The Ultimate Guide to

Scaling Your Retail Business

stitchlabs.com 2The Ultimate Guide to Scaling Your Retail Business | Stitch Labs

Scalable Technologies

Finding the Right Technology to Scale Your Retail Business

Managing Inventory & Operations Through Automation

Optimizing Warehouse Management

Simplifying Shipping & Fulfillment

Reporting & Finances

Managing Your Business Finances

Making Better Business Decisions with Real-Time Reporting

I.

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Retail Growth Strategies

Fueling Growth Through Multichannel Selling

Creating a Seamless Customer Experience

Developing Scalable Marketing Strategies

Expanding Your Business Through Product Development

Contents

II.

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44

III.

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Introduction

Growth is something every business continually strives toward. No matter the

magnitude of your business’ growth goals, in order to achieve them you’ll need

financial prowess, agile operational processes, winning marketing strategies,

and comprehensive data analytics.

From marketing growth strategies to scalable retail technologies and reporting,

this eBook provides modern retailers with guidance on how to implement the

right mix of proven processes, strategies, and technologies to accelerate sales,

improve profitability, and support sustainable growth.

I. Retail Growth Strategies

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OverviewMultichannel selling is an important growth strategy in today’s evolving retail

landscape. Since there are more channels to sell on and ways to reach

shoppers than ever before, smart retailers are taking advantage of online

selling platforms and marketplaces to acquire new customers and increase

revenue. Yet, added channels also means added complexity. To maintain

profitability and promote sustainable growth you need to strategically evaluate

and implement new sales channels.

Fueling Growth Through Multichannel Selling

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How To Strategically Expand into New Sales Channels

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Why to Expand Into New eCommerce Sales Channels

Multichannel selling (also known as omnichannel or cross-channel selling) is a

business strategy of utilizing more than one sales channel or method to offer

your goods or services to customers. But more sales channels means more

work and added operational complexity. So why is multichannel selling the

growth strategy of choice for most modern retailers?

Lower Barrier To Entry Than Physical Expansion

Instead of bearing the cost to open brick-and-mortar stores, today’s

eCommerce platforms leverage the speed and convenience of the Internet to

allow retailers a faster, lower risk investment path into new markets. Retailers

that are looking to expand their operations and penetrate new markets now

have access to numerous sales channels from which they can more quickly

and easily enter, test, and optimize.

Acquire New Customers

Your current and potential customers expect brands to not only offer a

seamless shopping experience, but also provide multiple paths to purchase.

Not to mention, these constantly connected customers typically have favorite

marketplaces or channels they regularly frequent for their online shopping

purposes. Leveraging customers’ built-in brand loyalty to marketplaces, like

Amazon, can be particularly beneficial. What better way to grow your business

than to actively reach these potential new customers where they’re already

shopping?

Establish New Permanent Revenue Streams

When it comes to multichannel selling, the proof is in the numbers. Stitch’s

data shows that small to medium-sized retailers who sold through a branded

eCommerce site (like Shopify, Magento, WooCommerce, or Bigcommerce)

made 38% more revenue by having a presence on a single marketplace (like

Amazon, eBay, or Etsy). And by simply adding a second marketplace, online

retailers grew their revenue by an estimated 120%.

Online Channels Revenue Gains: Marketplaces & Branded Websites

Branded Website Only

Branded Website + 1 Marketplace

% = Overall Revenue Increase

Branded Website + 2 Marketplace

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Even without utilizing branded eCommerce sites, retailers that sold on two

marketplaces saw 190% more in revenue than those that only sold on one

marketplace. Not to mention that on average, retailers that sold on two channels

had double the revenue of retailers that sold on only a single channel.

Exploring Different Types of Retail Sales Channels

Let’s explore some of the top online and offline commerce channels available

for businesses to sell through today.

Marketplaces

Marketplaces are eCommerce sites where retailers or third parties can post

information about their products and services, allowing the marketplace

operator to process their sales and online transactions. Since the marketplace

operator hosts, aggregates, and organizes the product information from a wide

range of sellers, they attract large numbers of online shoppers to their sites.

The top online marketplaces are:

Amazon: The largest online marketplace in the world, averaging over 188 million

user visitors per month and $88.99 billion in 2014 net sales. Amazon also offers

warehousing and fulfillment services through their popular FBA (Fulfillment By

Amazon) program, delivering over 1 billion items worldwide in 2015.

Ebay: An auction-based marketplace for C2C and B2C sellers. With an

estimated 159 million active users and 25 million sellers, eBay is a top

eCommerce marketplace.

Etsy: A marketplace for unique, hand-crafted products with 22.6 active

shoppers, 1.5 million active sellers, and $1.93 billion in 2014 annual gross

sales. Makers, craftsmen, and antique sellers tend to gravitate towards

selling on Etsy.

Alibaba: The dominant online marketplace in China, offering C2C, B2C, and

B2B eCommerce services. With 8.5 million annual active sellers, an estimated

Revenue Gains in Relation to Number of Marketplaces

1 Marketplace 2 Marketplaces

% = Overall Revenue Increase

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279 million active buyers, and 12.7 billion annual orders, Alibaba is the leading

global trade platform.

Sears Marketplace: A marketplace that allows merchants to advertise and/or

sell their products on the Sears Holdings Corporation family of websites. They

also offer warehousing and fulfillment services that are similar to Amazon FBA.

Rakuten.com: Buy.com became Rakuten.com in 2010, and now offers over 90

million products from 38,500 merchants around the world. Rakuten Ichiba’s

site follows a B2B2C (business-to-business-to-consumer) business model and

is the largest eCommerce site in Japan.

Jet.com: The newest online marketplace is Jet.com. Jet’s business model

relies on membership fees from customers, as opposed to the seller fee

model under which most marketplaces operate. Jet is currently partnered with

over 700 brands.

Branded eCommerce Platforms

Branded eCommerce platforms, also referred to as shopping carts, are

online platforms that enable retailers to create their own online stores. These

eCommerce platforms are favored by businesses since they allow retailers to

create stores that have their own branding, design, and customer lists. There

are generally two types of eCommerce shopping cart platforms: hosted and

non-hosted.

Hosted eCommerce platforms: Solutions that host and support web servers

for other companies’ sites. Meaning, your company can use a hosted platform

to build your branded website, paying them hosting fees to keep your website

up and running. The good thing about hosted platforms is they provide

technical web support in case you run into difficulties with your site. The

downside is you typically won’t have full access to your site’s source code and

might be slightly limited in the customizations you can implement.

The top hosted eCommerce platforms are:

Shopify: As the fastest growing eCommerce platform, Shopify hosts 200,000

active stores, earning about $12 billion in sales. There are a number of free

and paid site templates available to help you quickly get your store up and

running. They also offer close to 900 apps to provide additional features,

services, and plugins for your Shopify store.

Bigcommerce: Similar to Shopify, Bigcommerce has helped close to 500,000

business process $8 billion in sales. They also offer a mix of free and paid web

themes and app store integrations.

Self-hosted eCommerce platforms: Provide software solutions for businesses

to run on their own hosted systems. Meaning, your business would have to

procure and manage your own web server (or pay another company to host a

server for you), but you would be able to use the self-hosted platform’s software

to develop your website. The upside is you have more control over your

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website’s code, allowing for further customization. The downside is you’ll likely

have to rely on your own technical resources in the event of technical issues.

The top self-hosted eCommerce platforms are:

Magento: The leading open source eCommerce platform, helping

approximately 26% of eCommerce businesses manage over $50 billion in

gross annual transactions. Because Magento is open source, businesses have

full control over their site’s codebase, providing for ultimate back-end and

front-end customization.

WooCommerce: With 11.9 million downloads, WooCommerce powers over

30% of all online stores. WooCommerce is part of the Automattic family and is

an extension of the most popular online publishing platform, Wordpress. The

open and self-hosted nature of this platform allows for increased development

control and customization.

Brick-and-Mortar Stores

While many brick-and-mortar businesses are taking advantage of the

economies of scale offered by online sales channels, many online businesses

are expanding into physical locations. Although eCommerce business growth

continues to out pace the growth of in-stores sales, nearly 90% of today’s total

retail sales are still generated in brick-and-mortar locations. This has led online

brands to experiment with pop-up shops and establish flagship retail locations.

Choosing the Best Sales Channels for Your BusinessWhen looking for new, sustainable growth channels, today’s retailers have

an overwhelming number of options. Rather than trying to be everywhere at

once, you need to establish some method to the multichannel madness. The

following steps will help you effectively assess which channels you should

consider for your business:

1. Define Your Business Growth Needs

To effectively establish what your business needs from a new channel, you’ll

need to possess a strong understanding of your products, target customers,

and business operations. How much time and how many resources are you

willing to invest in properly building out a new channel? What percentage

increase in order volume can your current operations support? How much

brand control do you require from new channels? Answering these questions

upfront will help expedite your research process.

2. Evaluate What Each Channel Has To Offer

To find the best channel(s) for your product and business goals, you’ll need to

evaluate associated costs and fees, amount of branding freedom, required time

investment, and consumers shopping habits on each. It’s also important to know

who your target customers are, what they value, and how they prefer to shop.

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For example, if you have very aggressive revenue growth goals and a mass

appeal product line, you might want to be on a marketplace like Amazon as

opposed to the unique, handcrafted marketplace offered on Etsy.

3. Prioritize and Plan

Once you have a solid understanding of the available channels and have

assessed which options would fit best with your products and business goals,

it’s time to start prioritizing these channels and developing implementation

plans. While it’s important to prioritize channels based on potential revenue

impact as well as implementation time and resources, it’s also important to

consider diversification.

Just like a financial advisor would counsel you to diversify your stock portfolios

in order to minimize risk and maximize return on investment, you should build

an eCommerce portfolio of differing but complementary sales channels to

broaden your reach and maximize sales.

Implementing a Multichannel Selling StrategyThe business methods that may have worked for your single (or even

dual) channel operation may not be sustainable as your business starts

to scale. There are three important steps you’ll have to take to make this

implementation process as easy as possible:

1. Organize Product Listings

Consistency is key when it comes to multichannel selling. The more clear and

uniform your product information is, the easier it will be to not only publish

those listings across multiple new channels but also efficiently track them

throughout each individual sales process. Make sure all the product names,

variants, SKUs, and/or barcode IDs are consistently represented in your

systems. And don’t forget to ensure you have accurate inventory counts for

each stock item (more on that later).

2. Automate and Integrate Your Operations

The logistical burden of managing multiple sales channels and business

processes can quickly lead to operational failures and unhappy customers.

These types of headaches can be avoided by automating and integrating

your operational systems. Leveraging technology to sync your inventory, sales

channels, payment systems, shipping and fulfillment, and business analytics

will give you more supply chain visibility, save employees time, and eliminate

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the potential for human-error and miscalculation.

3. Adopt a Multichannel Inventory Management Software Solution

One of the most critical processes to automate and integrate across all

your sales channels is inventory control. Adopting an affordable, effective

inventory management solution can help multichannel sellers sync and

track all of their stock quantities and sales orders in one central location.

For example, Stitch Labs helps thousands of retailers transition from manual

and disparate processes to automated, real-time tracking everything

from accounting, purchase orders, and inventory counts to sales orders,

fulfillment, and reporting.

