MERCHANDISING

VP of Merchandising Guide to Seller Enablement: Build or Buy

Technology has fundamentally changed how brands, manufacturers, and retailers work together. The rise of software platforms has accelerated this change and merchandising is experiencing the impacts of digital transformation. Consumers increasingly expect a compelling assortment in line with their values. They also want fast shipping in a few days or less and competitive prices. And if their shopping experience fails to meet their expectations, then they won’t be easily convinced to return for future purchases.

Customers expect a relevant assortment, fast shipping, and competitive prices regardless of where they shop, whether you have the resources of Amazon to enable that experience or not. Every part of the supply chain, from manufacturers, to brands and then finally retailers, have had to build and buy new technology to enable this shift.

The digital transformation shift has also given rise to Direct to Consumer (DTC) ecommerce. Not convinced? Look no further than the meteoric growth of Shopify. In 2019, Shopify generated approximately $60 billion in GMV across 1 million brands in 2019. The DTC wave is here to stay, and with the right decision-making, you can provide an on-ramp for DTC brands to sell through your channel. For merchandising executives, success in ecommerce is predicated on how your assortment, margin opportunity, customer experience, and brand can benefit from the rise of DTC. DTC brands are saturating advertising channels right when they reach broad appeal, that’s an excellent time for a strong retail brand to partner up and continue growing.

These shifts will continue and accelerate as a result of the Covid-19. A key driver of success or failure for large retailers is correctly deciding what piece of the modern retailer stack to build and which ones to buy.

At Convictional, we believe that the modern retailer stack hinges on two very important technology decisions: your commerce platform, and your seller enablement platform. Several of Convictional’s team members spent time at Shopify (an ecommerce platform) before leaving to form Convictional (a seller enablement platform). The purpose of this guide is to walk a VP of Merchandising within a large retailer through whether they should build or buy a modern stack.

What is Seller Enablement

We use the term “seller” to describe a supplier or vendor. A seller is the party responsible for the product and for fulfilling the order to the customer. Seller enablement focuses on making sure that vendors you partner with in your retail business have the tools needed to keep up with your service level and commercial expectations. Retailers often use a combination of software and services to onboard, integrate, and manage sellers.

Seller enablement also includes documentation, education, skills and best practices relating to vendor management. Altogether it serves as the foundation for all vendor facing relationships, enabling the supply side of a two-sided value proposition. Some retailers approach this by pursuing a marketplace model, others pursue drop ship, owned-bought inventory or consignment. All valid.

Retailers will be defined in the future as much by your seller experience as you are by your customer experience, and we are seeing investment in seller enablement surpass customer experience platform investment in some cases. Read on to learn more about seller enablement.

History of Seller Enablement

Seller enablement, and the need to more efficiently source, onboard and integrate with sellers, has existed for centuries. Various technologies have been used to attempt to solve this problem through time. One of the first automated seller enablement technologies is called EDI.

EDI is a familiar pain point for anyone working in major retail today, it started however with good intentions as a way for airline assembly companies to coordinate with their many parts suppliers.

It was later applied to a variety of enablement problems spanning finance, insurance, retail, healthcare and other industries. EDI is still a tried and true approach for seller enablement although the need to enable digital channels has uncovered some significant downsides to it.

What Seller Enablement Enables

What practical business benefits come from enabling sellers to more easily be found, onboarded and integrated with? The reality is that as time passes, customer expectations continue to rise, as retailers like Amazon (most recently) and Walmart (before that) push past existing expectations. In order to continue to meet customer expectations, retailers are forced to invest in customer and seller facing technology. More retailers have come to appreciate the investment it takes to keep up and win on the customer experience side. We believe few are appreciating what it will take to win on the seller experience and seller enablement side.

Seller enablement is the difference between getting inventory counts for third-party fulfilled stock every minute and every day. It’s the difference between high quality, vivid product images for your customer with no effort on your part and having to delay all product listings to shoot new photos. It’s the difference between sub 8 hour order ship time SLAs and hoping it goes out the next day. So much of the customer experience ends up being defined by the vendor management experience, and that can’t possibly be scaled without effective seller enablement.

Seller Enablement Responsibilities

Earlier in the article, we provided a brief enumeration of what seller enablement means in the context of major retail, and the impact it can have. What is the full scope of a seller enablement solution? How do you know when you’ve arrived at an optimal state? Here are some ideas:

  • Visible, scalable tools for sellers to understand the criteria for participation in the channel, and an easy to understand way to pursue next steps with you
  • An onboarding experience that gets out of the way of the seller. It should take as little time as possible to get a seller ready to start selling, but still give you what you need to meet your own definition of a great seller experience. A lot of things fall into this:
    • Understanding how data can be shared back and forth across businesses formed before (classic) and after (modern) the internet became widely available
    • Communicating what defines your customer experience in terms of commercial expectations (pricing, returns) and service levels (ship time, time to close)
    • Gathering relevant business information about the seller’s business, their compliance to legal requirements, their product catalog and more.
  • A path to integrating systems that doesn’t cost them more than they will make in year one by participating in your retail channel, and works with their existing systems
  • Excellent, up-to-date documentation guiding sellers through each step (criteria and qualification, onboarding, integration and ongoing expectations) of the life cycle

As you can see, seller enablement comprises a long list of technical and domain problems that require significant internal resources to support. It’s not unheard of to build your own seller enablement technologies, a handful of major retailers including Amazon do this. It’s worth exploring though whether this is a viable strategy for all retailers, or if alternatives are required.

