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There’s a lot about ecommerce that’s complicated. An ecommerce business must be agile, and its decision-makers switched on to succeed. When you get right down to it, though, the heart of online retail remains simple. 

Strip everything else away, and selling is still selling. It’s all about having what a customer demands when they want it and getting it to them. That straightforward premise is at the core of what is now a vast global ecommerce market. 

But how do you know what consumers want? And, more importantly, what might they demand next week, month, or year? Ay, there’s the rub, as Shakespeare might say. It’s also where ecommerce demand forecasting comes in. 

Read on, and you’ll learn all you need to know about ecommerce demand forecasting. We’ll cover what it is and how it works. Then, we’ll discuss areas of your business, like inventory management and warehousing, that demand planning can support.

To help you get demand forecasting right, we’ll talk about its challenges and variables. Finally, you’ll get a step-by-step guide covering how to forecast demand. As well as the broad retail tech trends to take advantage of when doing so. 

What is Demand Forecasting? 

Ecommerce demand forecasting is the process of predicting the future demand for products. That could be new products or those that you’ve been selling for years. The best way of forecasting demand is by using historical data. 

You can ID patterns and trends by raiding your order management system or other sources for sales data. From those, you can estimate future sales and how they may fluctuate. Getting ecommerce demand forecasting correct is essential for businesses in the niche.

Only through accurate data analytics and decision making can a firm maintain the correct stock levels. Achieving that is critical for keeping a healthy bottom line. We’ll talk more about that later. First, let’s delve deeper into the different types of demand forecasting. 

Types of Demand Forecasting

In general terms, demand forecasting is about using historical sales data to predict future sales trends. You can categorize forecasting models, though, by different factors. They include time scale, scope, and more. As such, the following are four common varieties of demand forecasting: 

1. Macro-level. 

Macro-level demand planning puts forecasting in the broadest possible context. It’s a demand forecasting method that looks at the market in which an ecommerce business exists. That means it needs market research and is most appropriate for firms with certain aims. 

That may be companies looking to launch new products or target a new market segment. For instance, say the audio brand, Skull Candy, wanted to branch out into clothing. They’d need to perform macro-level demand forecasting. That’s how they’d get their inventory planning and supply chain management correct. 

 2. Micro-level. 

As the name suggests, micro-level ecommerce demand forecasting is the opposite of the above. It’s when a firm drills into its own operations for sales forecasting and planning.

There are many things an ecommerce business may consider here. They include:

• Past sales performance of product categories and individual lines (by SKU).
• Profit margins achieved on different items. 
• Cost of production and cash flow considerations that may impact inventory planning.

3. Short-term. 

Forecasting demand is always about looking to the future. How far, though, is up to the brand doing the forecasting. Short-term demand planning usually limits predictions of sales trends to the next 3-12 months. If you forecast demand in this way, you’re typically looking to learn about seasonality. That’s how product demand changes by time of year. 

The National Baseball Hall of Fame’s online store, for instance, would likely see more sales during baseball season. Would purchases spike more, though, during the World Series? Or is the sweet spot the week after the regular season gets underway? It’s these types of questions that short-term demand forecasting can answer. 

4. Long-term. 

Long-term ecommerce demand forecasting is the most comprehensive variety. It utilizes data analytics to ID demand patterns for the next 12, 24, or even 48 months. This far-reaching demand planning feeds into broader business strategy. 

Patterns in sales data, for instance, might suggest new sales channels to adopt. It could also reveal that a brand may need to change its supply chain fundamentally. The trends may, for example, predict a sharp spike in customer demand for a particular product. Present suppliers, as a result, may not be able to provide the inventory levels required. 

How Does Demand Forecasting Work? 

Demand forecasting involves predicting trends in sales and customer demand. The premise is that with prior knowledge of sales trends, a firm gets a jump on its rivals. They can, for instance, boost inventory levels of a product to avoid suffering a stockout. 

We’ll talk more about ecommerce forecasting’s benefits for inventory management later. For now, let’s consider precisely how it works. In short, it’s by either qualitative forecasting or quantitative data analytics. 

The qualitative method looks at the broader economic environment to create forecasts. You may consider any of the following:

• Market research – target audience surveys, etc. 
• Industry expert’s opinions
• National or global economic circumstances – recession, etc. 

Quantitative forecasting leans more on hard data. It’s the type of planning that develops a trend projection based on prior information. That typically means looking at sales data or website analytics and finding patterns. Can you extrapolate from sales of an individual SKU, for instance, that sales will rise sharply? As a result, do you need to change your inventory management? 

Demand Forecasting Can Help Ecommerce Stores

So, now you know what ecommerce demand forecasting is and how it works. We’ve also touched a little on how it benefits an ecommerce business. It’s advantages, though, are diverse and well worth some further attention. 

1. Helps reduce financial risk. 

One of the main benefits of accurate forecasting is that it provides a basis of evidence for your budget. If you can understand changing customer demands, it improves your financial decision making. 

For example, historical data may tell you to expect new products to take a while to start selling in high volume. When you launch a new line, then, you’ll know to spend a little less on inventory. That, as a result, reduces the risk of getting left with dead stock. 

2. Provide customers with products when they want them. 

Modern consumers have more choice than ever before and are savvy and demanding. They know what they want, and they often want it right now. If you can’t deliver, one of your rivals will. Ecommerce demand forecasting ensures you’re not left in that situation.

Knowing product demands and how they fluctuate keeps you ahead of the curve. You can boost your inventory level before replenishment would generally occur. Your inventory planning, after all, gets based on future customer demand. All predicted by your forecast. 

3. Decreases inventory expenses. 

Ideal inventory management is when you have precisely the right amount of stock at all times. Too little, and you risk disappointing customers. Too much, and your inventory and warehousing costs can spiral. Warehouse space isn’t cheap, so you must use it as efficiently as you can. 

Get ecommerce demand forecasting right and your warehouse management system benefits. You’ll have the right amount of stock on hand, after all, to meet requirements. That means no wasted space and no slow-moving stock wasting space. Robust inventory forecasting, too, could help you find new warehousing methods to cut costs further. 

4. Create a pricing strategy that reflects demand. 

Other areas of operations benefit from effective demand forecasting, too. Take pricing strategies as an example. One of the most critical factors in choosing such a strategy is the demand that exists for a product. You can charge more, after all, for items in higher demand. 

Get sales forecasting correct, and you can tweak your pricing strategy to match. Say, for instance, that shoe company, Hush Puppies, commissioned some market research. That, alongside historical sales data, suggests rising demand for women’s sandals. Customers, then, would be prepared to pay a higher price for those lines. 

Challenges that Face Ecommerce Demand Forecasting

Nothing that’s worthwhile in business – or life – is entirely straightforward. Demand forecasting for an ecommerce business is no exception. The following are a pair of significant challenges that you may face.

1. Applying the wrong methodology. 

We’ve spoken at length about the different demand forecasting methods. Choose the wrong one, and your predictions are worthless. You need to take a step back, therefore, and assess your options. The following are three common ones:

• Expert Opinion – Gather insights from industry experts on the market in which your business operates. 
• Collective Knowledge – Ask all your sales team members for their input on product performance, sales trends, and more.
• Time Series Analysis – Using historical data to make predictions. For instance, you may find purchases of a product spiked around Black Friday for the last two years. You could then conclude that sales will rise again around the same time. 