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OverviewMany companies struggle to keep up with today’s complex mix of online and

offline platforms. To cut through the clutter and gain loyal customers, you must

create a seamless experience across all your sales and marketing channels.

Since your customer experience can strongly impact your bottom line, it’s

imperative to assess what’s working, where improvements should be made,

and which processes must be in place to ensure customers have a positive

experience from the time they discover your brand to the moment they

receive an order.

Creating a SeamlessCustomer Experience

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Signs Your Customer Experience Needs ImprovementIt’s impossible for 100% of your customers to be happy 100% of the time. While

mistakes will certainly happen, your customer feedback should overall reflect a

consistent experience. When the same mistakes occur frequently, it’s probably

time to consider making changes.

Here are a few signs your customer experience needs improvement:

• Customers repeatedly express frustration regarding the time frame

in which their questions or concerns are addressed

• Delivery dates are frequently delayed

• The wrong products are consistently being shipped

• Inaccurate inventory tracking and management regularly cause

out-of-stocks or overselling

• You have high online shopping cart abandonment rates

Building A Foundation for Exceptional Customer ServiceA positive customer experience should be at the heart of all your business

decisions. From the navigability of your site to the logistics behind your

fulfillment and shipping, there should be very minimal effort required on the

customer’s side to select and receive an item. Once you’ve established a

customer experience worth raving about, you can focus on highlighting it

through marketing efforts. But first, focus on the intricacies and systems that

work together to create a fluid, exceptional customer experience.

Navigating Your eCommerce Site

From the time a customer adds a product to their cart on your website, to the

time they receive an order, their experience with your company should be as

simple and predictable as possible.

Here are a few factors to consider when designing your brand’s website to

ensure it is as easy as possible for customers to navigate:

Shopping on your site: Global eCommerce sales are projected to exceed $1

trillion in 2016. To get a portion of those sales, shoppers need to be able to

find your site. It is imperative to invest in optimizing your website for search.

Search engine optimization (SEO) and search engine marketing (SEM) are

essential ways to drive people who are looking for products like yours to your

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site. And don’t forget that website optimization extends to mobile search and

site performance as well. Today, 30% of online retail purchases take place on

mobile phones. Bottom line: If you’re not web and mobile-first, you’re behind.

Understanding buying habits: Make it as easy as possible for return customers

to make purchases. Save customers time by preserving billing and delivery

addresses as well as order history at checkout. Knowing what people want to

buy and when can help you increase email click through rates and improve

on-site conversions.

Checking out: When choosing a payment system, it’s best to go with

something reputable. You wouldn’t want to lose a customer at the very end of

their buying process because they didn’t feel comfortable entering their credit

card information on your site. Also be sure to include all costs upfront - when

shoppers abandon a cart, 56% of the time it’s because they are presented with

unexpected costs.

Shipping options: Once a customer places an order, a lot happens on your

back-end, but all they should know is when and how the correct item(s) will

arrive. Shipping options have become the norm, and customers expect to

get what they want, when they want it. Whether they want an item shipped

free (93% of customers will take action for free shipping), fast, gift wrapped or

personalized, a lot of work needs to happen behind the scenes to keep your

customers satisfied. Not all options are realistic for all companies, but test out

what works for you and implement any and all options you can accommodate.

Customer Support

U.S. businesses lose $83 billion each year due to defections and abandoned

purchases credited to poor customer experiences. To ensure your profits don’t

contribute to this statistic, your customers must feel supported, especially

when something has gone wrong.

Communicate quickly and thoughtfully: Should a customer need to

communicate an issue, make sure they can do so easily and through the

means of their choice. Whether by phone, email, or social media, customers

expect you to see their concerns and respond in a timely manner. A social

media management solution, like Hootsuite or Sprout Social, might be an

effective tool to give you visibility into what’s being said about your company

across all social channels. It can be tempting to skip the negative comments

and respond only to glowing reviews, but it’s how you respond to a customer’s

poor experience that truly impacts how they see your brand. Tactfully and

thoughtfully responding to a customer’s negative feedback shows customers

that you take service - and your brand - seriously.

Hire the right people: It should go without saying that the way you

communicate is an extension of your brand. Proveen Kapelle, a marketing

professor at Dartmouth who analyzes companies with top rated customer

service, said, “Customers get their service by interacting with the employees,

and so for the employees to provide better service, they have to take

ownership of what they are selling. If you have employees who are motivated,

who take ownership, who take pride in what they do, that translates to

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customer satisfaction right away.” Hire for support and service roles with this

in mind, and make sure employees who regularly speak with customers share

your mission and can communicate it effectively.

Listen to feedback: Customers want to be heard, and incorporating their

feedback as you iterate on your products and scale your business is a way to

create a culture of loyalty. Amazon Kindle is a famous example of doing this

successfully; they went through thousands of customer reviews and continue

to create new versions of their e-reader with this feedback incorporated. Not

only do you create a product you know your customers want, but you show

them you are listening.

Set clear expectations: When you fail to meet expectations, the customer

experience crumbles. And these expectations are high. A recent Aberdeen

survey shows that elevated customer expectations are the highest source of

external pressure faced by mid-market retailers. Decide from the beginning

whether your product is intended to serve a luxury or budget purpose. From

there, be very clear and intentional with how you position your brand.

How a Positive Customer Experience Impacts Your Bottom LineIf you don’t have customers evangelizing your brand, your customer

experience has fallen behind. Once you’ve created an experience customers

can’t get enough of, it’s time to turn that positive feedback into a way to attract

new customers.

Word of Mouth

Even in the age of connected customers, there is no marketing tactic more

effective than word of mouth. According to Nielsen, 84% of customers say they

either completely or somewhat trust recommendations from family, colleagues,

and friends about products. Unsurprisingly, these recommendations are

the highest ranking source for trustworthiness. Each experience has the

opportunity to impact many more future customers.

Social Media

Social media is imperative to how customers view and interact with your

brand. A recent Salesforce survey reported that 70% of marketers plan to

increase their spend on social and content marketing. If you’re not already

there, your competitors are. Understand what social platforms your customers

are on by using social sharing tools on your website and in emails to gain

visibility into what, when, and where customers share. Once you know where

your customers are most engaged, create and maintain a strong presence

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on these platforms. “Like,” post, share, and experiment with paid ads to get in

front of your target demographic.

Content Marketing

Know who your customer is and speak to them in their language. Chubbies

Shorts, a San Francisco-based apparel brand, quickly identified their target

audience as young men seeking a fun-loving, laid-back lifestyle. Their language

never deviates from their attempt to connect with that audience, addressing

customers on their website as “Hombre, Friend, Chubstomer, Amigo,” and

writing product descriptions that start with, “Don’t even bother filling out that

PTO form.” Chubbies’ voice is unwavering in who they are targeting, which has

enabled them to grow an immensely loyal customer following and maintain a

98% customer satisfaction rate.

Create Customer Advocates

Consumer behavior is most influenced by the recommendations that come

from a person’s network. An App Data Room survey found that advocates

tell twice as many people about their purchases and are five times more

valuable than average customers. You can directly influence your bottom line

by leveraging customer advocates, and you’ll fall behind when your customer

experience isn’t worth sharing.

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OverviewThe Internet, social media, software innovations, and mobile devices have

changed the face of marketing. Constantly emerging new customer acquisition

channels and marketing platforms are increasingly available for retailers to

leverage for business growth. While it can be challenging to craft integrated

marketing strategies within this progressively complex environment, retailers

must develop a scalable and effective mix of marketing tools and techniques

to reach today’s connected customers.

Developing Scalable Marketing Strategies

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Building an Omnichannel BrandThe lines between shopping online versus in-store are becoming increasingly

blurred, with 68% of adults checking the Internet on a smartphone while

shopping and 55% of shoppers saying they use a retailer’s mobile app while in

the store. Whether customers are checking reviews or making sure the price

listed in-store is the same as the one listed online, this purchasing experience

is the new normal. To streamline your branding efforts, you must pay attention

to each aspect of a customer’s on and offline shopping experience, ensuring

cross-channel consistency.

Building a branded website, optimizing for mobile, nurturing customers via

value-adding emails, and engaging on social media are all ways to enhance a

customer’s online experience with your business.

Branded Website

A strong brand is consistent, thoughtful, and memorable (think Apple or

Coca-Cola). A shopper on your eCommerce site or in your brick-and-mortar

store should instantly recognize an email or social media account by your

brand. Use integrated messaging to help customers move seamlessly from

search and social, through mobile or desktop versions of your site, all the way

through to purchase.

Challenges of Marketing to the Connected Customer• The connected customer is constantly inundated with marketing emails

and advertisements, which makes it difficult for companies or products

to stand out.

• With smartphones enabling instant research, connected customers can

easily find a similar version of your product if it’s overpriced, you don’t

have the correct size in stock, your shipping takes too long, etc.

• It can be difficult to create and maintain loyalty when you aren’t meeting

customers face-to-face.

• Customers have never had higher expectations for the experiences they

have with retail businesses.

While there are added challenges in marketing to the connected customer,

it is possible not only to cut through the noise and grab potential customers’

attention, but also to foster loyalty and gain repeat revenue. To overcome

potential barriers to growth, one of the first things you should focus on is

creating a consistent experience for your customers.

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Mobile apps can help keep your company top of mind and make it easy for

a customer to place an order or communicate with your brand. A glitchy or

slow mobile app, however, might quickly get deleted, so be sure you have the

proper resources to build if you decide to go this route.

Mobile ads aren’t going anywhere - so test some paid advertising on mobile

platforms to experiment with this channel.

Email

Forty one percent of consumers in a recent survey said they would buy more

from retailers that send them personalized emails. While adding a customer’s

name is a great place to start, determining where they found you, which

product(s) they have researched, and knowing their previous order histories

are all ways to help you make an email worth reading.

Personalized emails are 6 times more effective than bulk emails at lifting

transaction rates and revenue-per-email. When customers are segmented for

more personalized offers, email open rates increased by 39%, emails were

seen as more relevant by 34% of email recipients, and unsubscribe rates

reduced by 28%.

Consider win-back emails for lapsed customers or clever abandoned

shopping cart emails to remind shoppers of the items they may have forgotten

about in their online carts.

Before you spend thousands of dollars committing to a website design, test

several iterations. A/B testing is a great way to experiment with different

designs and use data to make your final decision. While certain details may

seem insignificant, sometimes the tiniest changes have huge impacts. For

example, one mobile phone retailer increased sales by 27% after A/B testing.

Since 75% of users never scroll past the first page of search results, it is

imperative to invest in optimizing your website for search. Search engine

optimization (SEO) and search engine marketing (SEM) are important ways to

drive people who are looking for products like yours to your website. You’ve

invested in great products and a great website, so take the extra step to make

sure anyone who’s looking for what you offer will make their way to your site.

Mobile

According to a recent Chief Marketing Officer Council survey, by 2017, mobile

devices will make up 87% of the total sales of Internet-enabled technology.

Mobile purchasing is only going to become more popular, so it’s important to

lay the right foundation now.

Thirty percent of mobile shoppers abandon a transaction if the shopping

experience is not optimized for mobile; so pay attention. Things that work just

fine on a desktop might not be as successful on a customer’s mobile device.