Building DIY Seller Enablement

Many retailers, either in their early days or at maturity, attempt to build their own seller enablement program. Between the technical and commercial requirements of a seller enablement program (discussed above) this is often a multi-year, relatively high risk project to try and bring all your sellers into one centralized means of enablement. Some of the things that tend to come up during these projects that retailers don’t typically predict include:

  • The need for multiple generations of technology skill. Modern sellers and classic sellers have very different needs, you’ll need an approach to support both methods.
  • The need to support a growing team of cross functional skilled labour through retail cycle up and downs (hiring freezes due to covid are an example of this unfortunately)
  • The need for extensive monitoring and escalation process. It turns out when bringing two companies together for automated trade, a lot can go wrong, so having extensive monitoring (of what’s happening) and escalation (for problems) is the only way to make sure the customer experience stays good as you and your sellers scale together.
  • Establishing integrations with a variety of systems, and maintaining those integrations on an ongoing basis, can be an expense easily underestimated by an order of magnitude
  • Building the necessary payouts and compliance infrastructure can take a year or more even for the most competent, well resourced team. This alone can delay the ultimate benefit a program like this can bring to the business, because of additional requirements
  • Creating and maintaining documentation relating to each step in the onboarding process, including all the necessary context that sellers need to succeed

The list above is a high level summary of what it takes to get started with seller enablement. The ongoing maintenance cost in time and energy is easily underestimated. We find almost every major retailer we talk to has explored or gone ahead with an internal seller enablement program. Almost every one of them ended up shelving it in favour of solutions available on the market. It’s very hard to build seller enablement well while not losing sight of the customer experience.

Costs to Build Seller Enablement

Building your own seller enablement program may provide more control than going with something off the shelf, but that control comes with a significant cost. We already mentioned how maintenance is something people often underestimate by a factor of ten. What’s the right way to think about costing a build or buy decision when it comes to seller enablement?

Our experience has been that seller enablement costs should ideally scale (at most) linearly as you add more sellers. Meaning that if you were to increase the number of sellers you partner with from 100 to 1000, you would want your seller enablement costs to increase at most by a factor of 10. What we see when people try to build seller enablement themselves is that the costs then to grow superlinearly, or in other words, they grow faster than the seller count does.

The reason for this really comes down to domain knowledge resource constraints. It’s not unheard of to have a strong, core team or merchants partnering with high value sellers in the early days of establishing a retailer (or a new category). As time goes on, the focus starts to muddy, and the goal ends up being to increase SKU count or add new categories. The challenge is that the initially effective team of merchants ends up overwhelmed, sourcing in categories they don’t understand and pursuing arbitrary targets instead of customer experience.

When companies try to build seller enablement themselves on top of this, merchants end up spending a lot of time becoming “enablement experts” and helping people debug their way through a painful onboarding process. In some retailers this just leads to disengagement, and an attitude that onboarding is sink or swim but no help is provided. In others, it means merchants are constantly chasing down issues that occur during the earliest steps of a trade relationship, instead of focusing on customer experience and commercial deliverables.

Here’s a non-exhaustive list of the things that are considered mandatory for any seller enablement program today. We’ve attempted to provide cost estimates, but it may vary based on where you’re located, how many sellers you have and what categories you operate in:

  • Around one merchant per 100 sellers who onboard per year. If you plan to onboard 1000 sellers, and you’re doing it all yourself, we often see teams of 10 ($500k-$1M/year)
  • A team with sufficient software engineers to build and maintain integrations to classic systems (EDI-based) and modern systems (API-based). This is a pretty big wildcard budget wise, but we tend to see anywhere from 4 to 20 people. ($400-2M/year)
  • Additional skills in the area of technical writing, pricing, commercial negotiations and product management may be required to actually bring the program to life ($100k-$1M)
  • Some amount of time for the team described above and perhaps additional members ends up being dedicated to keeping up with changes and shifts happening in retail. A lot of companies invested significantly in EDI enablement only to be met with a world focused on enabling integrations through APIs. That has hard and soft costs to it.

Alternatives to Building

Seller enablement is not a new problem, and various software platforms from various generations of technology exist to help meet this need in major retail. Most of them focus on EDI-based integrations, but struggle to provide an easy way for API-based sellers to onboard. We have surveyed retailers who find that as many as 70% of new onboardings are with sellers who prefer API-based integrations for seller enablement. Convictional started in order to solve for this need, and save major retailers millions on in-house seller enablement efforts.