Operational efficiency is all about getting the most out of the very least. In other words, if your business is operationally efficient, it’s figured out how to perform at the same great level using a fraction of the resources. 

This article will dive into the basics of operational efficiency, why it’s so important, and how ecommerce brands are boosting their efficiency using tried-and-true processes and automation tools. 

What is operational efficiency in ecommerce?

In ecommerce, excellent operational efficiency means a company has figured out how to streamline its internal processes and operations to maximize productivity, minimize waste, and get the most out of its resources. While operational efficiency is essential to virtually every business, it’s especially vital to ecommerce companies. That’s because operational efficiency plays a major role in a company's profitability, customer satisfaction, and competitive advantage over other businesses in a crowded online marketplace. 

For example, an ecommerce company may decide to pause SMS marketing due to its costs. Now, it has to find a way to perform at the same level, even without those extra dollars spent on texting customers. It must leverage other retention channels, such as email or push notifications, to stay in touch with shoppers. If you can up the ante on these communications correctly, your company can match its previous performance while spending and doing less. 

Don’t confuse operational efficiency with operational productivity. Operational efficiency is all about getting the most out of the very least, whether marketing dollars or actual inventory. Before your ecommerce business focuses on what to do to become more productive, it should zero in on what it can do to be more efficient. 

Want a quick biz school lesson on operational efficiency? Investopedia’s piece is an excellent place to start.

How Tapcart customer Dose of Colors uses its app to boost operational efficiency

Beauty brand Dose of Colors uses its app to outsmart the competition, not outspend them. After all, cosmetics is a crowded space — and standing out matters.

"I know we're a successful brand, but we're nowhere near as well-funded as some other brands substantially larger than us,” said Jodi Lynn Elle, CMO. “So we need to work smarter because we can't outspend the competition. So we must outsmart them.”

Here’s the TLDR:

‍Dose of Colors execs wanted a seamless, quick way for customers to purchase products. (No complex log-in or zillion steps, etc.) Besides, an app would give DOC a chance to:

• Differentiate itself in a crowded space where most competitors do not have apps
• Allow DOC to reach customers in the palms of their hands (literally) with push notifications
• Supercharge AOV (27% higher on app vs. website)

The app is also a key channel for operational efficiency because it allows the brand to do more with less. Push notifications, unlike SMS, are at no extra cost. There’s no tech team required to manage the app—Tapcart handles that. It’s a simple, plug-and-play extension of DOC’s Shopify store that encourages customers to spend more and engage with the brand better…without requiring DOC to tap into tons of extra resources.

How to Improve Ecommerce Operations

So, you’re sold on the importance of boosting operational efficiency, but what’s next? 

These six steps are proven ways for your ecommerce business to become more efficient.

1. Create an operational baseline for your business

Every business has rules for how it should run. But like many start-ups, ecommerce businesses don’t always have time to update these guidelines as the company grows and market trends change. If you haven’t done so, now is the time to sit down and create an official document that explains exactly how every aspect of your business runs.

Set up meetings with executives and managers, sit down and talk to different people in different departments, and seek to understand every employee's role in your business. Larger businesses will create more traditional operational charts. Smaller companies tend to have more crossover between responsibilities and roles. No matter what your business looks like, make a crystal-clear picture of your company's operations.

After all, it’s difficult to determine whether things are running smoothly if nobody’s outlined how they should run. 

‍Questions to ask yourself and other stakeholders include:

• What are the key purposes of this department?
• What are the top department goals, and how do they serve our organization?
• What business responsibilities does this department take on, and what processes or steps are required to fulfill those demands?

Once you have a clear understanding of the primary functions of each department of your business and what it needs to do to achieve those functions, you’re ready to move on to step two. 

Need more help getting started with your baseline? This article will help you get started—and determine KPIs you need to track your progress over time.

2. Measure operational efficiency

You’ve probably heard it a thousand times: numbers don’t lie. That’s why many businesses calculate their operational efficiency. You can calculate your company's operational efficiency by summing up all of your operating expenses and then dividing them by your total revenue. 

3. Continue to review your baseline of operations

As much as we love data and metrics, it’s just as important to sit down with your operational baseline and manually identify every possible inefficiency.

Look for challenges with:

• Order fulfillment

• Inventory management

• Website performance

• App and other sales channel performances

• Supply chain management

• Customer service

• Marketing and sales

• Payment processing

• Return and refund processing

• Data and analytics

• Technology and automation

Whenever possible, work with the right people in the right department to determine bottlenecks and other challenges that make any of the above processes difficult, efficient, or expensive. If you can find a way to do something faster, smarter, or with fewer resources—do it. 

4. Consider hiring an ecommerce operations manager

Some companies employ ecommerce operations managers to assist with boosting operational efficiency. An ecommerce operations manager is there to upgrade user experience, make intelligent decisions about inventory levels, handle order fulfillment, enhance customer relationships, offer essential insights to the marketing department, and optimize your business's supply chain.