Test and optimize your site for mobile with tools like Google’s PageSpeed

Insights, and preview and perfect responsive mobile email designs with tools

like Litmus.

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Identify peak shopping hours and build staff schedules accordingly. Not planning

properly for your busiest hours creates long wait times and low bandwidth to

address customers questions or concerns.

Foot traffic means impulse purchasing. Forty-seven percent of consumers

buy on impulse in a brick-and-mortar compared with 25% of online shoppers.

Whether it’s allowing returns of digital purchases in-store or hosting events or

special promotions, try to get shoppers into your store.

Retail Growth StrategiesLoyalty Programs

Seventy-five percent of U.S. companies with loyalty programs generate a

return on that investment. This should come as no surprise, particularly since

Forrester Research has reported one loyalty program member spends up to

13% more than two non-members.

While developing and maintaining a customer loyalty program may seem like

a daunting task, there are many different approaches to take. The following

loyalty program strategies have proven to increase engagement and drive

repeat purchases:

Social

According to Shopify, discovering products through social media and ad

targeting has increased 202% in recent years. With more platforms embracing

the ‘buy button,’ it’s easier than ever for shoppers to purchase a product

directly from their favorite social media channels.

While the social landscape is ever-changing, Pinterest is the fastest growing

social network right now, and is arguably the best place for product marketing.

With the ability to add “buy-it” buttons to your product listings, shopping (and

selling) via social has never been easier.

Online reviews matter. Positive reviews can bump up a product’s price by

9.5%, while negative reviews have an 11% chance of changing a person’s intent

to purchase.

Before you over-zealously create accounts on every social media channel

you can think of, keep in mind that effectively managing social media takes a

great amount of time and effort. If you don’t have the bandwidth to respond

to customer comments or questions on Facebook, Twitter, and Instagram,

then you probably shouldn’t create accounts for all three. It’s better to be fully

present on one social channel than sparingly post and engage on five.

In-Store (Brick-And-Mortar)

While a strong social presence is critical to attracting and maintaining customers,

your brick-and-mortar store(s) should also reflect brand consistency.

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Influencer Marketing

Leveraging industry influencers to promote your brand is one of the least

expensive, most effective marketing methods. A McKinsey study found that,

“marketing-induced consumer-to-consumer word of mouth generates more

than twice the sales of paid advertising.”

To begin bolstering an influencer marketing program, retailers will typically

send free products to influencers within their industry or target audience to get

them to love their products enough to promote and recommend them to their

networks.

Influencer marketing is:

Authentic: A consumer would much rather read about your product in an

article by their favorite blogger than see it featured in a paid ad. Influencers

create buzz organically by reaching consumers when and how they want to be

reached.

Cost-effective: Not all brands are taking advantage of influencer marketing,

leaving competition (and cost) relatively low. Depending on the influencer’s

scope, they may be highly selective or simply excited for a free product. While

some influencers will charge fees on top of receiving your product for free,

in many industries, such as apparel, all it costs you is the price of sending the

product you want to promote.

Rewards points with purchase: The most common customer loyalty strategy

offers customers rewards points with every purchase or dollar spent with a

brand. The more customers spend with your company, the more rewards

points they get to put towards their next purchase, ensuring customers need

to keep coming back to your company.

Make sure your rewards points are easy to use and valuable enough that

customers will want to use them. To motivate customers to spend more in

order to receive more rewards points, retailers like Sephora have tiered

their loyalty programs, setting spending milestones to reach more exclusive

rewards.

Exclusive members-only offers and events: Everyone wants to feel like a V.I.P.,

so start giving your customers this treatment. Instead of offering rewards

points with every purchase, some retailers opt to provide loyalty members

with exclusive discounts, early access to promotional sales and items, and/or

invites to brand events. Understand what your customers value and do what

you can to provide it through your loyalty program.

Gamified customer engagement activities: Gamification is a great way to

engage customers in a way that is mutually beneficial. The most effective

consumer advocacy-building campaigns are engaging, interactive, and inspire

people to get behind your brand enough to share it with their networks. For

example, ask customers via social media to post a picture of themselves with

your product and offer gift cards, rewards points, or prizes for select winners.

22The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

2. Set up a proper tracking code methodology

Your marketing strategy is only as strong as the system you use to track it.

If you are not sure how to track the data, where to find it, or if the data is even

trustworthy, you have a problem. Find a way to create consistency among all

of your tracking links that tie back to your campaign.

3. Implement post-mortems for every campaign

It’s important that everyone on your team understands the “why” behind

your successes and failures. After a campaign is complete, gather your team

members to discuss what went well, what didn’t go well, and what needs to be

changed for the future. This is also a great time to reiterate the unit economics

of your business and help people understand the financial impact of the

marketing campaigns you run.

4. Constantly iterate

There is a reason so many technology companies have jumped onto the agile

marketing model - quick iteration means failing fast. This “fail fast” mentality

is not only applicable to the tech world. If you’re looking to improve on your

marketing efforts but don’t want to take on a big campaign, leverage tools

like Optimizely and free tool Google Analytics Content Experiments (GACE) to

quickly test if your hypothesis is correct.

Highly trackable: Provide influencers with a special promo code to use when

they talk about your product, and you’ll instantly see the effectiveness of a

social campaign. If you don’t want to discount your product, simply provide the

influencer with a trackable link to the product featured on your site.

How to Ensure SuccessThe intersection of data and marketing is where the real impact happens.

Whether the goal is market expansion, testing new products, or improving

customer loyalty, developing a clear plan of how you will measure success

is critical. Here are four ways to increase the impact of every marketing

campaign you launch.

1. Hire a data operations lead or data analyst

It’s a big investment, but worth it in the long run. As you scale your business,

it’s important to recognize when your team needs to move from “generalists”

to “specialists”. If you’re at the point where your marketing coordinator is

stretching across customer service and analyzing the unit economics of your

business, (s)he is doing too much. Hire a data analyst to align clear objectives

across departments and assess them properly.

23The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

OverviewExpansion is an essential part of any solid growth strategy. While it’s important

to expand into new sales channels and scale your operations, you also need

to expand your product line to truly achieve sustainable growth. Still, many

factors can influence the decision to expand your product offerings. Timing,

customer demand, competitive landscape, and manufacturing costs are just

some of the things to consider when you’re thinking about developing new

products. With the right processes in place, however, product development is

a highly effective way to scale your business.

Expanding Your Business Through Product Development

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Product Expansion ChallengesCreating new products can be exciting and rewarding, but attempting to expand

your product line before you’re ready can negatively impact your business.

Here are some challenges to consider before you start dreaming up your

newest product:

Cost of time and resources: Creating and launching a new product takes a lot

of time away from running the rest of your business. While this can definitely

be time well spent, it’s important to ensure your readiness and need for new

products before making the decision to allocate time and resources toward

product development.

Potential for cannibalization: With the excitement of new products can come a

decline in sales for older products. Keep in mind that when you launch a new

product, you’ll most likely see this decline, so prepare accordingly.

Added inventory to manage: The more you add - whether in sheer quantity of

products or in variations - the more difficult it is to manage inventory. Be sure

to have a system in place so you don’t lose loyal customers due to out-of-

stocks or overselling.

Why You Should Expand Your Product LineWhen you have the time and budget, developing new products is a great way

to increase your profits and grow your brand. Here are some key benefits of

expanding your product lines:

Reach new customers and break into new markets: Offering more products

gives your business the potential to appeal to a broader audience. When you

appeal to more prospective customers, you have the ability to sell on more

channels or in more stores.

Diversify your offerings: It’s easy for one SKU to get lost on a shelf in a sea

of similar products. A diversified product offering creates a recognizable

brand as opposed to appearing as a seller of a one-off product. Creating new

products also enables you to fill in any existing gaps in your current offerings.

Respond to customer demands: Whether you’re selling t-shirts or electronics,

novelty is what keeps customers interested. Especially if you’re seeing

multiple requests for a particular product or variant, you already have

validation it will sell.

25The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

for. While you need to consider competitive pricing and your ROI, make sure

you thoroughly assess your options before making a decision solely based

on price. Trade shows and industry recommendations are great places to start

your research. Many of Stitch’s customers recommend physically visiting any

factory or warehouse before deciding to partner with them.

Return on investment (ROI) analysis: When you think about your return

on investment, make sure you’re thinking of pricing holistically - including

overhead costs. Consider everything from shipping to employee wages to the

cost of warehouse storage and marketing the product. Only when you have

a detailed look into what the product will actually cost to make, store, and

deliver, can you get an accurate picture of your ROI.

Prototyping: Before you invest in manufacturing, packaging, and marketing

hundreds or thousands of items, consider testing several iterations on a

sample of your target audience.

Positioning Your Product

When thinking about effectively positioning your product, it’s important to know

your customer. Do they care more about brand or price? If it’s more important

to establish your brand than sell a ton of products quickly, you’ll want to start by

making fewer items and invest more heavily in your marketing strategy.

Also, think about where you want to sell your product and how it fits into the

marketplace. Where do your customers shop? If the answer is a channel or

How to Navigate the Product Development CycleOnce you decide it’s the right time to expand your business through

product development, there are many factors to consider. Here are some

recommendations for successfully navigating the product development cycle.

Ideation

The best place to start the new product development process is by mining

customer needs. Solicit feedback on what your customers love about your

product(s) and what they would like to see moving forward. There’s no need

to spend time and money on extra buttons or a different color pattern if

customers are perfectly satisfied with the original design. Once you have a

clear direction that is based on customer demand, identify whether or not

there are viable market opportunities for your new product. You can do this by

tracking industry trends and assessing the competitive landscape for similar

products that already exist.

Research & Development

Once you decide to move forward with your idea for a new product, it’s time to

think about the logistics that go into creating it.

Sourcing material and choosing vendors: It’s tempting to base decisions

regarding materials and vendors on price, but it’s true you get what you pay

26The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

slightly raise your prices or reduce shipping and storing costs.

Launching a Product

The best information you can get on product development comes from the

data you’ll get after you launched a new product. Although industry trends

from experts like Stitch Labs can be helpful, each business is unique and you’ll

learn best from iterating on your own process.

Customer feedback: The goal of creating a new product should be to meet

your customer’s needs based on something that was lacking from your original

product offerings. Hearing directly from the customer whether or not you

achieved this goal is invaluable. Using prototypes for customer tests and focus

groups gives you the opportunity to receive feedback in time to make changes

before you’ve invested heavily in your new product development and launch.

Promoting your product: Now that you’ve created a new product, don’t

underestimate the time and effort required to make sure it is seen by your

target audience. If you want to sell in brick-and-mortars, you might need to do

product demos or pay for promotional materials to be featured in the store.

Selling online requires different types of marketing strategies, from buying ads

or banners to sending free products to influencers. With all the time and effort

you put into developing your product, the end result is hopefully satisfied

customers and increased profitability.

store that’s new to you, evaluate what goes into selling there and make sure it

makes sense for your business.

Pricing Strategies

While assessing competitors’ pricing is a great place to start, there is a lot

more to the economics behind choosing the best price for your product. You

can always iterate on pricing, so try a few strategies out and decide what

works best for your products and business.

