What is an ecommerce operating system?

After reading this guide, you’ll understand what an ecommerce operating system is, how to use it to drive online strategies, and how it can fit into your ecommerce ecosystem.

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What You’ll Learn:

  • What an ecommerce operating system is (and is not) and why your brand needs one.
  • How an ecommerce operating system works with your other ecommerce tools and platforms.
  • How different roles within your company can use an ecommerce operating system to drive their strategies.
  • And much more!

Who This Guide Is For:

  • You’re a business founder, CEO, or COO needing a holistic view of your ecommerce performance and insights to optimize operations.
  • You’re a head of ecommerce using multiple spreadsheets and tools to oversee the day-to-day operations of your company’s multichannel sales strategy.
  • You’re a marketer managing multichannel marketing campaigns, reporting on campaign performance, and adjusting budgets based on channel performance.
  • You’re a financial analyst measuring the profitability of sales channels and products and the overall total revenue and net margin.
  • You’re an operations manager tracking inventory levels and trying to forecast inventory needs based on shopper demand, upcoming sales events, and promotions. 

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IMG_3594-1About the Author

Shannon Abel is the Content Marketing Manager at Tradeswell, creating content on topics that matter most to brand and retail leaders. She previously worked for an ecommerce agency, where she learned the ins and outs of customer experience, digital transformation, ecommerce technology, digital marketing, and more. She has a marketing degree from Clemson University and lives in Charleston, SC.

Chapter 1: What is an Ecommerce Operating System?

Brands often fall into one of two traps:

  1. They treat their ecommerce business as an art and rely on opinions and hunches to make business decisions.
  2. They spend too much time trying to analyze their data, leaving little to no time to focus on product innovation.

This is where an ecommerce operating system comes into play.

An ecommerce operating system takes away the guesswork and tedious task of running an online business by collecting data from all of your sales and marketing channels—including DTC, marketplaces, email, and social media—and provides a single system of intelligence. 

How It Works Screenshot

No more waiting for an analyst with a spreadsheet to provide insights that may be days or even weeks old. Unlike traditional analytics tools, ecommerce operating systems use AI to automatically generate actionable insights on advertising, financial, inventory, and operational trends. 

In an era of rising customer acquisition costs, having easy access to accurate, integrated data allows you to preserve margins, improve operational efficiency, make decisions faster, and identify revenue opportunities.

Chapter 2: Why Brands Need an Ecommerce Operating System in the Real-Time Commerce Era

Shoppers quickly adopted new digital channels at the start of the pandemic, and now they expect to buy products where and when they want, whether it’s in a store, on social media, or through a brand’s ecommerce website. To keep up with fast-changing shopper behavior across channels, brand’s need access to real-time commerce data. 

Separate reports from Tradeswell and Salesforce found that there’s a 57% YoY increase in global online sales, a 40% increase in net new customers shopping online, and 95% of ecommerce businesses now sell in two or more online marketplaces.

Ecommerce Insights from Tradeswell and Salesforce

However, selling and advertising products through multiple channels adds to the complexity of managing data from various sources.

Legacy brands, in particular, often face disjointed functions and data, making it difficult to quickly pivot the product, marketing, and merchandising strategies based on changing trends. Access to real-time data that allows you to accurately identify changes in revenue, costs, and margins across channels will be the differentiator between industry leaders and laggers.

Ecommerce operating systems simplify the complexity of selling online by tracking multi-channel performance in real-time and capturing insights that help optimize business operations, boost sales, maximize profit margins, and enhance the customer experience.

Download our latest research report that uncovers the top ecommerce challenges threatening profitability in 2022 - according to 300+ brand leaders.

Chapter 3: What an Ecommerce Operating System is Not

Ecommerce operating systems are a relatively new category in the ecommerce software space and are often confused with other solutions. While there may be some overlapping functionality, an ecommerce operating system is not:

  • A Data Warehouse: Most data warehouses act as a data repository and provide little to no actionable insights or easy reporting capabilities.

  • A Customer Data Platform: Customer data platforms collect customer data to form unified customer profiles, but many lack financial, inventory, advertising, and operational insights.