2. Leveraging incomplete data to make decisions. 

Even with the right forecasting model, your predictions may fail due to incomplete data. This is particularly true if you adopt a quantitative forecasting method. For such processes to work effectively, you need as much accurate information as you can get.

For instance, if you can’t collect real-time data on sales or inventory, your conclusions may be out of date. In the same vein, if you’ve only got sales figures from the past month, you can’t make informed decisions. 

Fortunately, in this era of big data, incomplete information is less of an issue. Every ecommerce business now has the chance to capture info from many channels. That’s crucial, as the more extensive the data set, the more effective the conclusions which you can draw from it. 

Variables that Impact Ecommerce Customer Demand 

You might be wondering at this point just how much customer demand for products can change. Is it really that critical to forecast any changes in demand? Will it genuinely make that much difference? The answer to those questions is yes. And it’s yes because of the many variables that impact ecommerce customer demand. 

1. Location. 

One of the best things about ecommerce is that a brand can serve customers across the globe. Where consumers reside, though, will affect their demand for products. People from different nations and cultures have varied needs and expectations. A line that’s popular in one country may get no sales at all, across only one border.  

2. Seasonality. 

Seasonality is another factor that makes a massive difference to product demand. Significant events – like Black Friday – often generate a need or desire for products that doesn’t exist at other times of year. It’s a good idea for ecommerce businesses to draw up a retail calendar to keep track of such events.   

3. Types of products. 

The goods you sell can also impact customer demand. Say, for instance, you sell high-priced luxury items. There will be less repeat custom in that niche. As such, product demand will be more unpredictable. It could, therefore, be trickier to forecast demand effectively.  

4. Competition. 

How competitive your marketplace is will also impact customer demand. If a new rival enters the field, for example, they may siphon off some of your customer base. Your product demand, therefore, will fall. 

It doesn’t even have to be something as drastic as a new firm opening. Perhaps a competitor runs a terrific video marketing campaign. If it really catches the imagination, it could win your customers over. You would then see lower product demand. That would impact your decision making as regards inventory management, cash flow, and more. 

Steps for Demand Forecasting in Ecommerce

The above should have convinced you of the importance of demand forecasting. For ecommerce businesses, it’s as vital as a SaaS marketing strategy is for firms in that niche. How, though, can you start forecasting demand more accurately? The following are a few straightforward steps to get you started. 

1. Identify goals. 

As with many business processes, the first step to excellent demand forecasting is planning. Before you start collecting or analyzing data, you must know what you want to achieve. Set timeframes for your forecasting and devise the questions you want to answer. Examples may include:

• What volume of particular products will we sell?
• Will demand for certain lines fluctuate over time?
• What events or external factors could influence demand?
• Might changing consumer expectations affect sales?
• If demand shifts significantly, will our commercial infrastructure cope?

Once you’ve identified your goals, get buy-in from all your stakeholders. Ensure your sales team, social media marketers, and decision-makers agree you’ve covered all bases. Then, you can start forecasting demand in earnest. 

2. Collect and record data. 

We’ve already discussed that more data leads to more accurate forecasts. Whatever demand forecasting method you use, then, you must gather as much information as you can. There are loads of ways to collect insights and hard figures.

Remember at this stage that internal and external factors influence product demand. As such, you’ll want to gather historical sales data and information from beyond your organization. 

The former should be easy enough to source from your CRM or order management platform. For the latter, you could perform your own market research or lean on existing reports and surveys. 

 3. Measure data. 

With your data at hand, you need to use it to draw conclusions. That means analyzing your results to find patterns and trends. It’s possible to do this manually, but that’s only viable for smaller firms. 

When you have lots of diverse data, your best option is to lean on a data analytics platform driven by AI. Such solutions can utilize machine learning to derive insights from your data swiftly. Remember not to rely wholly on tech, however. Use your experience and nous to interpret the insights you gain intelligently. 

4. Make adjustments. 

You’ve collected your data and found illuminating patterns. So, what’s next? Well, that would be the part of the process that actually delivers the benefit to your business. It’s where you make adjustments to business operations in line with your forecasts. 

Say, for example, that you forecast falling customer demand for a particular item. You could then adjust future purchase orders to put fewer of those products into stock. Alternatively, you might discover that a product has a highly seasonal life cycle. You could then decide only to stock it at the relevant times of year. That way, the inventory doesn’t clog up your warehouse when it’s not needed. 

Conclusion

People in charge of decision making at ecommerce businesses have to wear lots of hats. They must be marketers, salespeople, and accountants. When it comes to demand forecasting, you could also add soothsayers to the list. 

Ecommerce demand forecasting, after all, is all about predicting the future. Get it right, and you can tailor your operations to meet customer needs perfectly. It’s that kind of service that modern consumers demand. 

Add to that the fact that forecasting demand delivers a raft of other benefits, and you’ll see how essential it is. So now you know all you need about the process, it’s time for you to get started – no crystal ball required! 

Like smoke and fire, commerce and inventory have been intrinsically linked since the early days of business. The beginning of business, in fact, started with a product that was exceptionally hard to keep tabs on: cattle. They were the first item recorded to be sold for a fixed value, rather than as a bartering item. 

For early traders and merchants, tracking inventory such as cattle was physically demanding, complicated and inaccurate. Beyond livestock, these early traders needed to transport large swaths of inventory across oceans and deserts, all the while keeping track of how many products they’d sold, acquired and produced, monitoring prices and costs to boot. So how did they do it? How did they remember what they’d sold, what they had, what they’d be acquiring, and where it all was? 

The answer is simple, yet staggeringly complex: inventory management. 

At its core, inventory management is defined as “the process of ordering, storing and using a company’s inventory. This includes the management of raw materials, components and finished products, as well as warehousing and processing such items.” 

Depending on the size of the business, inventory management can be anything from a deep web of complexities, to a simple list of stocked items. For growing ecommerce businesses, the options for and challenges of inventory management become big issues as stock grows. Increasingly, ecommerce merchants scaling their businesses are faced with a new spin on the age-old question of “where do I keep my inventory?” 

Historically, merchants simply stored goods in a single warehouse or fulfillment center. Orders were placed and shipped directly from that location, regardless of order details or where the customer lived Today, merchants must consider whether their inventory should remain in a single location, or if it should be distributed across multiple locations. This is known as decentralizing inventory.

Centralized vs. Decentralized Inventory 

To understand the difference between this and centralized inventory, just think of the old adage, “putting all your eggs in one basket.” 

1. Centralized inventory. 

Centralized inventory means everything a merchant sells is stored in the same location. This simplifies things on a number of levels. First, anything produced or manufactured goes to the same place and ships out from there. This simplifies shipping rate and speed calculation. For centralized inventory, there are three major considerations:

• Shipping: When you’re shipping everything from the same location, you quickly learn how to optimize operations. On the plus side, you’ll have foolproof lead time, transit day and rating data to ensure accuracy in customer pricing. The down side, however, is that with just one location, you’re stuck with slow shipping speeds to many customers. 
  
• Costs: With a centralized warehouse, merchants only need to pay operating costs for a single location. This might include rent, utilities, wages for skilled workers, surcharges and other expenses. Consolidating these expenses to a single place can also increase margins on high-value items, making it an ideal option for oversized product sellers.
  