Focus on bestsellers: You can play a bit more with the margins on your top

sellers knowing that an extra dollar or two of profit has more potential here

than potentially making pricing changes across your entire catalog. Typically,

80% of your revenue is driven by 20% of your products. Stitch’s Product Drill-

Down report can help find which products make up your 20%.

Bundling: An especially effective pricing strategy when you’re launching a

new product. Create a special deal in which you pair your new product with a

bestseller. This introduces customers to your new product while giving them

the safety of something they already know and love.

Price adjustments: Rather than spending time price optimizing everything

you sell, focus on what’s really moving the needle. Make price adjustments to

highest selling items, as these changes will have the greatest impact. There

can be a tendency to zero in on how many products sold, even though in

some cases you can make more money by selling fewer products when you

II. Scalable Technologies

28The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

OverviewAlthough great businesses are built on great products, technology is

increasingly the underlying driver of a company’s success, regardless of the

industry or marketplace. From accounting and point-of-sale (POS) systems to

inventory and fulfillment technologies, the efficacy of the solutions you invest

in has the potential to make or break your business.

Finding the Right Technologyto Scale Your Retail Business

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Challenges & Benefits of Adopting New Technology Solutions While business owners and executives typically understand the value

technology tools can provide, the sheer number of available solutions can

quickly become overwhelming. Today’s rapid pace of innovation means that not

only are new technologies continually becoming available, but existing solutions

are also constantly improving in order to stay competitive. This growing plethora

of business technologies naturally leads to a lot of confusion around what the

best technology investments are for your business. In fact, a study by Brother

International Corporation reported that 63% of small business owners frequently

feel overwhelmed by the number of technologies available to run their business.

Signs You Need to Implement New Business TechnologiesIf any of the following statements apply to your business, it’s probably time

for you to begin researching new technologies:

• There are inconsistencies and/or inaccuracies in your accounting,

inventory, or order processing

• You are unable to keep up with or properly track growing sales orders

• Manual or disparate tracking processes are killing your productivity

• You are experiencing failures and/or limitations with your current systems

• There is a lack of interoperability between dependent systems

and processes 63%of small business owners feel

overwhelmed with the number

of technologies available to

run their business.

30The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Long-term Benefits of New Technology Systems

Increased efficiencies and productivity: In a business, time is money. As such,

the fundamental value new business technologies provide is saving time.

Technology solutions help to automate and simplify processes, allowing for

the same (or, ideally, a lower) level of effort to produce a much greater output.

The best technologies will continue to improve productivity and increase

efficiencies over time.

Improved ability to scale: Since the main driver of technology acquisition is the

need to accommodate or facilitate growth, newly adopted solutions enable

your business functions and processes to scale.

Gain a deeper understanding of your business: Knowledge is power. New

technologies are helping to put greater insights and more comprehensive

data at retailers’ fingertips. With a deeper understanding of your company’s

operations, you can make better informed business decisions.

Still, most small business owners (28%) are confident that implementing

new technologies is a better investment than hiring more employees. The

Brother study also revealed that 72% of small business owners indicated new

technologies would offer a bigger return on their investment than

new employees.

Biggest Barriers to Technology Adoption

Budget/financial restrictions: It goes without saying that at the end of the

day, business decisions are dollar decisions. Small and mid-sized businesses

(SMBs) typically have limited resources to work with, so your business must

be able to afford any new solutions it acquires - including implementation,

support, and maintenance costs.

Lack of technical support: It’s no small undertaking to implement new tech

systems into your critical business processes. Some systems require a tech-

savvy workforce to implement and manage not only the new systems, but also

any legacy systems that may already be in place.

Employee disruption: Many business owners and managers hesitate to seek

out new technology out of fear that its implementation will disrupt their current

processes: employees might have a hard time learning and using the new

system, current processes and integrations might breakdown, deployment

may take longer or be more complicated than originally anticipated.

31The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Another strategic approach is to leverage the app marketplaces of the core

technologies you are currently utilizing. Since you’ll want any new technologies

to integrate with your existing platforms, this will help you create a short list

of tools that already plug into your current infrastructure. For example, if your

eCommerce site is hosted on Shopify, search through Shopify’s app store to find

top integrated technologies and partner solutions.

3. Assess the Scalability of Available Solutions

While it’s important to ensure any new technology your business adopts

checks off the majority of your requirements, no solution will be a magic bullet.

Consult your prioritized list of must-haves and nice-to-haves, making sure any

system you choose is able to automate manual processes and scale with your

business. Acquiring new technology is a significant financial investment for

your business. Do your due diligence to achieve the best return on investment

with whatever solution(s) you choose.

Your team should seek answers to the following questions to assess the

scalability of the technology options you’re evaluating:

• Are the solutions you are considering innovating at the same pace as your

company’s planned growth?

• Do these solutions integrate or plug into any of your other existing or

planned technologies?

Four Steps to Choosing the Best Retail Solutions1. Determine Your Business Needs

It’s not enough to know you want to improve and expand your business; you

have to know what is needed to do so. Before you begin your technology

search, compile a list of all the business needs a new solution must be able

to provide. Consult with key managers and employees to make sure all

departments’ needs are being considered. It’s important to understand that

you likely won’t be able to find a single solution that covers every requirement

on your list. However, if you’ve prioritized your requirements by necessity

and potential business impact, it will make your search and decision making

process much easier.

2. Research Available Technologies

Identify the key manager(s) and user(s) of the technology you’re looking to

adopt; this is the team that should lead your research and evaluation efforts.

They will be the most impacted by any new system that’s implemented and

stand to benefit the most by picking an effective solution. This team will

also likely have the most relevant professional networks to reach out to for

software and tooling suggestions. Beyond online searches and network

suggestions, analyst reports and trade associations are great resources for

solutions research.

32The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

• Are these systems cloud-based for increased agility, flexibility, and scalability?

• Will these systems be user friendly enough for you and your employees?

• How quickly will you be able to get this new system up and running?

4. Get Quality Technical Support

Technical support services should be a top consideration when choosing a

new software solution. Depending on the size and maturity of your business,

chances are you aren’t planning to hire a dedicated staff to support your newly

acquired systems. However, you’ll want to make sure the implementation

process goes smoothly and your existing staff knows how to effectively

operate your newest technology. Ensure the business solutions you choose

offer top-notch support including implementation, training, security, upgrades,

and troubleshooting services.

Choosing the right technology for your business can be difficult, especially

for rapidly growing companies. Not only do you not want to waste your

limited time and money adopting ineffective solutions, but implementing the

wrong solutions has the potential to actually introduce new problems into

your system. Following the steps laid out above should help to make this

overwhelming process much more approachable.

33The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

OverviewFor retail businesses, one of the most critical and challenging operational

processes is inventory management. It’s no wonder poor inventory

management is one of the top ten reasons SMBs fail.

Your inventory is the heart of your business, and your operational processes

are the arteries that facilitate the flow of inventory into and out of your company,

essentially keeping your business running. Without proper management of your

inventory and operations, your company could not survive.

You may already have systems and processes in place that you believe are

working, but how manageable will those same processes be when you begin

to scale the quantity, size, and frequency of your sales and purchase orders?

How much time and how many resources could you save by automating and

upgrading your systems right now?

Managing Inventory & Operations Through Automation

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Inventory control solutions are needed to reduce errors, guarantee accuracy,

and boost efficiencies.

Top Benefits of Centralized Inventory SolutionsInventory management is a constant struggle for a lot of companies, particularly

those who sell through multiple channels. It’s a difficult balancing act of always

having in-demand products on hand while also avoiding having unsold items

draining your capital and taking up space in your warehouse(s). In fact, REL has

reported top public U.S. companies have $1.1 trillion in working capital tied up in

inventory. And these are larger retailers that typically use expensive enterprise

resource planning (ERP) tools. Gartner has reported businesses pay an average

cost of 1.2% of their annual revenue for ERP solutions.

Signs You Need to Upgrade Your Inventory SystemDon’t waste valuable time and resources on under-optimized systems and

processes. If any of the following inventory inefficiencies have occurred

(or worse, are regularly occurring) with your current processes, it is time to

improve your systems.

• Constantly running out of stock or overstocked

• Inaccurate or unknown stock and order quantities

• No access to real-time stock counts

• Difficulty tracking inventory across multiple sales channels and/or warehouses

• Inability to accurately forecast inventory needs

If your business is using manual processes to manage and track stock

quantities, you’ve likely run into most of these issues. Wasp Barcoding

has reported that 46% of SMBs either don’t track inventory or use manual

processes. While manual tracking methods may work when businesses are

just starting out, they are notoriously time consuming and prone to errors -

not to mention their fallibility rates grow exponentially as businesses scale.

$1.1 Trillionin working

capital is tied

up in inventory

35The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Increase efficiency and productivity: By eliminating manual processes,

reducing redundancies, and removing human error, inventory management

solutions can automate and streamline your most crucial business processes.

As your company grows, it will continue to gain productivity from new and

existing integrations with not only your sales channels but other important

business functions like accounting, payments, shipping, and fulfillment.

Save time and money: A natural byproduct of improving efficiencies and

increasing productivity is a corresponding rise in time saved. With automated

integrations and the removal of time-intensive manual processes, you and

your team will have more bandwidth to focus on other important business

tasks. Additionally, higher accuracy in your inventory tracking will ensure your

business capital won’t be tied up in unsold inventory.

4 Best Practices to Gain Control of Your Inventory & Operations1. Organize Your Existing Processes

It has been said that for every minute spent organizing, an hour is earned.

Start to gain clarity through the chaos by doing a thorough, physical stocktake

to know exactly what you have on-hand and where it’s currently located.

Work to categorize your inventory in whatever way is most effective for your

operational, tracking, and reporting purposes. Having well organized and

If even top companies with expensive ERP solutions are unable to effectively

control their stock, how are growing businesses supposed to tackle this

complex and crucial business function?

The answer is to adopt a fully integrated and centralized inventory

management solution that will not only support your existing multichannel

eCommerce platforms, but also help you scale intelligently.

A streamlined inventory control system will enable your company to:

Improve inventory accuracy: An inventory control solution that syncs with all

of your online and in-store sales channels while tracking incoming purchase

orders will allow you to eliminate the potential for human error, letting you

know exactly how much inventory you have on-hand at any given time. Best-

in-breed solutions will not only give you real-time stock counts, but will also

centralize all your inventory and sales data to help provide insightful business

reports and sales forecasting.

“The cost of an inventory solution like Stitch Labs

paid for itself immediately by allowing us to avoid

being out-of-stock for even just one day a month.”

Brian Hahn | Co-Founder, Nomad

36The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

operations solution that can sync all these disparate systems for you.

3. Unify Your Inventory and Operations Data

While integrating your operational systems will improve efficiencies, it will also

help you start unifying the data around your inventory and operations. Each

of your individual systems and spreadsheets contains valuable data you rely

upon to make important business decisions but when these interconnected

systems operate in isolation, that data becomes siloed. Having your key

business data and reports disseminated across disparate systems makes it

difficult to get the full picture of what’s happening in your business.

You need comprehensive business intelligence to gain a deeper

understanding of what’s working and what’s not when it comes to your

operations. Where do you need to cut inventory and operational costs? What

sales channel is generating the most revenue? Which products are selling the

best across all your sales channels? Unifying your business data will give you

easy access to these answers and allow you to develop more actionable plans

and make smarter business decisions.

