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The 7 elements of profitable retail operations [2024]

The 7 elements of profitable retail operations [2024]

Chief of Staff and Interim COO @ Flieber

In the early days of e-commerce, effective retail operations were all about increasing top line revenue. All you had to do was be more convenient than in-store shopping and the sales were virtually guaranteed. 

But that was then. As the e-commerce market matures, you need new ways to boost your top and bottom line growth. If the goal is to widen your margins and continue driving sales, you can’t afford to overlook your operations.

In this article, we’ll explore the latest best practices in retail operations and the role of inventory planning in driving your future success.

Table of contents


Retail operations: New standards for 2024

Retail operations are the day-to-day processes that go into running a retail store.

In brick-and-mortar, retail operations can include areas like facilities management, onsite employee management, store layout and merchandising.

In e-commerce, retail operations mainly relate to:

  • Listings optimization
  • Advertising
  • Inventory planning and management
  • Customer service
  • Payments and processing
  • Order fulfillment
  • Returns management

To secure your margins in a more mature e-commerce economy, you’ll need to carefully upgrade these and other key internal operations.

Here are the seven core areas to optimize for profitable retail operations in 2024.

1. Product listing

You already know optimizing your product listings is crucial in e-commerce. But in 2024, it involves more than simply displaying your products. True listings optimization is about enhancing every aspect of your listings for maximum customer appeal.

Start with engaging photos and detailed descriptions, emphasizing features and benefits while integrating SEO-friendly keywords. Pricing strategy is also vital. Aim to keep your prices competitive yet profitable. Carefully manage your discounts and promotions to boost sales without harming the product's perceived value.

Don’t forget to monitor the user experience in your product listings. Ensure easy searchability, clear categorization and keep your listings updated and responsive to customer feedback.

2. Advertising

If you haven’t already, it’s time to make managing your advertising part of your daily operations.

From video ads to new placements in outlets like Buzzfeed and Pinterest for Amazon Sponsored Products, the advertising landscape is evolving rapidly. And there’s a lot to be gained for early adopters. 

Focus your efforts on finding the sweet spot with your Return on Ad Spend (ROAS) to ensure profitability across the product portfolio as you add and expand new product lines.

3. Inventory planning

If you don't get your inventory dialed in, there's not a lot you can do to recoup your profit. Issues like stockouts, overstocks, dissatisfied customers and cash flow problems can all have a damaging impact on your margins. 

In 2024, these factors all depend on how well you forecast your sales and inventory. You need streamlined systems to improve your demand forecasting, optimize your stock levels, and avoid costly inventory mistakes.

3. Supply chain management

Supply chain issues like labor shortages and strikes, international conflicts, and natural disasters can tie your products up in endless transportation delays. That’s assuming you can procure the raw materials necessary to manufacture your products in the first place.

To maintain profitability in 2024, merchants and brands will need to simultaneously streamline and diversify their supply chain operations. This can include localizing elements of your supply chain or diversifying your supplier portfolio, both of which may reduce labor costs and prevent expensive delays.

4. Order fulfillment

Reliable, on-time shipping is an absolute necessity in the current e-commerce environment. Customers expect ultra-fast, ultra-affordable, and perhaps most importantly, ultra-trackable shipping. If they have to guess when their deliveries are coming, you’re probably already losing sales, profits, and loyalty.

Your order fulfillment process can also make or break your operations costs, with a sizable impact on your profits. It’s a tricky balance to strike, but partnering with the right 3PLs and shippers can help lower your overhead while keeping sales and fulfillment on target.

5. Payment systems

To win more sales, many brands are offering diverse payment methods, including buy now, pay later (BNPL) options. One-click and autofilled checkout pages are also key to making sure you never lose a customer at the point of sale.

Some payment options, however, can have expensive processing fees and monthly charges. They may also be more vulnerable to fraud or limit your visibility into why transactions decline. 

Another operational risk here is that you could end up with a bloated payment system with too many third-party apps and clunky integrations. To reduce your operational costs and increase your margins, consolidate your internal payment processing systems while continuing to offer your customers their preferred options.

6. Customer service

Excellent customer service helps you attract new customers, boost sales and scale your profits. But dedicated customer service staffing can be expensive.

To drive more margin, you need to save on customer service, while still providing excellent support, fast refunds and responses to customer complaints. But be warned, AI is not ready to solve this problem on its own. To keep costs low and customer satisfaction high, consider outsourcing to a 24/7 human customer care network like Onepilot.


Common retail operations challenges and how to combat them

Some of the most common retail operations challenges facing e-commerce merchants, DTC brands, and omnichannel retailers start with supply chain and inventory management. 

Here are some of the main challenges you may find when optimizing your retail operations, plus tips to help you manage them.

Lack of control over inventory

As you increase your retail sales channels, your inventory operations become exponentially more complex. You’re fulfilling Shopify orders, storing Amazon goods, and forecasting to determine how much product should sit where in order to fulfill your orders as efficiently as possible.

Unfortunately, if you’re relying on dated demand planning methods, poor inventory management could lead to frustratingly long lead times, stockouts, overstocks, deadstock, increased storage costs, and other issues that can eat into your ROI.

To reduce your expenses and up your bottom line, start by gaining deeper visibility into where your inventory is and where it needs to be.

