As a retail business owner, there are never enough hours in the day. So how is your time best spent? Are there aspects of your operation that are best done by you - curating new products, managing inventory, providing personalized customer service - and other tasks that you could delegate? By learning the pros and cons of outsourcing, you can best determine how you may benefit by delegating specific functions of your company.
What is Outsourcing?
Quite simply, the practice of outsourcing is hiring a company or contractor to take on certain job functions which would otherwise be handled in-house. Retailers are known to outsource a variety of functions including:
Web design, development and web hosting: agencies are specialized in creating the ideal online platform for customers to engage with a retailer’s brand and buy from their ecommerce store. Web hosting is a related service most companies hire out.
Accounting: outside firms manage financial information, including tax paperwork, payroll, and structure a retailer’s finances to support growth and expansion into new markets.
Logistics and Fulfillment: these companies, also known as to third-party logistics (3PL) providers, pick and package product and then ship it to the consumer.
Pros and Cons of Outsourcing
For most retail entrepreneurs, your time is best spent on tasks and processes that fall within your speciality, such as curating rare vinyl releases for your record store or creating new recipes for your line of organic personal care products. The expertise of you and your staff may not include having the technical ability to set up Magento to operate your ecommerce store. You may not have the skills to ensure your website is mobile-ready, and waiting to take that on yourself could cost you potential sales and a drop in your Google rankings.
In situations such as this, the benefits of outsourcing lie in the ability to delegate functions of your company that are best left to the professionals who specialize in areas outside your scope of your expertise. Then your time is freed up to handle parts of your business that only you can do. In fact, 88% of retail businesses that currently use an outsourcing model consider it successful.
It could even save you money, especially if your store’s business has grown but your internal accounting resources have not. Making mistakes on your finances can be costly, and firms who stay up on the latest tax code changes are the best professionals to manage that part of your business.
In years past, outsourcing was considered to be a dirty word. Handing over parts of an operation to external companies, especially in area of customer service where quality is poor, can have a very negative effect and tarnished a brand’s reputation. While the fault in delivering less than adequate service to customers would then lie within a third-party call center, the company who hires them could avoid going down that path by checking references and even setting up a trial period.
Outsourcing - Next Steps
If you are considering outsourcing a part of your business, especially if it is consumer-facing, do your research. Talk to their customers and check those references. Make sure the lines of communication are clear and consistent to avoid misunderstandings of where your involvement in a given part of your operation leaves off and the third-party provider picks up.
Also understand the difference between hiring a contractor, such a bookkeeper or graphic designer, and a company, such as an accounting or web design firm. When hiring a contractor, make sure you have the proper paperwork in place, as tax agencies such as the Internal Revenue Service (IRS) have strict laws pertaining to a 1099 contractor versus a W2 employee.
Getting to really know the advantages and disadvantages of outsourcing, when to hire and when to keep functions in-house, can be a real boost to your business. It can save you time, stress, and in many cases, money, especially as your company scales. By partnering with a third-party company, you can then hand off the baton with confidence and peace of mind, and get back to those aspects of your retail operation that are your forte.
Learn more by downloading the free white paper,
“The Benefits of Outsourcing for Improved Operational Efficiency.”