4. Implement an Inventory Management System

To have the utmost confidence in your stock quantities and integrated

operations, you need a centralized inventory management solution. All the

steps discussed above - organizing your processes, integrating disparate

systems, and unifying business data - can be enabled and simplified with a

comprehensive inventory management system.

defined product information is the first step to improving inefficiencies.

2. Integrate Your Disparate Systems

Running a retail business requires managing numerous complex and

interdependent systems and processes, which each present their own unique

challenges. These inherent challenges are compounded if you are selling

across multiple sales channels and/or operating multiple warehouses.

You’re likely using disparate systems to handle all your business-critical tasks

such as purchase orders, stock quantities, invoices, shipping, and fulfillment. The

amount of time and resources it takes to separately manage, maintain, assess, and

optimize all these systems is killing your team’s productivity and holding you back

from business growth. To begin increasing efficiencies and start driving greater

productivity, you must find ways to bring your disparate systems together.

Start by evaluating all the different software and manual systems you’re using,

mapping out the interdependencies among them. Once you’ve pinpointed

where all these systems need to connect, you can begin exploring different

ways to integrate them.

Most cloud-based software programs offer plugins and integration capabilities

with other widely-used technologies. With a little bit of research on relevant

software marketplaces and app stores, you should be able to identify which of

your systems offer integrations. If few or none of your systems have existing

integrations, you should consider adopting a centralized inventory and

37The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

If any or all of these capabilities were on your list of business needs,

Stitch Labs can help. Stitch’s inventory management solution helps modern

retailers automatically track inventory, purchase orders, sales, shipping, and

fulfillment across multiple channels and warehouses, providing unparalleled

visibility into your operations and a holistic understanding of your business. It’s

this kind of comprehensive control and transparency that improves accuracy

and productivity while driving operational efficiencies.

Wouldn’t you like automated alerts for low stock quantities to avoid

disappointing customers with “sold out” messages? Or a single system to track

everything from purchase orders to sales and fulfillment data? Top inventory

control systems automatically sync with all of your eCommerce platforms and

tools, creating a single business command center to manage and analyze all

your retail operations.

How to Find the Right Inventory Control Solution for Your BusinessTo avoid costly out-of-stocks and overselling while improving efficiencies

and operational visibility, you need an inventory management solution that

connects to all your retail systems and sales channels, while also consolidating

your data for comprehensive tracking and superior business intelligence.

Finding the right technologies to scale along with your business can be

challenging. You must go through the process of determining your business

needs, researching available technologies, and assessing each option for

scalability and quality technical support before making a decision. As experts

in inventory management, we’ve complied a list of features growing retailers

need to effectively manage their inventory and operations (See Chart).

Automated Inventory Tracking Multi-Warehousing

Multichannel Integration & Order Tracking Barcoding

Low Stock Alerts Fulfillment by Amazon (FBA)

Publish Listing Functionality Third-Party Logistics (3PLs)

Sales Channel Reporting Product Bundling

Sales Forecasting Drop Shipping

Shipment Tracking Predictive Analysis

Historical Order Imports & Reports Wholesale Management

Advanced NeedsStandard Needs

38The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Retailers achieve massive time-savings across all aspects of their businesses

with Stitch, making it easier than ever for them to expand into new sales

channels and marketplaces.

The less time you spend worrying about your inventory, the more time you

can spend focusing on the things you actually want to do - like growing and

scaling your business.

With a centralized and integrated inventory solution like Stitch, you can:

• Accurately track your inventory across all your sales channels

• Avoid out-of-stocks and overselling with low stock alerts

• Boost revenue by easing expansion into new channels

• Reduce costs with proximity-based order fulfillment from multiple warehouses

• Refine purchase order efficiency

• Effectively forecast sales during peak seasons

• Anticipate when to invest more in a hot selling product

Stitch Adds Efficiency Across All Operations

% = Average Efficiency Gain with Stitch

Purchasing AccountingInventory Management

Order Management

Reporting

Customer Story

“Stitch is totally the central hub of our business. We built the company

around Stitch’s ability to control inventory in different warehouses and

across various channels. We’ll continue to grow into more facilities

and channels and we know Stitch will grow with us.”

Brad Westerop | Co-Founder, Bedface

A Solution That Provides Real Results:

• 100% MoM revenue increase since implementing Stitch

• 400% revenue growth expected by the end of 2016

• 28 million possible product combinations managed by Stitch

39The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

OverviewThe hustle and bustle of an active warehouse is music to every retailer’s ears.

But to make sure everything continues to hum along smoothly, particularly

as your sales orders grow and your operations become more complex, you

must continually work to strategically improve efficiencies, reduce costs, and

exceed customers’ expectations.

Optimizing Warehouse Management

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Key Elements of Effective Warehouse ManagementWarehouse operations are notoriously labor-intensive, cost drivers for

businesses. But instead of viewing them as a necessary evil, modern retailers

are seeing their potential to maximize the value they provide.

Take commerce powerhouse, Amazon, for example. They put warehousing

on the map by taking what’s typically considered to be a retail headache and

turning it into their competitive advantage. Amazon’s world-class operational

systems are the most well-known of any company, and their warehouses are

regularly toured and reported on by top industry journalists. They’ve even

parlayed their warehousing and fulfillment expertise into an a new line of

business services, called Amazon FBA (Fulfillment by Amazon).

So what does it really mean to effectively run your warehouse operations?

Effective warehouse management should:

Minimize errors, delays, and disruptions: With the proper processes and

technologies in place, you should be able to automate and streamline warehouse

operations to avoid costly delays and reduce human and system errors.

Maximize productivity: Establishing and maintaining an efficient flow of

inbound and outbound activity throughout your warehouse will increase the

The Importance of Effective Warehouse ManagementInventory and warehousing facilities and technologies are a substantial

investment for most retailers. The productivity and management of these

processes have implications for every other part of your business and

significantly impact your customers’ experience with your brand.

Let’s say you’ve implemented a successful marketing growth strategy that has

doubled your customer base and sales order volume. Terrific! But before you

can start celebrating your well-earned success, your warehouse team notifies

you that this new flood of sales orders has overwhelmed your current systems,

slowing fulfillment productivity and causing shipments to be delayed. And if

you aren’t yet using a multichannel inventory management solution, you’ve

likely also oversold a number of items and will be forced to inform your new

customers that the items they’ve bought are actually out-of-stock, requiring

even longer delays. If you had that experience as a first time customer, how

likely would you be to make repeat purchases from that company?

And that’s just one common scenario. There are countless other potential

business risks a company can experience from disorganized warehouse

operations: everything from packaging errors and lost or damaged

merchandise to mismarked items or even employee injury. All of these can

slow your productivity, disrupt other processes in your supply chain, and

ultimately eat away at your company’s profits.

41The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

importantly, how are they connected and reliant upon one another? Identifying

and understanding how each activity and individual task is currently working

throughout your warehouse will help you to see where inefficiencies are

occurring. Mapping out your entire warehouse value chain will serve as your

guide for optimization. This evaluation exercise should bring to light processes

that can be reworked, refined, or maybe even removed and replaced by new,

automated technologies.

2. Implement Automated and Integrated Technologies

No matter how your warehouse is set up, it’s quite stressful to manage and

process large quantities of goods. As you start to scale your business, it will

become increasingly difficult to support that growth without overworking your

warehouse team. Implementing integrated and automated technologies is the

best way to increase the overall accuracy and productivity of your warehouse

operations while improving your team’s efficiency and relieving them of

repetitive, monotonous tasks. Help unify and empower your team by giving

them the right tools to achieve success.

Since you’ve already documented all the existing tools and processes in

your warehouse operations, it should be easier to identify where integrations

and automation would be most beneficial to your business. From purchase

orders and inventory management to invoices and shipping labels, there

will be plenty of opportunities to adopt new technologies that will unburden

employees and drive efficiencies.

overall quantity of products your company can process and improve the speed

at which you can ship them to customers.

Ensure compliance and security: The phrase “safety first” is especially important

in warehouses, which require workers to operate heavy machinery. Beyond

Occupational Safety and Health Administration (OSHA) regulations, you need

to make sure you’re operating in compliance with your various supply chain

vendors and partners to prevent any unnecessary roadblocks. You’ll also want

to ensure the overall security of all your facilities to avoid things like theft.

Provide supply chain visibility: The more visibility you, your vendors, and your

logistics partners have into your receiving, packaging, labeling, and shipping

methods, the more smoothly your operations will run.

Steps to Optimize Your Warehouse OperationsWhether you’re managing one or multiple warehouse(s), there are basic steps

you need to take and processes you must implement to ensure your facility is

always operating like a well-oiled machine.

1. Evaluate Your Operational Value Chain

What are all the steps in your current warehouse system, and, more

42The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

this process even more efficient.

In order to support your growing business, implement tools that will

help improve the productivity of your team. Inventory management and

multichannel selling software, like the Stitch Labs platform, enables retailers

and wholesalers to manage invoices, purchase orders, inventory quantities,

and sales order data in one application. This centralizes information and keeps

teams on the same page, which saves you time and money.

3. Analyze Warehouse Performance

You can’t manage what you can’t measure. Once you’ve defined and

implemented all these new processes and technologies, you’ll want to

measure and track their progress to make certain they’re actually improving

the productivity of your warehouse. While every business is going to value

metrics differently based on their industry and goals, there are a few key

warehouse performance metrics businesses should actively monitor:

Order fill rate: The number of items ordered versus the number of items

shipped. You want to make sure you’re fulfilling as many orders as quickly

and accurately as possible to help guarantee customer satisfaction. Top

businesses have a fill rate of 98% or higher.

Order picking accuracy: The percentage of orders picked without errors from

either choosing the wrong product or quantity. Best in class businesses have

98% order picking accuracy or higher.

Inventory management software: Since inventory is at the core of every

warehouse operation, the most critical technology needed is a comprehensive

inventory management software. Manual processes are error-prone and not

scalable. Fully integrated inventory control systems are required to not only

push the right stock quantities out to your sales channels, but to also integrate

all your other solutions and track your end-to-end retail processes.

Warehouse automation systems: Automated warehouse systems utilize

conveyor belts and sortation and retrieval technologies to streamline sorting,

routing, and packing processes throughout your facility. To aid in the efficiency

and interoperability of these systems, you must integrate them with your other

crucial warehouse technologies like inventory, barcoding, label printing, and

shipping solutions.

Barcoding solutions: You can make your warehouse employees more

productive while gaining greater visibility into your warehouse activity and

increasing the value and accuracy of your inventory systems by utilizing

barcoding technology. Barcode scanning can be used through every step

of your warehouse operations, helping to ensure the right products are

received, stored, picked, packed, and shipped to the right people in the most

timely fashion. Barcode scanning technology is also useful for performing

regular stock takes by allowing workers to quickly scan all the items in a box,

counting what should be in the box and identifying items that might have

been mistakenly placed in the wrong box. Top inventory management and

warehouse automation solutions will integrate with barcoding systems to make

43The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

How Stitch Helps Optimize Your Warehouse for Maximum Efficiency

These are just a few of the warehousing benefits retailers get with a

solution like Stitch:

Automatic overflow system: Stitch can anticipate when you’re running low on

specific items. If an order comes in and you need a backup warehouse to pull

from, we’ll reroute the order to a secondary warehouse automatically.