• Customer service: Centralized inventory can potentially help or hurt your customer service. While you are providing customers with a single source of truth and centralized service location, you also sacrifice the agility to ship items to them quickly if they are outside your region. With centralized inventory, you’re putting all your eggs in one basket. A shoe retailer, for example, might hold all inventory in a single location to simplify operations and keep things tidy. With a single warehouse in New York, everything ships from the same place.

Pros of centralized inventory:

• Lower operating costs thanks to a single location
• More control over warehouse processes and personnel
• Potentially higher margins

Cons of centralized inventory:

• Slow shipping speeds to some customers
• Liability of all inventory in one location
• Lack of agility and adaptability to serve customers

2. Decentralized inventory. 

Decentralized inventory means you have distributed your inventory across multiple locations. Retail giants like Amazon typically rely on these multi-channel distribution processes. There are also many benefits to this system. Merchants can reach customers in more locations in less time when products are located in warehouses closer to them. It also mitigates the risk of holding all inventory in one place, in the unlikely event of mismanagement of catastrophe. Let’s check back on those three considerations:

• Shipping: Fulfilling orders from multiple locations means faster shipping speeds and happier customers. Customers expect speedy shipping and easy returns and exchanges. With multiple locations, merchants can deliver this and lessen frustration with slow transit. 
• Costs: With inventory across multiple locations, merchants have to consider storage and management costs of each warehouse. Expenses like rent and utilities may be significantly increased. Of course, the expectation relies on the savings incurred through shorter-distance shipping, thanks to multiple locations.
• Customer Service: The sooner an order is delivered, the more satisfied the customer. The closer an order is shipped from, the sooner it will arrive, and the happier customers will be. With multiple locations, merchants should consider the need to manage operations and personnel in several places, a task which can be challenging without the right tools in place.

With decentralized inventory, you’re spreading eggs across multiple baskets. For example, that same shoe retailer, after shifting to multi-warehouse management, could add a warehouse in LA. They might decide to hold some styles at one location, and others at a different one. All the while, if that retailer were wise, they’d likely hold their most popular styles at both (or all) locations, giving more customers quick shipping times on those items. 

The difference between shipping from a single warehouse, and multiple warehouses. More locations mean shorter transit times to more customers.

A real-world example of this comes from Jeni’s Splendid Ice Creams. Using their BigCommerce platform with ShipperHQ integration, the company was able to seamlessly transition to a multi-warehouse fulfillment system. Because of the nature of their product, quick transit times were vital, and couldn’t be optimized by shipping out of just one location, so expanding locations was urgent.

Chelsea Clements, Director of ecommerce at Jeni’s said, “We were opening Scoop Shops across the country, but only shipping out of one fulfillment center,” said Clements. “We realized that in order to sustain our online business and our cold storage supply chain, we needed multi-warehouse fulfillment. This wasn’t native to our platform BigCommerce, so we knew we needed a solution.” 

Pros of decentralized inventory: 

• Faster shipping speeds to more customers
• Less risk with distributed inventory 
• Increased customer satisfaction 

Cons of decentralized inventory: 

• Margins on certain products may be reduced
• Costs of multiple locations 
• Higher transportation costs

How Can a Decentralized Inventory Help Your Ecommerce Business Grow? 

For ecommerce businesses on the rise, decentralized inventory may be a worthwhile investment. With smaller, regional facilities, they can get products into customers’ hands, sooner.

Additionally, depending on the location of warehouses, these locations may be able to serve as a pickup spot  for customers as well, an option growing-in-demand by the day. 

1. Reduced shipping costs.

When you add even a single warehouse location for your products, you instantly double your distribution opportunities. Depending on the strategic location of your warehouses, you may be able to seriously cut down on transit times and shipping costs thanks to closer proximity to more customers.

When warehouses are located closer to delivery locations, shipping costs go down. 

2. Reach a wider customer base.

Much like the benefits you get from reduced shipping costs, having more locations can increase your reach to customers spread across a larger area. 

A customer interested in a pair of shoes from our trusty shoe retailer is much more likely to order if their purchase will be delivered in just a few days. If that retailer had just one location, shipping might take a few weeks, giving customers a reason to shop elsewhere.

Expanding your footprint will expand your potential customer base, earning you more business. 

3. Manages warehouse risk.

Remember the analogy about putting all our eggs in one basket? Managing risk is the central reason for that egg distribution. 

One example that illustrates this in action is the case of two banana suppliers that were hit hard by Hurricane Mitch in the 90s. With more than 80% of the region’s banana crop washed away, both companies faced major obstacles with distribution. Dole lost 70% of its crop, ultimately reducing revenue by 4% overall. Chiquita, its competitor, held inventory and had relationships with multiple suppliers. Thanks to this preparation, the company increased its revenue by 4%.

While this is a somewhat dramatic display of the difference in strategies, it’s a lesson to apply to businesses everywhere, that putting all our eggs – or bananas – in one basket is risky. 

Jeni’s Splendid Ice Creams faced a similar situation when landslides threatened one of its fulfillment centers. “If that had happened before we used ShipperHQ, we would have had to shut down our entire ecommerce business until the roads reopened,” Chelsea Clements said.

With inventory across multiple warehouses, retailers are less likely to suffer a total loss because of mismanagement or catastrophe. 

4. Faster local deliveries.

Especially in the age of curbside pickup and same-day delivery, having multiple warehouses increases a local customer’s ability to pick up orders themselves, or give them access to same-day delivery. With these options in place, customers can potentially buy and receive items on the same day.

With just one warehouse, you only give customers in one area the chance for immediate pickup. Distributed warehousing, however, puts your products closer to more customers.

Issues that Face Having a Decentralized Inventory and Multiple Warehouses

With so much management science supporting decentralized warehouses, we’d be remiss to not mention the challenges it brings. Between multi-warehouse communication, management, inventory visibility and personnel issues, there are a few aspects we need to consider. 

1. Inventory management. 

With inventory spread across multiple distribution centers, supply chain management becomes increasingly complicated. When everything is in a single central location, management is centered around that location, streamlining operations and costs.

With goods in multiple places, retailers sometimes feel like they have to sacrifice inventory control because of a lack of clarity. While ERP systems should theoretically support these operations, they’re not perfect and can sometimes result in inventory shortages or mistakes. 

2. Cross-warehouse standardized procedures. 

Managing multiple locations is, understandably, more complicated than handling a single one. With several warehouses in the mix, more personnel, inventory and management is required.

If warehouses are shared, work as distribution centers, or operate as drop shipping locations, warehouse procedures can quickly become convoluted and messy. While everything may work smoothly in one location, adding inventory locations complicates processes and can become a liability for everyday operations. 

3. Managing shipping rates between warehouses. 

When shipping out of one location, calculating a rate or lead time is virtually always consistent. Shipping from the same place every time means clear cut rates and transit times, providing transparency customers want in their shopping experience.

When you add locations to the mix, you suddenly have many more factors to consider. Which warehouse will the order ship from? Does your warehouse closest to the customer have the range of products they require? Do you have high inventory at one location, and dangerously low supply at another?

Decision making with more than one location is more complex than with multiple ones, of course. But how will this affect your inventory decisions? It’s important to develop a strategy for these considerations before expanding locations.

When it comes to managing shipping rates between warehouses, having the right tools in place is vital. 