  • An Ecommerce Analytics Software: Ecommerce analytics software generates consumer behavior insights, such as conversion and abandoned cart rates, but typically doesn’t get into the financial and operational insights needed to maximize profit margins.

  • An Ecommerce Agency: Agencies can help your brand’s ecommerce team manage their online business, but this also means outsourcing your data analysis and decision making—leaving teams outside of ecommerce without the insights they need to do their jobs more efficiently.

Chapter 4: How an Ecommerce Operating System Solves Common Business Challenges

Manually migrating data from one system to another and managing frankenstein-type technology stacks often lead to costly and time-consuming efforts. Implementing an ecommerce operating system made for real-time commerce will help you solve these common yet complex business challenges.

  • Manual Spreadsheets: Many brands still use spreadsheets to manually input data—leaving a high risk for error. By eliminating spreadsheets with an ecommerce operating system, you can spend more time on product development and innovation.

  • Tool Sprawling: As ecommerce brands build up their technology stack to adopt new channels and enhance the customer experience, it becomes increasingly difficult to see a return on investment. Ecommerce operating systems provide a single platform to easily manage data and track online business performance.

  • Data Silos: Companies rely on various functions, systems, and processes to deliver digital customer experiences, often causing data silos. Centralizing data improves internal alignment, fosters cross-team collaboration, and creates a trustworthy source of information. When objectives and KPIs are visible across the organization, teams can work closely together and make informed trade-offs to achieve overarching business goals.

  • Digital Transformation: Unlike their data-first, digitally native competitors, legacy companies have long relied on systems made for physical sales. Ecommerce operating systems simplify the complexity of shifting large departments to a new way of doing business. They accelerate speed to market and foster a test-and-learn culture that streamlines decision-making.

  • Less Reliance on Third-Party Data: Facebook’s new data restrictions, Google’s cookie phase-out, and Apple’s data tracking transparency will require brands to prioritize first-party data. Ecommerce operating systems with AI capabilities empower brands to capture insights and generate predictive models without third-party data.

Chapter 5: What Types of Data Does an Ecommerce Operating System Capture?

By integrating your ecommerce operating system with your ecommerce sales channels and marketing tools, you gain a single source of truth for real-time analysis. There are four major data categories that an ecommerce operating system captures: sales performance, financial, marketing, and inventory. By weaving all four categories of data, you gain a holistic view of your ecommerce business performance that’ll help you identify opportunities and challenges.

Sales Performance Data

Capturing sales data allows you to understand channel performance and how well individual SKUs and product categories convert on each sales channel. An ecommerce operating system captures:

  • Total sales
  • Ad attributed sales
  • Merchandising sales
  • Sales by type (full price vs. subscription sales vs. coupon sales)
  • Top and bottom performing products
  • Sales details at the product and channel level
Retail Overview Data Screenshot-min

Who Uses This Data:

Ecommerce and marketing managers typically use sales performance data to identify changes in product performance across channels. By layering this information with marketing, operations, and finance data, you can determine what’s causing the decline or increase in performance.

For example, if a product has declining sales, there could be a few different reasons. You may have spent less on advertising, changes in shopper search trends are affecting your paid search campaign, or you have low inventory levels.

How to Use This Data:

  • Understand changing customer buying trends and plan for inventory needs
  • Adjust advertising spend to push low performing products or categories
  • Test new sales channels and determine the profitability of each one
  • Identify how merchandising strategies, such as coupons and subscriptions, impact product-level performance

Financial Data

Financial data that pairs SKU-level insights with the cost of goods sold will help you determine the overall health of your ecommerce business. An ecommerce operating system captures:

  • Total revenue
  • Total costs
  • Contribution margin
  • Net margin
  • Above the line costs
  • Below the line costs
  • Costs break down at the product and channel level
Financia Overview Data Screenshot-min

Who Uses This Data:

Analysts use financial data to track how well they’re pacing against their net margin threshold and tracking towards their revenue goals. Financial data also provides critical insight into what’s causing an increase or decrease in a specific product’s net margin.