Transfer orders: Want to shift stock to a different warehouse? Stitch’s transfer

order feature allows you to move stock to another warehouse whenever

needed. And we’ll keep a record of this activity for your historical records.

3PL integrations: If you’re taking advantage of third party logistics (3PL)

providers like Amazon FBA, Shipwire, DCL, or AMS, we’ll directly integrate with

their solution so you can assign a warehouse in Stitch to keep track of your

3PL-specific inventory.

Drop shipping: Don’t let fulfillment of stock hold you back when expanding

your product line. Drop shipping is a great option for businesses looking to

grow inventory but are short on up-front cash or space to hold the products.

On-time shipment to customer: The percentage of orders that shipped by the

requested or defined date. If your customers are always getting late deliveries

from you, it will reduce the likelihood of them becoming repeat customers as

well as damage your reputation. Best in breed companies maintain 97% or

higher on-time shipment rates.

Warehouse capacity: You have to be aware of how much product your

warehouse can hold at any given time. This is particularly important during

peak seasons. Top businesses have over 95% of their storage space filled

with products during peak seasons and an average of 91% warehouse

capacity overall.

If your business has a solid understanding of these warehouse metrics, you’ll

be better able to judge your overall productivity. But performance metrics

aren’t as helpful if they’re spread across multiple systems and spreadsheets.

The most effective businesses integrate all their most important metrics into

a single, comprehensive dashboard. This allows them to get the full picture

of not only how their warehouse operations are functioning, but also how

other business processes, like purchasing and shipping, are affecting their

warehouse performance.

One way thousands of small and mid-sized retailers are tracking their

inventory, optimizing their warehouses, and unifying their data is by using

Stitch Labs’ powerful inventory management software solution.

44The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

OverviewWhile eCommerce customers enjoy the convenience of shopping from

anywhere at any time, they don’t have the instant gratification of in-store

purchases. To offset this trade off, online retailers must provide customers with

timely shipping and delivery.

Not only do your shipping and fulfillment processes have to be fast, accurate,

and efficient, but there also must be constant communication with the customer

from the point of purchase through delivery. While this is no small task, there are

various shipping and fulfillment options available to retailers of all sizes.

Simplifying Shipping & Fulfillment

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• As volume grows, it tends to magnify any operational issues. Inventory

discrepancies, damages, and out of stock items are typically the first

issues to pop up.

• The demand for permanent and temporary warehouse workers is at

an all time high.

Section Sponsored by Shipwire

Strategies for Fulfillment SuccessOne key differentiator between best-in-class eCommerce players and those

that fall behind is their attention to detail with their fulfillment strategy.

A good way to benchmark where your business operations currently stand is

to ask yourself the following questions:

• Do you have a role in your organization focused solely on eCommerce

fulfillment, or a dedicated partner that handles it on your behalf?

• Do you ship from multiple locations - either fulfillment centers or retail stores?

Section Sponsored by Shipwire

The Importance of Effective Shipping & FulfillmentThe fulfillment experience you provide as a retailer is one of the main reasons

a customer will or will not shop with you again. The best customer service, the

greatest web design, and the most optimized shopping cart flow will all be

quickly forgotten by a customer if the product they ordered takes longer than

expected to arrive, or even worse, is damaged or incorrect. Even the largest

eCommerce businesses must tackle major delivery and shipping challenges.

Customers have high expectations:

• Most expect to receive all their orders within two days - and for free.

That’s costly to setup and maintain.

• They believe both delivery and returns should be free.

• They want options for how, when, and where their products are shipped.

Scaling your fulfillment operations is difficult:

• It is difficult to build a fulfillment operation that is profitable during low sales

periods, but can scale to support the demands of peak seasons like holiday.

46The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Third Party Logistics (3PLs)

Over the years, 3PLs have played various roles with retailers, from a seasonal

relationship for help with peak volumes to a fully outsourced logistics operation

handling every order that flows through their business.

There are many ways emerging and established retailers can benefit from

a 3PL partnership:

• Provide additional capacity for peak holiday volume or seasonal

product staging.

• Reduce delivery times and costs by locating inventory strategically

across the country, getting it closer to your customers.

• Enable international expansion by testing products in new countries

and markets.

Besides complementing your existing logistics infrastructure, a good 3PL

should also be a competitive differentiator for your business, by offering

services like:

• Logistics industry expertise and advice in the way of strategic account

management, network optimization, and cost saving analysis.

• Do you know the average time it takes from order submission to delivery

confirmation?

• Do you know your order accuracy rates (were the correct items shipped)?

If you answered “no” to one or more of the questions above, you have a lot of

opportunity in front of you.

So, where do you start? While it’s common for companies to have two different

systems in place to handle order management and control inventory levels, it’s

important to have constant visibility into both processes. Integrating your order

and inventory management systems can help you form a single source of truth

for real-time status updates on purchase orders, stock quantities, sales orders,

shipping, and fulfillment.

You need to be able to create, track, cancel, or modify orders quickly and

easily. With solutions like Shipwire’s order fulfillment platform you can do just

that while providing real-time analytics and alerts for elements like delivery

tracking and order status updates.

Inventory needs to be accurate as well as synced across all the moving parts

in your multichannel ecosystem. Software solutions, like Stitch Labs, centralize

your inventory into a single location, allowing you to control how much stock is

available on each sales channel.

47The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

orders. Pick all your products, pack them, and add the shipping label.

Are you struggling to keep track of orders and shipments? The faster orders

come in, the more difficult it is to keep track of what needs to be picked and

packed, which sales channel the order came from, what needs priority vs

standard shipping, etc. Shipping software helps categorize orders by sales

channel, priority, and even by item. These solutions help you figure out the

best workflow for fulfilling and shipping.

Are you constantly rate hunting? Retail postage prices are very high. If you

use a shipping solution, not only can you quickly find the best rate for your

business, but you can also print labels and schedule carrier pick-ups to save

time and money.

What Features Matter in a Shipping Software Solution?

The main purpose behind shipping software, like ShipStation, is to simplify the

shipping process by streamlining tasks like order aggregation, file imports,

and customer notification. But which features are non-negotiable in a shipping

software?

Integrations: Wherever you sell, whether on your own site, an online

marketplace, or a brick-and-mortar store, organizing orders isn’t easy. A great

shipping software, however, will integrate with dozens of sales channels and

carriers, covering your current integrations while also providing flexibility when

the time comes to expand.

• A consolidated view of business intelligence across all sales channels

for data like shipping costs, tracking information, and fulfillment key

performance indicators (KPIs).

• Connections to suppliers and manufacturers that could serve as potential

drop ship vendors

Section Sponsored by ShipStation

Shipping Software SolutionsWhen you consider the operational logistics of fulfillment - picking items,

building boxes, packing orders, and getting them shipped - online selling can

feel exhausting, time consuming, and frustrating. Shipping software solutions

alleviate some of the stress involved with actually fulfilling orders so you and

your team can focus on effectively running your business.

If you answer ‘yes’ to any of these questions, it’s time to find a software solution:

Are you handing orders one by one? Working on a single order from start to

finish and repeating that process until your orders are complete is working

harder, not smarter (it’s working longer, too). Take heed of the assembly line:

it’s easier and quicker to take one action and complete it en masse for all your

48The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Drop Shipping

Another fulfillment option for growing retailers is drop shipping. With this

shipping method, drop shipping suppliers deliver your products directly from

the wholesaler to the customer and charge you for the item once it’s shipped.

You never have to keep the products you’re selling on-hand in your facilities.

The main advantages of using drop shipping are:

Low financial investment: You don’t need to purchase and hold your business’

inventory, which greatly reduces your upfront costs. By avoiding having your

company’s capital tied up in inventory, you can use those funds for other

important functions like marketing and advertising.

No warehouse costs: Since you won’t be storing your inventory, there is no

need to own or rent warehousing facilities - or staff workers to run them.

Broader product selection: Because you’re not purchasing your inventory in

advance to have it in stock, drop shipping enables you to offer a more diverse

selection of products to your customers.

Geographical freedom: Without the need for a physical warehouse location,

you’ll have the freedom to operate from anywhere across the globe.

Scalability: Drop shipping takes the heavy burden of owning, operating, and

managing a shipping and fulfillment center off your hands. Therefore, it will be

Customizable workflow: You work in a particular way and your shipping

software should, too. Your shipping solution ought to let you filter, search, and

customize views in a way that won’t disrupt your workflow. Settings that can be

saved and applied to multiple orders at once - or that apply on order import -

are valuable time-savers.

Batches and bulk: Batching enables you to process hundreds of orders and

print their accompanying labels with just a couple of clicks. Bulk actions will

drastically reduce the time you spend applying shipping services and weights,

etc., to orders. The more actions available en masse, the better.

Automated tracking: Look for a software solution that automatically sends

tracking information to both you and your customer. A customized, branded

shipping notification email is best - especially if the software delays sending

the message until the package actually hits the mail stream.

Opportunity for growth: Whichever shipping software you choose should be

able to grow with your business, and needs features that will help facilitate that

growth. The last thing you want to do is spend time getting to know a system

and build a workflow around it, only to outgrow it.

Before you commit to a shipping software, make sure it’s compatible with your

current workflow. Sign up for free trials, connect your stores, and ship some

orders. Getting hands-on experience with different softwares will allow you to

make an informed decision.

49The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Choosing a Shipping StrategyOutside of product pricing, one of the most difficult tasks for retailers is

determining how to handle shipping rates. Charging customers too much can

make you less competitive in the market, but charging too little can eat into

your profits.

One major factor in an online shopper’s buying decision is the shipping

options they’re given and the fees they’re going to be charged. Forrester has

reported 44% of online customers abandon their shopping carts because of

high shipping costs - something every retailer wants to avoid.

With this in mind, the following are top eCommerce shipping options and the

pros and cons of each:

Free Shipping & Flat Rate

With free shipping, all orders are delivered free of charge to the customer

(we’ll dive into more details below). With flat rate shipping, all orders have the

same shipping rate regardless of the product or order size.

• Pro: No unexpected spikes in shipping costs for your customers - what

you see is what you’re charged.

• Con: You’ll need to calculate out your average shipping cost per order.

your drop shipping supplier’s job to manage any influx of orders your growing

business receives.

While this all sounds like music to many retailers’ ears, there are a few other

factors to consider:

Profit margins are dependent on the products you sell. Since drop shippers

typically bill businesses based on the products they ship, the larger, heavier,

and more expensive your products are, the thinner your profit margins will be.

Conversely, smaller and cheaper items will offer you higher profit margins.

Sourcing products from multiple warehouses complicates inventory tracking.

While it’s a plus that drop shipping allows you to easily source a wide-range of

products from various suppliers, fulfilling many different products from multiple

warehouses can quickly cause inventory tracking issues. To curb these

complications, you’ll need to sync your inventory management systems with

your drop shipping suppliers.

Potential for drop shipping supplier failures. Any time you outsource a

business function, you run the risk of that vendor or supplier’s errors costing

your business or harming your other processes and/or reputation. Any

mistakes your drop shipper make can create a negative customer experience

that will ultimately reflect poorly on your business.