Using Multi-Warehouse Management to Combat Challenges 

Despite the challenges, a multi-location distribution system has many benefits that can’t be replicated by other methods. Merchants struggling with long lead times, customers unsatisfied with transit times, or a lack of flexibility in distribution should take a hard look at multi-warehouse management and how it can solve these problems.

Ecommerce stores that benefit from a decentralized supply chain also get the benefit of the flexibility of using smaller or fewer warehouses. These warehouses can be managed nimbly and flexibly, giving merchants clearer insights into inventory replenishment needs, levels and shortages. 

At the end of the day, the flexibility gained from multi-warehouse inventory management nearly always proves beneficial for merchants. 

Best Practices for Managing Multiple Warehouses 

Ready to dive into the world of distributed inventory? It’s a smart decision, and one that will pay off. In the meantime, you’ll need to set up your distribution the right way to reap all the benefits. Here are a few of our tips on managing multiple warehouses smoothly.

One of the first steps you’ll need to take is to research and implement a warehouse management system or an ERP. With a software solution in place to manage things, your job will be much easier, and operations much smoother.

1. Keep stock levels balanced. 

This may be a bit of a learning curve. Our shoe retailer with warehouses in New York and Los Angeles will need to understand which warehouses need how many of which product. Trends will certainly play into this, perhaps customers in LA order high-tops by the dozen, but New Yorkers are all about the slip-ons. With purchasing data, you can keep stock levels consistent and lessen the chance of inventory shortages or delays. 

2. Keep a close eye on your bestsellers.

Your most popular products will be the most important ones to manage. It’s a good idea to set up minimum inventory levels of these products at each location to ensure you can quickly ship them out from every warehouse. Because they’ll sell out regularly, it’s important to get ahead of these trends and have excess inventory of these products.

Our shoe retailer might see trends differing from NY to LA, but sales of their signature trainers are consistently sky high. Keeping stock levels at each of these locations high will ensure customers expecting those popular items won’t be disappointed by slow delivery speeds. 

3. Count product stock in each warehouse separately.

Never consider your inventory as a singular entity. Separate warehouses have separate inventories, and it’s important to not convolute these differences. For example, if you’re monitoring levels of those popular trainers and see that you’ve got 6,000 pairs on hand, you may be able to breathe easily. However, if 5,000 of those are located in NY and just 1,000 in LA, you’ve got a serious problem. Be sure inventory is counted by warehouse rather than as a business overall. This will provide clarity and inform inventory distribution. 

4. Use wave picking and cross docking. 

Wave picking, or picking items for more than one order at a time, is crucial to your warehouses’ efficient operations. Rather than an employee walking through the warehouse to select specific items for a single, also known as “batch picking,” wave picking has that employee select multiple items from the same area of the warehouse, reducing picking time. 

Cross-docking is an under-utilized strategy that can avoid inventory handling completely. With cross-docking, products shipped to your warehouse are immediately relocated to a delivery vehicle. Effective cross-docking requires a lot of planning and purchasing insights to understand where to send products as they come in. Despite the required logistical coordination, cross-docking offers many benefits including reduced warehousing costs and less risk of inventory damage.

Things to Consider Before Opting For (Decentralized) Multi-Warehouses 

In our rapidly evolving ecommerce landscape, a decentralized inventory system may seem like a silver bullet for a struggling ecommerce business. However, there are certain factors that can affect its efficacy, and might mean it’s not the right strategy for everyone.

Before taking the leap into decentralized inventory control, consider a few factors that may affect the way it works for your business. 

1. How heavy are my products?

If you sell heavy products – think furniture or fitness machines – arranging inventory holding in more than one place may not be worthwhile. Because shipping costs for items like this are so high to begin with, it may not be a good investment to first send inventory to a warehouse, rather than shipping directly from the manufacturing or import location.

2. Where do I ship my orders?

If you’re a heavily regional company, it may not be smart to distribute inventory beyond your normal customer base’s location. An umbrella seller, for example, probably doesn’t need to expand from Seattle to Arizona, and may suffer financially from taking a step like this. 

3. What are the operating costs for many warehouses?

If your products require special care like refrigeration or regular quality checks, it may not be beneficial to spread them across more than one location. Because storing inventory like this is so costly to begin with, doubling the costs of warehousing them may make it a bad investment. 

4. What is the monthly order volume?

If you’re shipping just a few high-value products a month, it’s probably not necessary to use multiple warehouses. While ecommerce stores are in initial or growth stages, it may be wiser to keep things simple and central with a single location. Once you’re ramped up and receiving a higher influx of orders, it may become necessary. 

5. Is there a business need for more warehouses? 

Decentralized inventory is a hot topic in the ecommerce world at the moment. With so much chatter about it, it may seem like it’s required to successfully grow your business. But if your shipping challenges don’t involve inventory location, it may not be the time to pursue decentralizing your inventory. 

6. Is the existing technology infrastructure ready for multiple warehouses? Do you need a multi-warehouse management system?

Do you have an ERP in place? A warehouse management system? What software is helping you run your business as of now? Before taking the leap to distributing your inventory, be sure your systems are powerful enough and equipped to handle the change. Being well prepared will be the single most vital step to take before beginning the shift. 

Summing It Up

For ecommerce merchants, handling inventory is an everyday challenge that’s only getting more competitive. Those who take steps now to implement a smart inventory strategy will be the ones who continue to thrive. It’s important to understand the pros and cons of this style of management, and whether it’s right for your business. With the right tools, people and strategies in place, decentralized industry can prepare your business for future success, while making for happier customers and lessening risk.

You can handle your decentralized inventory effortlessly with ShipperHQ’s comprehensive shipping management platform. Speak to a shipping expert now to understand how it can benefit your business.

Let’s Talk Shipping

The internet impacts every area of our lives. We use it for socializing, entertainment, working, and research. We also use it to shop. 

There’s now a generation of adults who have only known a world where the internet exists, and as they, and the generations that follow, spend more money, ecommerce will continue to grow. Currently, 43% of shoppers use the internet and social networks to research products before purchasing, and by 2024, ecommerce revenue will be worth $476 billion in the U.S.

Retailers cannot afford to stay offline if they want to reach customers. Ecommerce sites empower businesses to reach new markets and gain resilience by selling if their brick-and-mortar stores have to close. If you’re just starting a business, an ecommerce site can give you a worldwide market and brand recognition before you even open a physical store.

Starting a dedicated ecommerce website gives you the ability to control every aspect of your customer experience, from branding to shipping and customer service. You can choose to build it yourself or go with a developer, but either way, knowing about the process can help you make informed choices, so you get a website that’s optimized for selling your products.

Ecommerce Selling Statistics

Ecommerce is growing every day and offers businesses unique opportunities to connect with their target market. A well-designed ecommerce store can benefit from providing convenient shopping options for consumers.

1. Ecommerce will make up 22% of global retail sales by 2023.

Sales in online stores are expected to reach 22% of global retail sales by 2023, compared to 14.1% in 2019.

While some of this growth is driven by more ecommerce sites being created, most of it is due to a shift in shopping trends. Business owners can take advantage of this global phenomenon by giving customers opportunities to buy as soon as they decide on a product and also reaching overseas consumers with international sites and shipping.

