The Importance of Managing Backend Ecommerce Operations During COVID-19

Ecommerce

Stay-at-home orders across the U.S. have radically changed how consumers think and go about shopping for essential and non-essential items. For many consumers, online shopping has become the de facto choice to browse and make purchases, which has had a major impact on ecommerce sales across industries.

Since the Trump administration declared a national state of emergency on March 13th, some experts have found that ecommerce sales have increased by as much as 40%. As a result of these mandates and shifting consumer habits, many retailers have shuttered their storefronts for the foreseeable future and are focusing on their online operations.

For some businesses, this is the first time they are exploring ecommerce while established online sellers are working to expand their presence into other channels. As retailers race to meet customers online during these unprecedented times, they will be focused heavily on providing positive customer experiences throughout every stage of their journey.

From browsing to checkout to delivery, online retailers must ensure that they are providing personalized and transparent experiences for each customer and, in some cases, delivering seamless experiences across multiple channels.

Despite the number of considerations that go into the customer-facing aspect of digital commerce, there are a host of behind-the-scenes considerations that business owners must also keep in mind that have a direct impact on the customer experience and overall efficiency of the business.

Managing Customer and Business Data

Online businesses are likely leveraging several different business systems to manage everything from payments to fulfillment. As a result, managing data from disparate sources can easily become difficult for even the largest ecommerce merchant.

However, the technology and integrations exist today that enable businesses to neatly track streams of data and harness it to make more informed decisions about their operations.

During this time of uncertainty, managing data can support businesses in a number of ways, including:

  • Targeting and reaching customers—Customers are going online, but many are also wary of spending money due to the uncertainty tied to employment and other market factors during the pandemic. Data can help businesses understand the change in consumer habits and help inform ongoing offers and marketing strategies to effectively reach customers.
  • Streamlining business operations—Business data housed across various systems is rich in information that can help businesses understand what changes can be made to their operations during this time to save money, become more efficient, and manage supply chain disruptions. For example, data can be used to understand which products are selling better than others to help create a more efficient product procurement process.

The use of business systems, including ecommerce platforms, payment systems, and tax compliance solutions that can easily integrate will be key for businesses looking to better understand and harness the data they are collecting.

Understanding Compliance Obligations

For many businesses, managing tax compliance is the last thing on their minds, especially during a time of crisis. However, the rapidly changing sales tax landscape has placed more compliance obligations on online businesses than ever before. So, for businesses going online for the first time or those that are expanding their online presence, the risk of failing to understand and manage compliance is paramount.

At a baseline, ecommerce sellers should understand where they have an obligation to collect tax on remote sales due to economic nexus legislation. Following the 2018 Supreme Court decision in South Dakota v. Wayfair, states were granted the ability to apply tax to online transactions made within the state regardless of where the seller is located.

Businesses that are used to selling through a storefront will need to ensure that they are not triggering economic nexus thresholds if selling beyond their state borders online. Similarly, it’s important that businesses selling through multiple channels are cognizant of which state’s thresholds they are at risk of triggering since their sales will likely expand.

Marketplace facilitator laws are another compliance obligation that ecommerce merchants should be aware of. Due to the prevalence and popularity of major online marketplaces, many ecommerce sellers include a marketplace storefront in their online strategy.

Fortunately, almost 40 states have put legislation in place that requires the marketplace to collect sales tax on transactions made by third parties—lessening the burden placed on the individual retailers.

However, it’s important to note that the sales made through marketplaces contribute to a retailer’s overall transaction volume, so it’s important to monitor sales across all channels to understand where they are at risk of triggering economic nexus thresholds.

While many states are delaying sales tax payments due to COVID-19, it’s inevitable that states will seek their share of online revenue in the coming months. Whether a business is new to online selling or expanding their ecommerce business to new channels during this time, it’s likely that their compliance obligations will shift and will need to be addressed to save headaches down the line.

In the short-term, it’s critical that businesses pay close attention to the customer experience to ensure that they are not turning away any potential customers due to subpar shopping experiences. This means that businesses should take a close look at the functionality of their online stores from product descriptions to checkout

However, it’s also important that businesses take the necessary steps to optimize their backend processes, like tax compliance, to mitigate interruptions to the customer experience in real-time and safeguard the business from the risks that lie ahead once operations return to normal.

Amit Mathradas, president and COO, Avalara