50The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Section Sponsored by ShipStation

Free Shipping StrategiesFree is a price everybody loves. Offering - and advertising - free shipping can

increase your average order, build brand loyalty, and help differentiate you

from competitors that are still charging for shipping. Plus, offering free shipping

has been proven to reduce shopping cart abandonment rates and increase

revenue by up to 10%.

But there’s no such thing as a free shipping label, so how can you make free

shipping work for your business?

Free shipping promo: If you’re apprehensive about free shipping, or want to

see whether or not it makes a difference, offer it as a promotion. Maybe it’s for

a holiday or a weekend, or your business is celebrating an anniversary. Run it

for a limited time and analyze how well the promo period does compared to a

non-promo periods.

Free shipping with minimum spend: If running a promotion or offering free

shipping full time is too much of a strain, set a threshold. Don’t make the

mistake of setting the threshold too high, though. A good rule of thumb is to

figure out your average order size and make the minimum threshold 10 or 15

percent higher. That way, you encourage your customers to increase their

Weight-Based Shipping

Shipping fees are dependent on the weight of the products being delivered.

• Pros: You can set specific price ranges for weight tiers that make sense for

your products.

• Cons: If you sell heavier items, you’ll also be passing along hefty shipping

fees to customers that could cause a spike in shopping cart abandonment

rates. Therefore, this strategy is better suited to companies selling lighter

weight goods.

Calculated Shipping Rates

Most shipping carriers (like USPS, UPS, and FedEX) offer real-time rate

calculators that determine shipping costs based on multiple factors like order

size, weight, delivery location, and speed of delivery.

• Pros: You can curb your costs, particularly on heavy and/or international

shipments which are typically more expensive. Also, customers know they

are paying for exactly what they order, no more or less.

• Cons: Although the costs are customized per customer, you’re still passing

fees along to customers.

51The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

a holiday. If that does well but the cost to ship hurts your business, add a

threshold. If you can afford it, offer free shipping full time and make sure your

customer base knows about the change.

If you’re using the cheapest and slowest shipping service, make sure your

customers are aware of that timeframe. And always offer alternative services.

Shipping - free or paid - will never be one-size-fits-all so make sure you still

provide options.

As your business grows and your operations expand into new sales channels

and multiple warehouses, your shipping and fulfillment methods must be able

to scale along with them.

order only by a little bit more than they normally would.

Free shipping for everyone: Free shipping for every (domestic) order gets

attention from your customers and will keep them coming back. Especially if

you advertise it (which you must do!). Keep in mind that free shipping doesn’t

have to mean fastest shipping. You should still offer an expedited service,

which can help absorb some of the cost of the free option. Product prices can

also get a small bump to make free shipping worthwhile.

Free shipping for specific products: You can work in several different ways: you

have too much stock of a particular item, are replacing current inventory, or want

to get your best selling product into more hands. This strategy can be used a bit

like a flash sale or a daily deal: “Free shipping on Product X for a limited time!”

No one wants to miss out on a limited offer, especially if it saves them money.

Free shipping if you like our page/follow us/join our email list: If you’re trying

to build a great email list or a social media presence, incentivize free shipping.

The challenge is verifying that the hundreds or thousands of people that order

from you also interact with your brand in the way you intended. Still, this is

an easy way to build a following while letting your customers feel included.

The key to this is keeping them as fans of your pages and emails, but that’s a

whole new can of worms.

What works for your business? What’s affordable and feasible for you? Try a

few of the above strategies before settling on one. Start with a promo over

III. Reporting & Finances

53The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

OverviewNo retailer ever started a company out of a love for managing business finances.

In fact, according to inDinero, 40% of entrepreneurs say bookkeeping, taxes,

and payroll are the worst parts of owning a business. Since money quickly

flows into and out of businesses - typically tracked in disparate systems and

spreadsheets - many struggle to properly manage cash flow and prepare profit

and loss (P&L) statements and tax documents. And the more your sales grow,

operations scale, and employee count increases, the more complicated your

business finances become.

You can better understand your retail finances by identifying the best accounting

software for your business, unifying reporting, and properly tackling tax season.

Managing Your Business Finances

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Calculating the Unit Economics of Your BusinessUnderstanding the unit economics of your business is key to building a solid

foundational financial model for your company. Without knowing the unit

economics of your business, it can be difficult to determine your company’s

current profitability and whether or not changes need to be made in order to

improve your gross margins and sustainably scale your business.

To understand your business’ opportunity to scale, you need to calculate your

per product (gross profit / margin) and per customer unit breakdown (customer

acquisition costs and customer lifetime value). A healthy business is one

where the cost to acquire a customer (CAC) is less than the lIfe time value of a

customer (LTV).

Considering Your Costs

To calculate the CAC for your eCommerce business, divide your total marketing

costs by your total number of new unique customers in a given time period.

Signs You Need To Improve Your Finance and Accounting Processes• Your record keeping isn’t accurate or up-to-date

• You have a difficult time accessing the financial data you need

• You’re unaware if you’re in compliance with tax regulations

• Bookkeeping is taking up too much of your time

• Your revenue is increasing, but your profits aren’t growing accordingly

• You’re unable to get additional funding

• You’re not confident your records would hold up during an audit

55The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

number of new visitors to your site increasing? Is the rate of new customer

purchases climbing along with your increased site traffic? If not, you need to start

testing changes to your eCommerce site: switch up the messaging, post new

high-quality product photos, change the size and color of your buy buttons, etc.

2. Reevaluate the profitability of your various sales channels. If you’re selling

on multiple online sites and marketplaces, each has different associated costs

and access to different audiences of potential customers. Determine the

profitability of each of your sales channels by evaluating which channel costs

the most, provides the highest rate of new customers, and has the highest

average order value.

3. Create customer advocates. Wowing your customers with a great

experience can create repeat purchases and increase the likelihood

customers will tell family and friends about your brand. Word of mouth is one

of the most effective types of marketing but also the hardest to earn. For this

you need to provide top-notch customer service and a unique and seamless

shopping experience. Make customers feel like VIPs with rewards programs

that offer special discounts, or try experimenting with packaging - just make

sure you watch how it affects your gross margin, as discussed below.

Understanding Customer Lifetime Value

Since it is typically more costly to acquire new customers than it is to keep

current customers, you should calculate the average lifetime value of a

customer. Knowing the CAC and LTV of your customers can help you determine

The equation looks like this:

Marketing costs should include all promotional campaign costs (like display

ads, Google Ad Words, and paid social ads), marketing team wages, as well

as the cost of your marketing tools and software. If you have a sales team, this

would also be included in your marketing costs. As an example, if you spent

$10,000 a month in total marketing costs and acquired 500 customers, your

CAC would be $20.

Tips To Improve Your CAC

If your CAC is hurting your company’s profitability, at least now you know

what’s stopping you from expanding your profit margins.

1. Increase your on-site conversion rates. You’re investing in marketing activities

to drive people to your site, but if you’re not gaining enough new customers

to lower your CAC, you need to examine your online conversion rates. Is the

CAC Total Sales

& Marketing

Costs (MC)

Total

Customers

Acquired (CA)

56The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

need to calculate the churn rate: take the number of customers you have at

the end of a particular time period (E), say the month of April. Then subtract (E)

from the number of new customers you acquired in April (N) and the amount of

customers you had at the beginning of April (S). Then divide the result by the

number of customers you had at the beginning of April (S). Lastly, divide 1 by

the churn rate.

The full equation is:

Expected Lifetime =

1 / [ (E-N-S) / S ]

How to Improve Your Customer LTV

To improve the average lifetime value of a customer, you need to find ways to

improve each element of the LTV equation.

1. Increase customer order frequency: If you can increase the average number

of purchases your customers make, you can improve your customer LTV.

Leverage strategic email marketing, start a loyalty program, or develop a

gamified shopping experience to keep your customers engaged. Push timely

emails to offer them special discounts, remind them of unpurchased items in

their online shopping carts, invite them to events, etc.

2. Extend the average lifespan of a customer: The longer you can retain your

customers, the more value they’ll ultimately provide to your business. How do

you elongate the lifespan of a customer? Keep them happy. Offer top-of-the-line

the ROI of your marketing activities and better understand which sales and

acquisition channels provide the best customers. While this may seem like an

obvious metric to track, it is often overlooked by many retail businesses.

The basic formula for determining the LTV of your customers is:

LTV =

[Average Order Value]

x [Average Purchases per Month]

x [Expected Lifetime in Months]

x [Gross Margin]

Average Order Value =

[Total Revenue over last 6 months]

/ [Total # of Orders over the last 6 months]

Average Purchases per Month =

[Total # of Purchases over last 6 months]

/ [Total # of Unique Customers from the last 6 months

/ [6]

Note: you can choose a different duration length than the 6 months, just be

sure you are consistent.

The metric in this equation that’s typically most challenging for retailers to

accurately calculate is the expected lifetime of their customer base. First, you

57The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Maintaining Accurate Financial Records The cornerstone of every successful and scalable business is sound accounting

practices. Businesses that don’t maintain accurate and detailed records are

not only unable to understand the profitability of their company, but are also

exposed to government fines, audits, fraud, and theft. Although it is time-

consuming and tedious to maintain complete financial records, it is a necessary

evil that helps businesses:

• Actively track income, expenses, assets, and liabilities

• Make more informed decisions for increased efficiencies and profitability

• Project cash-flow

• Apply for additional funding, benefits, or credits

• Prepare, file, and pay taxes in a timely manner

The best way to reduce your accounting workload while also ensuring you

maintain comprehensive records is to get professional assistance from

accountants and accounting software solutions. Any person you hire or software

you purchase should be accurate, reliable, consistent, and timely with reporting.

customer service, create a positive customer experience across all your sales

channels, and personalize their service and products as much as possible.

3. Upsell: Track what items your customers are purchasing (or considering

purchasing) and offer them complementary items. For example, if you’re selling

apparel and a shopper is looking at a pair of gloves on your site, highlight a

bundled offering that includes that pair of gloves along with the matching hat

and scarf. And if you offer that bundle at a slight discount, shoppers will be

even more compelled to buy those three items instead of just the gloves.

Optimizing Your Gross Margins

Since your gross profit margins ultimately determine whether your business

fails or succeeds, it’s paramount that you not only understand your profit

margins, but are also constantly working to optimize them. Typically,

eCommerce businesses have gross margins of about 20-50%, with the

exception of resellers who operate with thinner margins but higher volume.

To calculate your gross profit, use the following equation:

Gross Profit = [Total Revenue] – [Cost of Goods Sold]

And to calculate your gross margin use this equation:

Gross Margin = [Gross Profit] / [Total Revenue]

Costs of goods sold include what you pay your supplier/wholesaler or the cost

of materials and labor needed to make your products, packaging and shipping.

58The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Getting Funding to Grow Your Business Growth requires capital investment. Finding funding is one of the greatest

challenges facing entrepreneurs who are trying to grow their retail business.

While there are many conventional - and a growing number of unconventional

(e.g. crowdfunding, peer-to-peer loans, etc.) - ways to raise funds for your

business, it’s important to seek out sources that make the most sense for your

unique company and industry.