2. Ecommerce sales in Q1 of 2020 accounted for 11.5% of total sales.

It’s estimated that 11.5% of sales in the first quarter of 2020 were ecommerce sales. The impact of COVID-19 means more people are shopping online, and ecommerce sales have continued to grow throughout the year. As more consumers buy on the internet, opportunities exist for business owners to prove that the best ecommerce sites offer excellent online services, building loyalty for the post-COVID-19 world.

Why Create an Ecommerce Website?

It’s clear that the growth in ecommerce brings many benefits for a business’s bottom line, but there are more reasons to create an ecommerce website. An online presence gives businesses ample opportunities to create connections that lead to growth.

1. New market acquisitions.

For many companies, especially small businesses, it can be hard to reach customers in new markets with just a storefront. An ecommerce site enables you to reach new customers online that you couldn’t reach with only brick-and-mortar sales.

2. Create unique shopping experiences.

Online businesses are also able to directly impact the customer journey by creating a unique shopping experience through videos, stories, and personalized services. These shopping encounters don’t need to end at the checkout either, as you can reach customers via email or social media. These extraordinary experiences have a way of convincing customers that online shopping offers inclusive opportunities that a brick-and-mortar store typically doesn’t provide.

3. Strengthen your brand.

If you sell on an online marketplace, like Amazon, your products are listed generically and often use the marketplace’s brandings. Some customers may not even realize they’re purchasing from you and consequently won’t learn about your brand. Building your own ecommerce site ensures control of how your products are presented. Your customers remember you, not the marketplace.

9 Steps for Building an Ecommerce Website

Building an ecommerce site may be simpler than you imagine. There are now ecommerce solutions that do most of the work for you, but you still need to understand what’s offered and what your site needs. If you do enough research, you can make decisions that lead to a magnificent site that grows and evolves with you in the years to come.

1. Select your perfect ecommerce platform.
2. Purchase a domain name.
3. Find a developer.
4. Pick your ecommerce theme.
5. Customize your ecommerce template.
6. Add your products.
7. Set up payment methods.
8. Sort out your shipping settings.
9. Preview, test… and publish your online store.

Find Your Perfect Ecommerce Platform

Finding the right ecommerce website builder is the first step in your journey. It’s important to have one that can meet the needs of your products and brand.

1. Types of Ecommerce platforms.

There are three main types of ecommerce platforms to choose from, which suit different kinds of businesses. Here’s what you need to know:

Open source

As the name suggests, open-source platforms offer their source code freely to everyone who wants to use it. It’s free to install and endlessly customizable. However, open-source platforms usually require advanced coding knowledge to use properly. Security breaches are also a concern, and users often need to hire people dedicated to maintaining the security, which may end up costing more than a subscription to another type of platform.

SaaS

SaaS, or Software as a Service, is an ecommerce platform that’s offered as a subscription service. These systems are generally easy to use, scalable, and have robust security. As they’re designed specifically for ecommerce, they can handle the logistical processes, like checkout and payment processing.

Cost is a concern with SaaS, as there’s a monthly subscription fee, transaction fees, and expenses for plug-in apps. Some services may also have restricted branding, which limits your creativity when designing. Sites built on Wix, for example, have “powered by Wix” at the bottom of the screen, so not only are you promoting your brand, but you’re sharing the spotlight with Wix. Premium services usually give you more leeway to create a look and feel that reflects your brand, alone.

Headless commerce

Headless commerce keeps the shopping cart and display layer of ecommerce sites separate. This means you can use a content management system (CMS), digital experience platform (DXP), progressive web app (PWA) or other technology on the frontend and power that with an ecommerce engine on the backend. 

Headless commerce enables customer-facing changes to be made quickly and gives businesses plenty of creative control. It also lets companies get to market faster, with a lower total cost, and businesses get increased control over their store while outsourcing security and PCI compliance.

2. Ecommerce Hosting.

Ecommerce hosting is where your data is stored. It can have an impact on security and costs, so take the time to understand your options.

Cloud

Cloud hosting refers to ecommerce sites hosted off-site. It’s generally offered by SaaS or headless commerce companies. The platform manages the uptime as well as updates, patches, and upgrades that help keep sites secure. Open source solutions may also have a cloud option that includes the costs of hosting, but will still require security maintenance to be done by the merchant. 

On-premise

On-premise hosting refers to ecommerce sites that are hosted on servers owned by the business and is usually found with open source solutions. The company needs to have space for the server, handle the installation, and hire people to look after it to ensure that the site stays up and secure. This usually is more feasible for large corporations.

3. Things to consider when choosing your ecommerce solution.

Several systems have to work seamlessly to give your customers the best ecommerce experience. Look at how your preferred ecommerce platform works in the following areas to ensure it performs optimally now and into the future.

Website performance

Make sure the platform works consistently and has a strong uptime record, so your website is available when customers want to shop. Unlimited API calls help make your site easier to manage, and pages that load quickly give customers the best experience.

Traffic capacity

Can the platform meet your current traffic needs? Does it have the scope to grow with you as your business expands? Does it handle big days like Black Friday and Cyber Monday?

Mobile optimization

More consumers are shopping on mobile devices, so it’s essential that your platform can optimize your website for an excellent mobile encounter. Look for ways to enhance customer experience through mobile technology, like geolocation, which helps customers find the nearest store.

Secure payments and data

The platform must be able to protect your data and your customer’s data. SaaS solutions include security, like SSL and PCI, as part of their monthly plans. Self-hosted and open-source solutions require you to have a greater understanding of security, as there’s a higher chance of attack.

4. Ecommerce website builders to use.

Your website builder is the foundation of your online store. Options explicitly designed for ecommerce give you more options and room to grow than generic website builders with an ecommerce add-on. Here are a few to consider:

BigCommerce

BigCommerce is a SaaS solution that’s known for being scalable. It has 24/7 customer support, with priority support available for large accounts.  There are plenty of built-in features. Multi-layered security keeps data safe, and local payment methods bring in customers from around the world. BigCommerce supports headless, so brands can deliver API-driven experiences through a CMS, DXP, application, device, or custom front-end — with BigCommerce powering the commerce engine.

Shopify

Shopify is another SaaS solution that’s fully hosted and known for being quick and easy to set up. They have an extensive range of plug-ins, but if you need to use a lot, the price can quickly add up. Shopify can handle a high number of transactions per minute, so it can easily cope with traffic spikes. 

Magento

Magento is a self-hosted solution, so you have total creative freedom; however, you need someone with coding knowledge to take full advantage of the platform. There’s a wide choice of integrations, and it can handle instant purchases and product suggestions. 

WooCommerce

WooCommerce is an open-source WordPress plug-in, so it’s free to install. It’s generally used by those with an existing WordPress site. WooCommerce is flexible, has limitless customization, and industry experts audit its secure code.

Purchase a Domain Name

If you already have a domain name, it can be transferred to your online store builder. If you don’t have a domain name, make sure it follows these best practices below.

1. Avoid creative spellings.

A domain name should be easy to remember and type, so avoid creative spellings. It doesn’t necessarily need to pass a spelling test, after all, google wasn’t a word until Google created it, but it must be easy to spell. Make sure that it’s also easy to pronounce, as you want customers to tell their friends about it. Avoid hyphens and numbers because this makes it harder for people to easily share the web address.

2. Avoid generic names.

A generic name has two problems: people will forget the name, or they’ll go to a similarly-named company that has a better SEO ranking. A brandable name is memorable, so make sure your domain name stands out.