For example, say you’re not meeting your net margin threshold. You can look at your above the line and below the line costs to determine your most significant cost drivers, such as seller fees, storage fees, or fulfillment fees.

How to Use This Data:

  • Track the profit and loss of each product to make merchandising and marketing decisions that drive growth
  • Adjust short and long term financial strategies based on your net margin
  • Identify your above the line cost drivers, including shipping costs and transaction fees, and adjust your operational strategy

Marketing Data

Marketing data gives you a clear picture of top performing marketing channels, which campaigns drive revenue, where campaigns drive traffic, and which campaigns attribute to conversions. An ecommerce operating system captures:

  • ROAS
  • Ad attributed sales
  • Ad spend
  • Impressions
  • CPC
  • Top and bottom performing products
  • Marketing performance broken down per product and channel
Marketing Overview Insights Screenshot-min

Who Uses This Data:

Marketing managers use marketing data to review campaign performance based on advertising and ecommerce metrics. While many marketers rely on ROAS to inform their marketing campaign strategy, an ecommerce operating system tracks marketing metrics that shape the ecommerce strategy.

How to Use This Data:

  • Identify the customer acquisition cost per channel and determine where to pivot marketing spend that will drive profit
  • Test new marketing channels and quickly identify profitability beyond the traditional return on advertising spend (ROAS) metric
  • Determine which paths to purchase need to be optimized based on where customers convert
  • Adjust paid search strategy if a keyword is contributing to a poor ROAS

Inventory Data

By using historical inventory data, you can better prepare for seasonal spikes, align inventory availability with marketing campaigns, and track changes in demand. An ecommerce operating system captures:

  • Weeks of fulfillable inventory
  • Available inventory
  • Average weekly sales by units
  • Reserved inventory
  • Inbound inventory
  • Unit sales forecast
  • Product-level forecast
Inventory Overview Data Screenshot-min

Who Uses This Data:

Operational roles use inventory data to predict how much inventory they’ll need to fulfill shopper demand. Having access to accurate inventory data minimizes the risk of shoppers seeing out-of-stock items or wasting marketing dollars on low-demand products. 

How to Use This Data:

  • Align marketing, fulfillment, and operation teams on inventory availability to ensure you’re promoting products the company can fulfill
  • Maintain inventory availability across marketplaces to prevent out-of-stock items that will ultimately negatively impact product listing ranking
  • Forecast inventory needs for major ecommerce sales events, such as Prime Day or Cyber Weekend, based on the previous year’s data

Chapter 6: How an Ecommerce Operating System Fits Into Your Ecommerce Technology Stack

Think of your ecommerce operating system as your ecommerce automation solution for mission control. AI-driven ecommerce operating systems pull in data in real-time and automatically generate insights that allow you to better manage your business. 

Your ecommerce platform, marketing tools, and ecommerce sales channels all integrate with your ecommerce operating system. Say you have a direct-to-consumer store built on Shopify, but you also sell products through Amazon, Walmart, Facebook, and Instagram and use Klaviyo for email marketing. All of these channels integrate with your ecommerce operating system. 

By feeding data to a unified platform, each function has access to the same data and can easily collaborate to make business decisions that drive profit and improve the customer experience.

Chapter 7: Ecommerce Operating System in Action: Packable

Packable is the single largest seller on Amazon, with products from household names like L'Oréal and 3M. While the company has access to troves of information, it needed a hub of cross-functional data with automated actions and insights. Packable partnered with Tradeswell, an ecommerce operating system for real-time commerce, to consolidate data into a single platform. 

Tradeswell allows Packable to automatically generate AI-powered insights and gain a deeper understanding of its ecommerce business. Dashboards in the Tradeswell platform make it easy for Packable to report performance to its clients and create unique, digestible data views for each function in its organization, from retail and marketing to finance and logistics.

Whether you're a small business or a large enterprise, when you embrace an ecommerce operating system as your single source of truth for all ecommerce data, you get smarter and more streamlined.

Ready to get rid of manual spreadsheets and tool sprawl? Get a demo today.