Here are some common paths for growth financing:

Debt Financing

These are loans a bank or lending institution makes your company. The size of

the loan and interest rate you receive is typically based on your ability to repay

a loan within an agreed upon time period. Lenders are usually expected to

provide enough collateral to satisfy the creditor’s risk threshold, which can be

difficult for start-ups.

Pros of debt financing:

• Access to short or long-term financing

• You maintain ownership and control of your company

• Loan interest rates are tax deductible

The following accounting solutions are top options for small to

mid-sized retailers:

inDinero: inDinero offers accounting software and services for small and

mid-sized business.

QuickBooks: Owned by Intuit, QuickBooks is the leading accounting

software for small businesses. Stitch Labs customers can get Quickbooks

Online discounts.

Xero: Xero provides online accounting software for small businesses.

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Cons of equity financing:

• Investors will have a percentage of ownership in your company, meaning

they’ll be entitled to a portion of your profits

• Depending on your profitability, you could end up paying investors dividends

that far exceed the interest you would have had to pay for a bank loan

• You may need to consult investors before you can make an important

decision about the direction of your business and their shares will come with

rights like voting on important items or vetoing significant decisions

• It may be difficult to find the right investors for you business

Tackling Tax Season According to inDinero, 53% of entrepreneurs say the administrative burden

of managing federal taxes is worse than actually paying taxes. For anyone

who has attempted to prepare their business taxes without the help of

professionals, that number is not a surprise. Tax codes and government

regulations are complex and complicated to navigate.

Identifying Forms You Need to File

Depending on the type of business you run and how you employ your

workers, there are various tax forms you’ll have to file:

Cons of debt financing:

• Loans must be paid back within a fixed time period

• Fluctuating cash flow can potentially cause late payments or defaults

• Business assets can be held as collateral to guarantee payment of the loans

If you have a first or second lien loan, your lender will receive priority payment

over all your other debts and obligations in the event of corporate liquidation.

Equity Financing

If you don’t want to take on debt or you’re just getting started, equity financing

may be a better option. While equity financing doesn’t have to be repaid

to investors, you are essentially accepting their financing in exchange for

ownership shares in your business.

Start-ups usually receive equity funding from friends and family or angel

investors, while established and high-growth businesses tend to receive

funding from venture capitalists and private equity firms.

Pros of equity financing:

• You’ll have more cash on hand to quickly invest in growth strategies

• You don’t have to repay investors, making it less risky than a debt loan

• Investors tend to buy into your brand vision and goals and don’t expect a

quick return on investment

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your finances to help ensure your deductions are maximized.

Hire a Professional

Find an experienced certified professional accountant (CPA) to ensure your

business is accurately preparing and filing all the proper taxes on time. If you

won’t be able to file your business taxes before the deadlines established by the

IRS, you need to file for an extension. Your CPA will be able to help you do this.

At the end of the day, managing your business finances will never be fast

and easy, but there are plenty of software solutions and professionals

available to help.

1120 or 1120S: Corporate income tax returns

1099: Need to file for contractors

W2: Need to provide to employees

Be Mindful of Deadlines

Tax deadlines are strict and the penalties for missing them can be steep.

Consult the IRS Calendar for Businesses to find all the important deadlines you

must meet.

Understand Sales Tax Requirements

Where your business operates is key in determining whether or not you have

“sales tax nexus” in any particular state. Depending on where your company

sells, has warehouses, or drop ships from, you may be required to collect

sales tax. An experienced professional can ensure you are in compliance with

nexus obligations within each individual state.

Take Advantage of Applicable Deductions

There are numerous tax deductions available to SMBs that many

businesses overlook. Everything from property rentals and operating

equipment to accountancy fees and employee wages may be tax deductible

for your company.

Get Your Bookkeeping in Order

Organization is key to keeping complete accounting records. The accounting

softwares we listed above should be able to help you automate and organize

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OverviewToday’s businesses have more data than ever before. Quite literally, since

90% of the world’s data was collected in the last two years alone. From sales

numbers to website statistics, it can be difficult to manage data and even

harder to identify actionable trends from all the information flowing through

your various business systems. And as you expand into more sales channels

and adopt new tools to grow your business, the amount of information you

need to process and evaluate will grow exponentially.

The fact is, there is simply so much data it can be difficult to know where to

start. Businesses realize data can help them make more intelligent decisions

and maximize profitability, but most struggle to derive actionable insights from

the overwhelming amount of data they’re presented with on a daily basis. It’s

time to start harnessing the power behind your business analytics.

Making Better Decisionswith Real-Time Reporting

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Four Steps to Better Business Intelligence 1. Determine Key Metrics & Reports

What business questions do you want to answer? What decisions do you want

the ability to make? What are the most important business and operational

reports and trends to your company and/or industry? Not only do you need to

understand what reports you’d like to run, but also what metrics are associated

with those reports. For instance, if you want to understand your gross profit,

you need to track total revenue and cost of goods sold.

The value you gain from your data reports will be directly related to how

focused your metrics are on the factors driving your business success.

A few of the most common key performance metrics (KPIs) for retail

companies are:

• Gross margin

• Sales velocity

• Days of supply

• Turnover rate

• Sell-through rate

Top Retail Data ChallengesThe World Wide Web and the emerging Internet of Things (IoT) have brought

about countless platforms and connected devices, providing businesses

with access to a seemingly endless amount of data on how customers and

potential buyers are finding, navigating, purchasing on, and interacting with

eCommerce sites. Yet, just because this data is available doesn’t mean

companies are able to readily use it. More often than not, all this information is

siloed in disparate systems, making it difficult to glean actionable insights.

For example, your web traffic may be tracked in one system while sales data

is in a different system and your inventory, fulfillment, and shipping metrics

are in another. When this information is distributed, it can feel impossible to

see how all the interdependent pieces fit together to reveal inefficiencies or

opportunities for operational or tactical improvements. To turn this data into

impactful business intelligence that truly moves the needle, your data must be

fully integrated into a single dashboard.

The process of condensing this data is a hefty task in and of itself. It requires

a tremendous amount of time, resources, and technical know-how to mine,

clean, and combine multiple data sets with different formats and variables, but

it’s necessary for comprehensive analysis to take place.

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How Retailers Are Using DataWhile aggregating, tracking, and utilizing data is no easy task, many retailers

have found ways to make data work for them.

Here are a few examples of real-world scenarios in which overcoming the

challenges of using data, combined with asking the right questions, resulted in

huge success for retailers:

Data Knows What Customers Want

Ever since the designer eyewear company, Warby Parker, was created in 2010,

the business has relied heavily on data to drive decisions and learn more

about its customer base. One of its most popular programs, “Home Try-On,”

in which customers are sent five eyeglass frames free of charge with the

opportunity to send back those they don’t want, is possible because of data.

The impact? Using data based on previous purchases, the company’s

algorithms predict demand as well as the styles a customer might want.

Warby Parker’s Director of Data Science, Carl Anderson, told Data Science

Weekly they learned through this program that their colonial monocle has “an

extremely high conversion rate,” leading them to “tweak our basket analysis

algorithm specifically to account for it.”

2. Implement Tracking Mechanisms

If you can’t measure it, you can’t manage it. Once you know what you want

to track, you need to assess whether you currently have access to that

information or if you need to establish new ways to collect that data. And, if

you have specific data points coming in from multiple sources, that data must

be properly consolidated. For example, if you have sales coming in from your

own branded website as well as your Amazon store and your brick-and-mortar

store, all those sales (and inventory) numbers need to be flowing into the same

analytics dashboard.

3. Keep a Pulse on Trends

Once you are properly collecting and managing all your business data, it’s time

to start analyzing and tracking trends. You should check the trends of your

top-line business stats weekly, if not daily. Are orders going up? Did you see a

boost in value per order? How many new customers did you acquire?

It’s also good to keep in mind that you may not have chosen all the best

metrics and reports at first. Don’t be afraid to iterate on metrics and goals.

4. Draw Actionable Insights and Implement Changes

Now that your data is unified in a centralized dashboard, you can start pulling

actionable insights. What channels are selling most? Which channels have

the highest order value? Are your warehouses being utilized efficiently? With

the big picture laid out more clearly, you’ll be able to make smarter, data-

driven decisions.

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they use customer data insights to better segment and target their marketing

emails. As a result, they managed to send 63% less emails while achieving a

101% increase in click through rates and a 275% spike in conversion rates.

Make Your Data Work For YouData is everywhere, but being able to use it effectively is a competitive

advantage. Once you have a system in place that provides you with increased

visibility into your data, you can use it to inform product development or break

into new markets.

Don’t be afraid to make drastic changes - these are most likely to show you a

difference in conversion - so long as the changes you’re making are based on

something more concrete than a hunch.

When data is used effectively, it has the power to improve efficiencies, increase

productivity, boost revenue, and ultimately save businesses money. Taking the

time to more effectively use your data to make decisions isn’t just a nice-to-have;

it’s a must-have.

Subscription Services Inform New Product Development

From fisherman’s tools to makeup to dog toys, there seems to be a subscription

box for everything these days. That’s because data is enabling these companies

to know what their customers want - all while gaining more information with each

new subscription.

According to Harvard Business Review, “When consumers sign up to receive

goods via subscription, retailers can gain access to a rich source of consumer

purchasing and preference data. They can also use subscription services as a

vehicle to test products prior to launch.”

Beauty, wellness, fitness, and fashion subscription company, FabFitFun, recently

used customer data from their subscribers to launch a new makeup line, called

ISH, with celebrity makeup artist Joey Maalouf. FabFitFun Co-Founder and CEO,

Michael Broukhim, said, “ISH is a perfect manifestation of us listening, seeing

whitespace, and launching something novel and special.”

Data Keeps You Competitive

According to IBM, 62% of retailers report that the use of big data and analytics

is creating a competitive advantage for their organization. Knowing what your

customer wants and when they want it can be available at your fingertips - you

just need the right tools and processes in place.

Take Vera Bradley, for example. The popular quilted handbag and accessories

company spoke at the 2014 National Retail Federation’s Big Show, sharing how

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Conclusion

Whether you’re planning for the future or currently experiencing rapid

growth, having the proper foundational processes and tools in place is critical

to growing your business. From a major increase in order volume to the

ever-evolving marketing strategies needed to keep up with consumer trends,

there is a lot of room for error in growing a business. But, there are also plenty

of solutions that will provide you with the interconnectedness, visibility, and

expertise you need to successfully scale your retail business.

Retail Growth Strategies Scalable Technologies Reporting & FinancesContents & Introduction

Retail Growth Strategies Scalable Technologies Reporting & FinancesContents & Introduction

66The Ultimate Guide to Scaling Your Retail Business | Stitch Labsstitchlabs.com

Stitch is an online inventory control solution that simplifies multichannel

retail business. It automatically syncs inventory, orders and sales across

channels, which provides retailers a holistic understanding of their operations.

With Stitch, retailers save time, make better decisions, and grow their

businesses. Stitch integrates with top sales channels such as Amazon, eBay,

Shopify, Magento, Bigcommerce, and Square, as well as add-ons including

Quickbooks, Xero, and ShipStation.

Want to learn how Stitch Labs can centralize your retail operations and help

you scale intelligently? Get a customized demo from a product expert or start

a free 14-day trial today.

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