3. The shorter, the better.

Aim to make your domain name 6-14 characters in length, making it easier for your customer to remember. Shorter names are also more straightforward for you to use in marketing, which leads to more customers, even if people are finding you through a search engine.

Find a Developer

Even if you’re bootstrapping your business, a developer can make the process of setting up an ecommerce site simpler. They have the technical know-how to get you set up quickly, meaning you can start selling sooner. When considering a developer, ask them about their timeline, so you can plan your launch date. Ask to see other websites that they’ve built and get references from those businesses. Make sure the developer shares your vision and can create what you’re looking for within your budget.

Pick Your Templates: Find a Theme that Matches Your Ecommerce Website Vision

Templates, or themes, are ready-built pages that you can customize to suit your brand and help your site look good without design or coding skills. Think about the following areas when selecting a template:

1. Customer navigation.

Smooth navigation is essential to an excellent customer experience. If a customer can’t find what they want, they’ll hit the back button and shop somewhere else. A navigation bar is easy to read and located on the left side of the page, as customers read from left to right.

2. Style of the homepage.

Does the template’s homepage reflect your brand? Does it have areas where you can include images, slideshows, or videos? Is there space for you to share your story with site visitors? A customer should be able to tell what type of business you are from first glance, so make sure the template communicates that clearly.

3. Customization options.

What parts of the page can be customized? Is there a font and color scheme that matches your branding? How many images can you include? How are products displayed, and can they be changed? Can social media be embedded? Most online store builders use apps to add features that aren’t built-in, so consider how many apps you need to interact with the template.

Add Your Products

Product pages are among the most critical pages on your site, as they show your customers what you have to sell. Take the time to ensure you display your products in their best light by including optimized product descriptions, eye-catching images, and easy to navigate categories.

1. Product descriptions.

Product descriptions are an essential part of your ecommerce site. They describe the usefulness, colors, textures, measurements, and/or value of the product to your customers and allow bots to index your page for SEO. Avoid cliches, long sentences, and complex phrasing when writing descriptions, and make sure the descriptions answer the following questions:

• Who is the product for?
• What are the product’s basic details?
• Where would someone use this product?
• When should someone use the product?

2. Product images.

Website visitors are engaged by visual information, so high-quality product images are essential. When producing photos, consider the following areas:

Use high-quality images.

Images represent the perceived quality and value of your product. High-quality photos make your products stand out. Vibrant photos also make the images more appealing, keeping customers browsing.

Make sure each image is the same size.

It’s essential that each image is the same size, as different sized photos can often misalign your gallery. Use an image editor to adjust each picture to the required size.

Add product variation image.

Most images should be product-only images that show the product from all angles. You should also include an in-context photo that shows the product being used. These are helpful on product pages and can also be used in social media to boost emotional engagement.

3. Product categories.

You can add products to categories, like clothing, books, and movies, to help customers find what they’re looking for. Categories can also be used with filters to enable people to sort through specific brands or price ranges, keeping them within their budget. And featured items are a great way to lead customers down your preferred shopping path.

Set up Payment Methods

The right payment method is essential for closing a sale. If the method is too complicated or not trusted, your customer could abandon their cart and not return. Make sure it also meets your payment processing needs.

1. Three types of ecommerce payment gateways.

There are three types of payment gateways, which all have their own pros and cons. When deciding on a gateway, think about the steps you need to take to keep payments and information secure.

Redirects

A redirect takes the customer to a separate site to process the payment. The most widely used example is PayPal. This is a simple solution for retailers and passes on security concerns to the third party, but adds another step for customers, which may drive some away.

Checkout on-site, payment off-site

This gateway hosts the front-end of the payment, including collecting details, but the payment is processed off-site. Stripe is a popular company offering this service. It takes away extra steps for customers, but you have to ensure your site is encrypted correctly so information can be safely sent to the payment processor.

On-site payments

On-site payments happen on your site, which gives you complete control and responsibility. It’s suitable for large corporations who process a lot of payments, as they can afford to keep it working and secure.

2. Tips for choosing your payment integrations.

A payment gateway integration is a secure method that encrypts and transmits credit card data to your payment processor. As it’s an essential part of your ecommerce site, make sure you research and understand what you’re getting from your payment integration.

Judge ease of integration

Think about how easy it is to integrate the system on your site. Does it work with the ecommerce platform you’ve selected?

Consider customer reviews

Look at customer reviews from other websites. Is the gateway trustworthy? Does it work consistently? Have people had problems sending or receiving money?

Keep fees in mind

There are fees involved in every step of the process, including taking payments and processing refunds. Read the fine print, so you understand how much the system costs and are happy with that price.

PCI compliant and secure

PCI refers to the Payment Card Industry Data Security Standard. This ensures that credit card details are kept safe. Non-compliance can lead to fines, lawsuits, and a loss of trust from your customers, so make sure your gateway is compliant and secure.

Sort out Your Shipping Settings

Shipping is a critical component of ecommerce. Customers want products promptly, so choose your shipping settings wisely.

1. Determine your shipping policy.

Your shipping policy includes fees and carriers. Are you offering shipping for free, a flat rate, or a variable fee? Who are you shipping with? Also, consider whether you plan to ship internationally and, if not, make sure that information is readily available, so international customers aren’t frustrated at checkout.

2. Select ecommerce shipping solutions.

Decide on your shipping solution. Will you be doing the packing, or are you dropshipping? Shipping software that works seamlessly with the rest of your workflow permits you to automate that side of your business, freeing you up for other matters.

Preview and Publish Your Online Store

A successful launch relies on everything on your site working as it should. If a link doesn’t work, payments don’t process, or the site doesn’t look good on mobile devices, it can send customers away and lead to time delays while you fix mistakes. Make sure you test everything before hitting the publish button.

1. Does checkout work?

Do a test run on an order. Can you add products to the cart? Is the payment processed? Do you receive all the confirmation emails you were expecting?

2. Are the store’s functions working?

Click every button and link it on your site. Do the buttons and links work? Do filters and categories work? If a link doesn’t work, does your 404 page direct customers back to your site?

3. Does the store work on mobile?

Look at the store on a mobile device. Are the dimensions correct? Are the buttons easy to click? Are images clear on a smaller screen?

4. Test your store on different browsers.

Look at the store on as many different browsers as you can, including Chrome, Firefox, Safari, and Edge. Make sure it works on all the browsers, and if you have difficulties, ask the developers to fix it.

5. Set up the store’s settings.

The store settings include things like language, time zone, your address and contact details, tax, and measurement units. Check that these have all been set correctly before you launch.

Conclusion

A good ecommerce site is more than just a place to sell products. It’s where a business can create an experience that strengthens their brand, draws in new customers, and converts casual shoppers into loyal ambassadors. Choosing the right ecommerce platform and having a strategy to create a successful online store can give you a headstart in being an ecommerce success.

Once you’ve been in ecommerce for a while, you’ll know the industry’s symbiotic relationship with technology. Ecommerce only exists thanks to the rise of the internet. The global spread of smartphones then helped put online stores in everyone’s pockets.

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Ask those in the know what the next trending tech is, and many will tell you it’s artificial intelligence (AI). AI is fast taking hold across niches and in a plethora of guises. The ecommerce sector is far from immune.

AI, and particularly the machine learning subset of the tech, is having a profound impact on ecommerce businesses. There are many applications of machine learning within the ecommerce industry.

