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Common Problems Retailers Should Solve Early, Before They Get Worse
byMay 25, 2022
If you’re driving a car and the Low Oil light starts flashing, there’s no need to panic. As long as you change your oil in a reasonable amount of time, there won’t be any long term issues. But what if you don’t get your oil changed for weeks or months? Then you may have to deal with the consequences of catastrophic engine failure. It’s an expensive headache, and it’s all because you didn’t address a small issue.
As a growing retailer, you’re used to small problems cropping up all the time. But which issues are okay to put on the back burner, and which issues should you address immediately so they don’t spiral into much bigger problems? We spoke to retail industry veterans Chris Walton and Anne Mezzenga of the Omni Talk blog – and a top-notch podcast of the same name – to learn about common mistakes retailers make and why many of them are worth tackling as soon as possible.
Many early-stage retailers focus an inordinate amount of time and attention on the public-facing aspects of their business, from marketing to the look and feel of their online store. But according to Walton, what shoppers don’t see is just as important. “At a company’s early stage, my focus would be to figure out how to work as fluidly and inexpensively as possible,” he notes, citing back office functions like accounting, in particular. “How are you coordinating things digitally through the cloud? Is everything fluid in that regard? That’s fundamental to surviving for the long term.”
Not only that, with supply chain issues continuing to stretch well into 2022, it’s an issue retailers would do well to focus on. “One of the biggest things retailers need to focus on right now is related to supply chain – understanding where their inventory is, and operating that as efficiently as possible,” Walton says. TaxJar partner ShipBob offers advice on improving your supply chain efficiency, including implementing inventory management strategies, automating your supply chain processes, and using the right supply chain software tools.
Even mature businesses are currently wrestling with supply chain issues affecting their bottom line, so while this is not a problem that can be managed overnight, it’s worth dedicating resources towards.
Not focusing on post-purchase engagement
When a retailer makes a sale to a first-time customer, it’s tempting to boil that one transaction down to just the revenue. E-commerce retailers often closely monitor metrics like CPA – or cost per acquisition – as a way to determine how much it costs to acquire that single, paying customer.
But merchants should also concern themselves with a customer’s post-purchase engagement, because it could determine whether or not they purchase again from your company. There’s an opportunity to turn that customer into a brand evangelist who are “happy to provide feedback, promote your brand online, [or become] an unofficial member of your sales force by way of review sites, social media posts, blog comments and word of mouth,” according to Sprout Social.
Manifesting an ongoing relationship with a customer can be difficult if they have an issue with their order. But it can also be an opportunity to show off your company’s superior customer care program. Let’s say a customer has a problem with their purchase and calls your customer service phone number linked to a call center – what happens next?
“Call center employees are often not being utilized to their full extent, and they’re so critical to whether or not someone comes back to your brand,” Mezzenga says. “How are you leveraging those call center employees to make sure the problem is solved and that the customer finishes the call with a positive brand experience and is going to come back to you? People are making decisions of where they’re shopping because of the post purchase engagement – not just the pre-purchase.”
Retailers that focus on providing exemplary customer service help create happy customers that keep coming back – and they might even tell their friends about what a great experience they had. Brands that choose not to focus on customer service have to live with a high CPA, which ultimately costs the company money in the long run. The Harvard Business Review cites eye-popping research from Bain & Company: “increasing customer retention rates by 5% increases profits by 25% to 95%.”
Overspending on marketing
Walton is blunt with his assessment of the industry’s reliance on marketing: “Our advice is there’s probably too much money spent on marketing,” he says. Research from the U.S. Small Business Administration targets an allocation of between 7-8% of total revenue to marketing, though it reached about 13% in 2021, according to HubSpot. These are general guidelines, however, so keep in mind that the ideal percentage of marketing spend can vary dependent on the industry.
“The core of what you should do is be strong with your brand’s mission and purpose and put the right foundations in place behind it,” Walton says. “Then it’s all about reacting to what the market is telling you, and devising your spend appropriately.”
Mezzenga recommends finding partnerships as a more cost-effective way to advertise. “It’s important early on for retailers to think about adjacent businesses that your customers are looking at,” she says. “Think about how you can leverage their audiences as a way to gain more information about your potential consumers – without having to invest a lot of money to go after them independently.”
For brick and mortar retailers, Mezzenga also recommends creating organic content using current employees. Instead of hiring a social media influencer to promote your products, people already working as a de facto local brand representative can show off new products and interact with potential customers online. “Leverage the teams you already have to create authentic content coming from your brand,” she explains.
Ignoring sales tax obligations
Retailers may not understand that if they hit certain sales thresholds in multiple states that they may have an obligation to collect, remit and file taxes. Knowing the rules around sales tax is half the battle, Mezzenga says. “I’d recommend finding a good sales tax expert who can meet with you on the phone,” she notes. “A lot of it comes down to education. Yes, there are companies that can take this responsibility on your behalf, but it’s important for you as an independent retailer to have someone explain [concepts like] the thresholds per state, so you can understand how it relates to scaling your brand.’”
Mezzenga explains that understanding sales tax compliance is something that takes time, as it can be complicated. That’s why working with experts is so critical. “If I’m going to take time away from growing my business to focus on tax compliance, I better have someone in my pocket who can work alongside me to make sure I’m doing things the right way – and eventually get to the point where I might hand that off to someone who understands online e-commerce sales tax implications and what that’ll look like as your business grows,” she says.
Many retailers manage sales tax compliance with the help of a SALT consultant (an expert in State and Local Tax) and a cloud-based solution like TaxJar, which aggregates multichannel sales data and automates filings and remittances. TaxJar’s platform can also help track your tax liability requirements and automatically calculate the accurate amount of sales tax for every item, in every state. Start your free trial with TaxJar today.
The basics of US sales tax
Learn the fundamentals of sales tax.Watch the video