This hire should have a deep understanding of data analytics, current digital marketing trends, and supply chain logistics. They are here to supercharge operational efficiency while boosting online sales and ensuring your company’s customers are happier than ever.

Regarding your company’s website and app, it is this operation manager's job to ensure your website is as engaging, fun, and intuitive as possible. It’s all about the customer journey… and the easier you make it for customers to discover new products and keep returning for old favorites, the better. 

You’ll also want this employee to be on top of all things inventory, fulfillment, and supply chain. They must understand how stock moves through your business and how seasonality, trends, and ever-changing customer demand may affect inventory needs. This is especially true if your company tends to sell out of product. 

‍Of course, many Tapcart customers are all about selling out. After all, it’s that kind of FOMO that leads to app-exclusive launches and an ever-growing push subscriber base. For example, VRG GRL leverages exclusivity to drive brand loyalty, app downloads, and revenue through the roof. And supplement company Obvi plays a similar game, leveraging demand to turn regular customers into lifetime app users. This is perfect for CPG customers because they tend to repeat purchases of the same products over and over. 

Your operations manager should work closely with your marketing team to bring the right customers to your company. 

5. Boost your retention marketing by looking beyond email and SMS

It’s also possible this operations manager will want to consider other sales and retention channels, including an app. After all, some of the best (and least expensive) retention campaigns happen on customer’s home screens.

Together, email, SMS, and push notifications form a retention flywheel that drives LTV. But if a company is serious about supercharging retention, it needs to ensure all these channels are working together. Once again, Tapcart customer Obvi relies on push notifications to offset increasingly high CPAs.

Our 2023 BFCM survey zeroed in on what drove direct-response purchases among consumers during peak season. We discovered that push notifications outperformed digital ads by 181.5%, and SMS by 94.9%.

For brands on the fence about whether an app is worth the investment, consider this: an app with push notifications will not only bring your customers back with 3x to 4x the frequency of any other channel but will also unlock 2.5x more revenue from your already loyal customers. 

“If we're having a rough day on Shopify and the ads have been tricky, then boom, we can just send [a push notification] and get what we need,” said Ron Shah, co-founder and CEO of supplement company Obvi and co-host of Chew on This podcast.

6. Shed everything you possibly can

We’ve already said it several times, but it’s worth repeating: operational efficiency can only increase if your company figures out a way to do more with less. The leaner your business, the better.

Case in point: many Tapcart customers were initially interested in an app… but had zero desire to become a tech company. After all, these customers are selling makeup, socially-charged luxury goods, and wellness supplements. They don’t want the distractions that come with an app—the engineering, debugging, and constant updating. That’s why a Tapcart app is such a great option for ecommerce businesses. It’s a plug-and-play solution that works with your existing Shopify store and offers a highly effective way to communicate with customers at no additional cost via push notification.

Don’t be afraid to scour your profit and loss statement, looking for chances to do more with less. And remember, everything is negotiable. Here’s a tip from Ron about reducing your cost of goods sold (COGS).

Whether it’s a 1% discount or a 50%, go back to manufacturers quarterly or even monthly to negotiate. Tell them you’ve got a bigger order coming up—could they offer you better pricing or work with you to bring COGS down by X% over the next few years? 

Need more tips on getting your business lean? Here are nine more ways to get more from your P&L. 

6. Embrace automation and technology

‍Finally, ecommerce companies looking to boost operational efficiency should consider automation and technology. Automation is a no-brainer for ecommerce. It makes tedious manual processes faster and helps customers enjoy a more personalized experience as they shop your company's offerings.

These days, there’s an automation tool for virtually every aspect of your business, from inventory management to customer service. This is a win-win, streamlining many aspects of your business while freeing up valuable human resources for more challenging work.

In the Shopify ecosystem, there are lots of automation tools available in the app store that can simultaneously give you more time back and make you the hero of your company. 

The key is getting your tech stack right. Tools like Klaviyo can automate your SMS and email marketing. (Here are some factors to consider when building your tech stack.)  

Currently, ecommerce automation solutions can:

• Help identify high-value customers
• Swiftly identify risky purchasing behavior
• Automatically note customer sales channel preferences
• Implement special prices for planned sales
• Automatically adjust check-out prices based on company-provided criteria or promotions
• Automatically handle scheduled new product releases or changes to the look and feel of your app as scheduled

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Start improving your operational efficiency today

Whether you implement one or several of the above tips and tricks, there’s no better time to boost your operational efficiency. From scouring how your business runs to leveraging push notifications to trimming the fat off your P&L, every little thing you can do to improve performance using fewer resources, the better. 

Want to see how easy it is to create an app for your business? With Tapcart’s mobile app solution, brands can conveniently power a new sales channel directly integrated with its Shopify store backend. Want to learn more? Let's chat!