Read on, and you’ll learn about a few of the most notable. What’s more, we’ll explain why you’re missing out if you’re not already leveraging the potential of AI for your brand. First, though, let’s cover the basics.

Machine Learning Has Developed Over the Years

Before we get to the nitty-gritty of machine learning and ecommerce, it’s vital to understand just what machine learning is. At a basic level, it is what it says on the tin, a process by which a machine can learn. As you may guess, though, things are a bit more complicated in practice.

Machine learning is an application of the wider tech area of artificial intelligence. It involves creating algorithms or programs that can access and learn from data. All without having to get programmed by a human.

How those algorithms ‘learn’ is primarily by pattern recognition. You train a machine learning algorithm by introducing as much data as possible. It then analyzes the information and finds the trends included within. Eventually, the algorithm is ‘intelligent’ enough to apply what it’s learned to new data sets.

Machine learning algorithms are typically categorized in one of three areas: 

• Supervised – These apply what’s been learned in the past to new data using specific labeled examples. They can predict future events and compare their output to the intended results. That helps the algorithms improve themselves with ‘practice’.
• Unsupervised – These algorithms analyze unlabeled and unclassified data. There are no specific examples upon which to base predictions. Such programs, then, draw inferences and ID hidden structures or patterns within data.
• Reinforcement – Reinforcement algorithms interact with their environment to test outputs. Through trial and error, the programs discover correct behavior. They then tailor their future responses in accordance.

The premise of machine learning stretches back longer than you might think. The discipline began soon after scientists found out how neurons in the brain worked.

In 1952, Arthur Samuel created a computer program that could play checkers. Six years later, Frank Rosenblatt built the first wholly artificial neural network. That’s a machine learning algorithm based on the general structure of human neurons.

The field of machine learning continued to develop in the ensuing decades. By 1997, IBM had created a computer called Deep Blue. It successfully beat the world chess champion. It’s in the 21st century, though, that the field has accelerated in earnest.

That acceleration is primarily thanks to the invention of GPUs (Graphics Processing Units). These processors have the power to let algorithms analyze far more data in a far shorter time. As such, modern machine learning can understand more complicated data-sets. It can also make far more accurate and complex predictions.

Differences Between Machine Learning and Artificial Intelligence

You may have read this far and thought ‘hang on, aren’t you describing AI rather than machine learning?’. Well, the answer is both yes and no. Much like fingers and thumbs, all machine learning is AI, but not all AI is machine learning.

1. Machine learning.

Machine learning is a subset of artificial intelligence. Machine learning technology uses data to make predictions or perform actions. The more data the tech gets exposed to, the more accurate its outputs. That’s how algorithms in this area can get described as being able to ‘learn’.

2. Artificial intelligence.

A far broader range of tech falls under the umbrella of AI. Artificial intelligence is any technology that exhibits human behavior. That may mean learning, but could also be reasoning, sensing, or adapting.

Deep learning, too, is another subset of AI, and in many ways of machine learning. It’s where complex neural networks analyze and learn from massive data sets. We’re talking the volume of information that’s only become available in the era of big data.

Business Benefits of Ecommerce Machine Learning

Along with other tech such as augmented reality, machine learning offers many business benefits. Especially to online retailers. The ability of algorithms to make sense of vast swathes of data is invaluable. 

There are now machine learning applications for almost every area of ecommerce operations. From inventory management to customer experience, ecommerce machine learning truly delivers. Let’s dig deeper into how machine learning could benefit your business.

1. Increased conversions.

Turning browsers into online shoppers is crucial for any ecommerce website. That’s why you’ll no doubt be a little obsessed with your site’s conversion rate. One reason machine learning is so useful to ecommerce is that it can help boost that rate in many ways.

We’ll cover how machine learning aids conversion rate when we look at ecommerce use cases. Typically, though, its value in this regard comes in two areas. These are how it can empower on-site search engines and product recommendations.

Machine learning algorithms can deliver smarter search results. Via natural language processing, they can understand what’s typed in the search bar. They’ll then use what they’ve learned from previous searches to show what the searcher genuinely wants to find. That’s even if they don’t type the name of a specific product or even an accurate description.

Product recommendations powered by machine learning are also smarter. Algorithms can analyze the behavior of visitors to an ecommerce site. They’ll recognize products a visitor browses or buys, and the content with which they interact. 

When an individual returns, then, they get presented with similar items to those they’ve shown an interest in before. That’s how, when you visit Amazon, you’ll see swathes of things related to those you’ve recently bought or looked at.

2. Run more relevant marketing campaigns.

Ecommerce marketing shares many similarities with sales prospecting. The best campaigns are highly relevant to their target audience. Machine learning can help an ecommerce company maintain that level of relevance.

In the era of big data, ecommerce stores have access to more information than ever before. Machine learning can help them make sense of customer data to better tailor marketing campaigns.

The patterns IDed by machine learning algorithms are vital. They show what interests different customers or visitors to your website. That allows for more accurate customer segmentation. You can split your prospects based on their interests. That lets you target them with far more relevant marketing material.

Retargeting is another area where machine learning is invaluable. Algorithms can understand customer behavior to suggest highly relevant retargeting campaigns. For instance, say a would-be customer visited the Bliss website.

That visitor might have browsed the brand’s skincare products for dry skin. They may even have added items from that range to their cart. In the end, though, they didn’t buy. What they did do, though, is provide an email address.

Via machine learning, Bliss will see the visitor is a prime target for a retargeting campaign. The firm can then send an email selling precisely the dry skin products it knows the lead is interested in.

3. Improve in-house operational efficiencies.

Not all benefits of ecommerce machine learning regard customer-facing processes. Algorithms can also deliver real-time insights to help you make your other operations more efficient. 

Take managing your stock levels and accounting for your inventory as an example. Many brands struggle with the age-old FIFO vs LIFO decision. The best way to choose which method is best for you is by analyzing customer data.

Machine learning makes such an analysis swifter and more accurate. A program can crunch the numbers on ecommerce sales, warehousing costs, tax implications, and more. It can also help predict future demand. Thus, you have all the info you need to adopt the most efficient possible processes.

4. More informed decisions.

Following on from the previous point, machine learning is an excellent tool for improved decision-making. You might need to decide whether dropshipping is right for you. You may be wondering whether there’s consumer interest in a new product line. Whatever the choice that faces you, machine learning can help.

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How machine learning helps in this area is by allowing all your decisions to be backed by data. Algorithms or programs process and make sense of high volumes of information swiftly. That delivers actionable insights you can use to inform your choices.

Use Cases for Ecommerce Machine Learning

We’ve looked at the business advantages of machine learning in general terms. Now it’s time to get more specific about the tech’s impact on the online shopping experience. The following are six use cases for ecommerce machine learning.

1. Personalization.

Today’s consumers don’t want to get treated as one of many customers. They prefer a highly personalized customer experience.

It’s that kind of personalization that keeps a customer loyal to your brand. If you can’t provide it, they’ll find a competitor who can.

Why should you use machine learning for personalization?

AI, and specifically, machine learning, is the only way to deliver high-level personalization online. Algorithms analyze customer data and behavior to tailor the user experience to each site visitor.

Your site can show each user product recommendations based on their known preferences. Such a recommendation engine is an excellent way to deliver personalized customer experiences. It’s also the tech utilized by hugely successful brands like Amazon and Netflix.

