“I thought using 3rd party software to automate my online business was one of the best decisions I ever made?”
I asked myself this question back in November last year, since then certain events have happened and I strongly feel that adding software to manage repetitive parts of an on-line business is a sensible move.
This is to the point that it doesn’t matter which tools you use, as long as they’re automated and take less work than processing the tasks manually would take is a good thing. However, sometimes the pitfalls are overlooked and in this article I delve into these.
Setting the Scenerio
Let’s make a fictitious company called “Widgets Ltd”.
This company started from one person and as the business model was proved, several members of staff were added and a team formed.
Widgets Ltd sells on multiple channels, they started with eBay, dabbled with Amazon and also have their own website, they also have a trade site and a trade counter with a simple till, with no real stock control over any of the platforms.
Approximately a year into the business, multi channel software was employed and while this took a few weeks to employ & for the staff to get up to speed, due to the forced efficiencies of the software, better stock control & they looked at Amazon more seriously, sales grew within a few months, compounded by a seasonal period, sales figures rose to levels they’ve only dreamt about and everything looks rosy.
Pitfalls, What Pitfalls?
On first glance, Widgets Ltd has done really well, mainly because they got past the one person stage and had a business model that worked at small scale, with efficiencies through the use of software, the business was able to amplify the model worked and allowed them to add the important factor scale and grew.
As I suggested, everything looked rosy. More & more money going through the business, everyone looking busy, feedback rocketing & receiving some real kudos from their family, suppliers & friends.
To quickly clarify, automation especially when it comes to labour intensive tasks is a generally a “good thing”. By automating these tasks, it can allow the business owner(s) to work on their business and not always in it. Purely because of this, this is why most 3rd party tools are a positive to their business, to a point that is, which I’m making in this article.
The moment you add software to automate a process, you become removed from it and this is the stem of majority of the issues that 3rd party software creates.
However, I’m going to take the most basic of examples, probably the most highly desired automated process of them all, leaving feedback on marketplaces such as eBay.
Can you remember when you first started on eBay? You probably bought a few items and gained some feedback, you then started selling a few items and leaving feedback was a personalised affair, tailored to each customer, you were leaving them manually and keeping a keen eye on what buyers were telling you.
After all the rest of the selling process was probably all manual as well and you knew everything about the products, listings, questions, orders, customers etc… However the second you automate one of these processes, you become removed and tend to focus on the visually detrimental parts, such as neutral, negative feedback & DSR scores and forget about the positive comments that may hold the key to moving forwards with the business.
And that’s why it’s quite easy to identify the pitfalls, because the dangers are all around the business when automation is employed and this is what I have dedicated the rest of this article to.
The Eight Common Pitfalls
There are way more than just eight of them, however, these are the common occurrences.
- Not at ground level any more
As I suggested in the simplest of examples above, when you automate processes, you can easily become removed from the ground level and only focus on the bad points, rather than the good points that become overshadowed. This happens throughout the business, as the decision makers become further removed the ground.
- Mistaking marketplace growth for business growth
Focusing on eBay & Amazon, these sites have seen double digit growths over the years, however eBay has slowed down & Amazon has picked up pace (on a global scale), however we’re not seeing huge growths with eBay anymore and it can be misleading to assume that the 5-25% growth in your business has been to the effects that your actions have had, rather that the marketplaces have grown by these numbers and you’re riding the wave.
Note: This is discussed in detail in two articles called The eBay “Best Match” Position Bias Modifier Hypothesis and Why do eBay Sales Stay Consistent?
- Unable to identify trends effectively
This goes back to the ground level view again, when the business in the example above Widgets Ltd was only one or a few people, it was easy to identify which products were moving and which ones we not, because the staff knew them intimately. However as the owners moved up the ranks, they became further & further removed from the front lines and if the software that they’re using is able to report on data their business is generating, then can lead to the business hitting a plateau and no-one knowing why and in the next one the most lethal of them all is covered.
- Happy with the businesses performance
Some business models have a natural plateau point in them due to the factors that make the business up and while adding automation to a business can remove most of the softer walls to a business to progressing, if we combine a spike of growth over a few months and the owners becoming complacent, the business becomes ‘happy’ with the current results and doesn’t take a serious look on how to expand further.
- Unhappy with the businesses performance
And a complete inverse of the above is that the business owners may mistake the automation of their systems and growth of their business as a huge demand for their offerings, when in fact the automation part, just allowed them to work more effectively, focused on a few key issues like stock control, sourcing, customer service and order management, but continuously expect the same amount of growth of the business that the employment of automation first provided.
I have one question for this, do you define success as a business that lasts 10 years with ever decreasing profitability or a business that lasts 10 years and keeps a competitive advantage and a decent profitability? Maybe both are right, but which one do you automatically get pulled towards?
- Unsupported or time lag to new features
When working with multiple marketplaces, things are bound to move. This is especially true of eBay you release updates every few months, some of which can completely alter the way that the marketplace works, such as best match did or the introduction of multi-variations (see earlier article here for examples), the same goes for updates to other platforms & software products, take a courier integration, they shelve the older version and you’re forced to the new version.
Now imagine that your current software provider, that was previously automating the courier process is unable to support the changes for 2-3 weeks. That’s a scary thought & while I’ve never experienced a courier software change that inflicted weeks of failure in automation, it can happen and crucially does happen.
- Owners are not always good managers
Before you draw insult from this, I am the first to admit that I am not a very good manager. People that are brilliant technicians rarely make brilliant managers. While they are outstanding at ground level, maybe creating code or graphic design, they can lack core skills to be able to manage people & businesses effectively. Employing automation can blur this, but without a core understanding of the processes required to scale or adding members to the team that can manage such roles, then this as I know all too well, can cause issues.
- Tell others about their automation tools
I’ve personally seen this a few times now, where business owners have seen obscene growths in turnover have spilled their tools to others (either knowing or unknowingly) and competitors and even suppliers have jumped in too and taken the advantages the automation provides.
While I’m not going to name examples of the latter, I can note here that one of the first tasks I made when using MarketWorks (a tool to automate eBay processes), the first task that I took was putting a layer on top of the MarketWorks logo that was automatically inserted in the listings, so that competitors could not readily work out which tool I was using.
While the above was not exhaustive and that 3rd party software products can provide huge benefits to businesses through automation, there are downsides to using them.
Some are obvious, such as competitors or even suppliers picking up that the business is using certain tools to manage their business and then using them to compete more fairly with the business, while others less succinct issues like the owners not being competent managers, or time lags in changes to marketplaces or being unable to trend their business can all impact a businesses effectiveness.