see it’s not just that last weekend in November, but that is through the whole month.

Sometimes, I do believe that actually relieves a little bit of the pressure because you’re not just scaling over one long weekend, but it is scaling throughout the month, which does make it a little bit easier, I think, from a performance side.

I also want to mention that we’ve seen over the past three years how a lot of the courier partners have also been able to scale their operations within the month of November.

That is very difficult for them to be able to do that. But I think, as an industry, there are a lot of things that are coming together to make it easier for e-commerce merchants to be able to scale in such a short time period.

JEREMY MAGGS: Anita Erasmus, you are the chief executive officer of the e-commerce company Bob, thank you very much indeed.

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