2. Site search.

Anyone who’s used Google lately can tell you that online search has come a long way. Far too often, though, site searches on ecommerce stores don’t measure up. Unless you know precisely what to type, it can be maddeningly tough to find the products you want.  

There’s no excuse for that in the age of big data and machine learning. Intelligent algorithms – leveraged correctly – make smart searches a cinch to deliver.

Why should you use machine learning for site search?

Many visitors to your online store will have an idea of what they need. What they might not know is the name of a specific product. Or even which item would meet their needs. Your site search, then, must be intelligent enough to present the right solution. That’s no matter what gets typed in the search bar.  

Say, for instance, someone visits Camelbak’s website. They might need something to help stay hydrated more easily while hiking. They may simply type ‘Hiking’ in the site’s search bar.

Fortunately, a smart search powered by machine learning can handle that. As you can see above, that exact search delivers highly-relevant results. The products returned are all packs and reservoirs designed for hiking.

3. Managing supply and demand.

When you get down to it, ecommerce, like many areas of business, is about supply and demand. As an online retailer, you must ensure you have the right stock in the correct amounts to satisfy consumer’s needs.

Those needs change over time. As such, the more proactive your inventory and supply chain management, the better. That’s why demand forecasting is so crucial to online stores. Being able to predict fluctuating customer needs keeps you ahead of the competition. Machine learning helps you make those real-time, accurate predictions.

Why should you use machine learning for supply and demand management?

Managing your supply chain is essential to success in the ecommerce sector. Balancing consumer demand with expenses like landed costs and logistics is how to get ahead. Via machine learning, you can crunch all the relevant numbers with ease.

By using an AI-powered algorithm, you can perform quantitative forecasting. That means making predictions based on cold, hard evidence. It’s the best way to ensure the forecasts you produce are as accurate as possible. As a result, the inventory and supply chain changes you make in response are more likely to pay off.

4. Churn prediction.

Customer churn is often discussed in the B2B niche. It’s the rate at which customers abandon a brand – potentially to patronize another instead. It’s worth considering as an ecommerce company, too.

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It’s quite simply more straightforward to sell to an existing customer. That’s why retention marketing is so valuable to online retailers. But what if you could improve that part of your marketing strategy by predicting the customers most likely to churn? That’s the opportunity afforded by machine learning.

Why should you use machine learning for churn prediction?

Churn prediction is about using data on existing and prior customers to find patterns. What behaviors, for instance, do customers do when they are about to churn? These are the insights machine learning algorithms can deliver.

With that knowledge on hand, you can pinpoint the people who may be about to leave you. Then, you can tailor marketing campaigns, by email, social media, or other channels, specifically to keep them on board.

5. Fraud detection.

In this age of cybersecurity awareness, you may think ecommerce fraud is a thing of the past. Unfortunately, you’d be mistaken. The value lost by online retailers to fraud continues to grow steadily.

Fraud detection and fraud protection, then, are essential processes for all online stores. Machine learning technology can beef up these processes and make them more efficient.

Why should you use machine learning for fraud detection?

It’s the sheer volume of data machine learning algorithms can process that helps with fraud detection, too. They’re able to analyze customer data when it comes to genuine transactions.

That means they can pinpoint the hallmarks of an actual purchase. What’s more, they’ll immediately notice a transaction that diverges from the norm. If something about a supposed purchase is off, it’ll get flagged up as potentially fraudulent. That may be if the payment comes from an unusual location, happens on an unverified device, or occurs at a strange time.

6. Improved customer service.

All ecommerce businesses understand the importance of customer service. Just what is world class customer service, however? In today’s competitive retail world, it’s characterized by delivering customer support both how and when each customer needs it.  

One way to offer such 24/7, omni-channel support is by taking on a raft of additional staff. Even for the largest brands, though, that’s often not viable. Instead, companies typically seek to boost customer satisfaction via AI and machine learning.

Why should you use machine learning for improved customer service?

Chatbots are amongst the most accessible examples of machine learning in ecommerce. Lots of sites feature a chatbot offering you assistance. For online stores, the tools help with common queries and direct visitors to specific products.

Where machine learning comes in is when it comes to improving the responses of chatbots. An AI-enabled bot can use the interactions it has to learn and tweak its future replies. The more a chatbot gets used, then, the more human it seems, and the better the information it provides.

Steps for Adopting Machine Learning in Your Ecommerce Business

You should now have a handle on how machine learning can apply to ecommerce. You may even have some ideas for your own online store. That’s great, but how can you get started adopting the tech? The following are six straightforward steps to get you started.

1. Get familiar with everything machine learning.

Before you can leverage machine learning effectively, you must fully understand its capabilities. That means putting in the time researching the present state of the technology. Look into the AI-enabled solutions around and what processes can get bolstered by machine learning.

2. Leverage third-party expertise.

If you can’t find all the answers yourself, look to existing experts in the field who can help. You might simply reach out to a pro to give you some general advice. If you’re going to go deep with the tech, you could hire a machine learning engineer. They’ll be able to manage adoption across your organization.

3. Identify problems you want machine learning to improve.

Before adopting any tech solutions, you must define what you want to achieve. The same goes for machine learning. It’s not enough merely to say you want to streamline your ecommerce store. You must draw up some identifiable goals.

For instance, you may find your home page has a high bounce rate. Your aim could then be to reduce that bounce rate with improved personalization. That’s a specific goal that a machine learning-driven solution can help you to address.

4. Acknowledge your technology and capability gap.

This step is best taken in concert with the previous one. When defining your machine learning goals, take your organization’s capabilities into account. Don’t dream bigger than your staffing or tech resources allow.  

Many machine learning solutions have comparatively low barriers to adoption. That’s not always the case, however. Full-blown machine learning implementations, moreover, aren’t something to take on lightly.

5. Create a team dedicated to implementing machine learning technology.

With clear and achievable aims in mind, you can start the process of adopting machine learning. Creating a team devoted to the process will help keep things on track. It avoids putting extra work on your existing staff’s plate. It also ensures implementation gets the attention it deserves.

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Some of the tasks this team must handle will include: 

• Collecting and collating data.
• Setting up systems to centralize future data collection.
• Choosing existing machine learning tools or coding unique solutions.
• Implementing pilot programs of solutions.

6. Measure and scale.

Any adoption of a new machine learning solution should start on a small scale. Use a new tool or program to analyze a small and specific data-set first. That way, you can test the insights, predictions, or results that arrive.

If you’re pleased with the performance of your new application of machine learning, then you can scale up. What’s more, by proving its efficacy at a smaller scale, you’ll get more buy-in from key stakeholders. That will make it more straightforward to get their support for expanding the adoption.

Conclusion

Once upon a time, machines that can learn independent of human input were the realm of science fiction. Now, it’s very much a part of everyday life. Machine learning and other AI-driven processes are ubiquitous. And their influence is only growing. 

If you’re an ecommerce business and you’re not on board with machine learning, you’re getting left behind. The benefits of the tech to your sector, after all, are numerous. From customer experience to inventory management, machine learning can make you more efficient.

Leveraging solutions in the area is easier than you may think, too. You’ve taken the first step by learning more about the basics of ecommerce machine learning. Now all that’s left is to ID what you want the tech to do for you and set about working toward that goal.