Chronic stockouts and overstocks

Lost sales. Increased storage fees. Excess inventory. Stockouts and overstocks are a problem for your profit margins. With the wrong inventory planning system, you might inadvertently be building these problems into your retail operations.

A key cause of chronic overstocking is using excess inventory as insurance against stockouts. We’re not just talking safety stock to stay afloat in case of a supply chain emergency, but rather constant over-ordering as the only line of defense against the threat of empty virtual shelves. 

Chronic understocking, on the other hand, is usually due to faulty demand forecasting calculations. One major culprit? Over-simplified formulas and Excel-based estimates that take previous stockouts from your historical sales data and plug them right back into future projections.

To make stockouts and overstocks a rarity instead of a routine, you need a system that generates more accurate predictions to prevent you from regularly over- or under-ordering.

Messy supply chain operations

Preventable supply chain problems often come down to a lack of due diligence in choosing suppliers, leading to long-lead times, expensive product quality or specification errors, and increased silos between teams. Strained relationships with suppliers or a poor cultural fit can further exacerbate these issues.

Many modern supply chain management problems stem from insufficient supplier or shipping carrier diversification. While political other bottlenecks may be unavoidable, building in backup options locally or overseas can keep you operational in the event of a serious holdup. 

Delivering omnichannel experiences 

Platforms like Amazon, Walmart, and Shopify now make it easier than ever to deliver your product across multiple channels, including your own site. But offering your product in multiple places is a very different animal from keeping it in stock and getting it to the customer on time.

Faulty inventory planning and poor visibility into your inventory can leave you struggling to deliver on orders, even when you’re technically in stock. If you’re attracting tons of attention on Shopify, but most of your inventory is tied up in an Amazon warehouse, you’ve got a problem on your hands. (Especially considering the obscene and rising cost of storage.)

To effectively deliver on customer needs, you need an omnichannel inventory management system that supports all your sales channels. That means up-to-the-minute visibility into your inventory, and the ability to move or replenish stock as needed to meet demand.


How to improve your retail operations and increase your profits

1. Centralize your sales and inventory data

In the age of omnichannel, legacy brands are moving online, online brands are moving to brick-and-mortar, and every brand is trying to meet every customer at every potential point-of-sale, from register to smartphone.

Sales and inventory are two sides of the same coin: to land the sale, you need to know what you have in stock, and where. You also need to know when to push sales or reduce advertising depending on your inventory levels.

The right inventory solution can:

  • Store all inventory data from multiple channels in a single location
  • Display real-time updates so you always know what’s in stock
  • Integrate with your sales channels and third-party apps so unavailable SKUs can be automatically hidden or displayed with backorder options

With so many touchpoints in play, modern merchants and brands will need robust operating procedures in place to optimize inventory across multiple digital channels.

2. Create your 'single source of truth' forecast

With legacy forecasting methods like Excel, only a small handful of people have access to the most current inventory data. Spreadsheet data must be updated constantly, and is incredibly vulnerable to costly human errors; not to mention issues like version control, file corruption, or just being excruciatingly slow.

Cross-functional teams should be empowered to make better decisions using the same key data and KPIs, updated in real-time.

Opt for an inventory platform that:

  • Automatically updates inventory with every sale, so you’re always looking at the most current data points and predictions
  • Offers customizable dashboards to empower the team to make better data-driven decisions
  • Lets each team member visualize product performance and forecasts by SKU and channel

A customizable inventory planning platform can give every member of your team access to exactly the same numbers at the same time, keeping everyone on the same page.

3. Automate manual workflows

Efficient retail operations start at the ground-level, with streamlined workflows that save your key employees valuable time and energy.

To free up your employees and widen your profit margins, look for automated solutions that:

  • Allow you to set and customize your reorder points, so you can replenish automatically
  • Generate POs and TOs with the push of a button
  • Integrate seamlessly with 3PLs, and with marketplaces and e-commerce platforms like Amazon, Etsy, eBay, Walmart, Shopify, and BigCommerce to automatically push sales data to all channels without human intervention

The less time your employees spend on inventory, the more they can devote to other crucial functions of your retail operations.

4. Align your sales velocity and inventory

Real-time inventory data can help you carefully engineer your sales strategy in-the-moment, to avoid stockouts and balance levels. With this kind of visibility, you know when to turn the dial up or down on ad spend or replenishment.

Look for an inventory platform that:

  • Provides full visibility into every node of your supply chain, like units in warehouses or 3PLs, fulfillment centers, in production, in transit, etc.
  • Can help you decide to pull (or automatically pull) particular ads from view, pause sales initiatives, or increase prices on specific items when you’re running out of stock
  • Lets you make immediate adjustments to speed up deliveries, replenish ahead of schedule, or strategize for stretching inventory

Whether your products are moving fast or slow, you need to be able to react in an instant and adapt on the fly.


Control your inventory, control your operations

The right inventory platform can be the difference between subpar and seamless retail operations. Take the time to put the right backend processes in place, and watch your margins grow.

And when you’re ready to streamline your forecasting and inventory, Flieber has you covered. Access full sales and forecast visibility at a SKU level, get native integrations with Amazon and Shopify, and select the strongest forecasting model for your business to help ensure a profitable outcome.

Ready to see Flieber in action? Sign up today for your free trial!