The ROI of Outsourcing: A Step-by-Step Guide to eCommerce Outsourcing

Are you an eCommerce business owner looking to increase efficiency and profitability? If yes, outsourcing is one strategy that will help you achieve your business needs.

In fact, did you know that an astounding 70% of businesses are turning to outsourcing to slash costs and create room for remarkable ROI? 

That's right, and this comprehensive guide offers a step-by-step approach to outsourcing in eCommerce. Expect lots of valuable tips on leveraging the power of outsourcing to attain your business goals and reap impressive rewards along the way. Let's dive in and get started on your outsourcing journey.

The Significance of Outsourcing

Perhaps you're wondering, "Why outsource in the first place?". Well, there are several advantages to outsourcing your eCommerce activities —  the reason why so many businesses are taking the plunge.

Here's a quick overview of the benefits:

• Cost reduction: As a business owner, you want to achieve good profit margins by minimizing the cost of operations, and outsourcing is a valuable tool for achieving this objective. By delegating to a third-party provider certain tasks and responsibilities that would have otherwise been expensive if done in-house, you can significantly lower overhead and operational costs. 

• Improved focus on core competencies: Outsourcing lets you focus on what your business does best by allowing you to use third-party service providers for the more time-consuming and labor-intensive tasks that are weighing it down.

• Access to specialized skills: Outsourcing means leveraging an external provider's knowledge and experience to succeed in areas where you lack in-house resources and competence. Plus, it gives you access to state-of-the-art innovations without having to incur the tremendous costs of acquiring them.  

• Scalability and flexibility: Outsourcing enables seamless scalability, allowing you to readily adjust to fluctuations in demand. Moreover, using an external service lets you switch providers when necessary, ensuring essential flexibility in business operations.

• Enhanced efficiency: Lastly, outsourcing allows you to increase efficiency throughout your organization. That’s by facilitating the achievement of tasks in a shorter time with greater accuracy — all while reducing costs and freeing up resources for more strategic initiatives.

Step-by-Step Guide to Ecommerce Outsourcing

Now that you recognize the merits of outsourcing, it's time to take the next step and discover the art of outsourcing. Here is a meticulous guide to help you outsource effectively in the eCommerce domain and reap its benefits.

Step 1: Identify the Tasks to Outsource 

Before you can start looking for an outsourcing partner, you first need to identify tasks that can be outsourced. Unless you selectively choose the tasks to delegate, you may not wholly reap the benefits of using this strategy. 

There are two essential steps when identifying the tasks to outsource:

1. Determining the Core and Non-Core Business Activities

Your business activities are grouped into two:

• Core. 

• Non-core. 

Core business activities are the essential ones or, in other words, activities that directly contribute to your success. In eCommerce, examples include product sourcing, website design and development, customer service and support, and more. 

On the other hand, non-core activities are the ancillary tasks not directly related to your core operations. Human resource and payroll, employee training, IT infrastructure and development, and legal and compliance are a few examples of eCommerce functions that fall under this category. 

2. Identifying the Tasks That Can Be Outsourced

Once you have distinguished between core and non-core activities, it's time to assess what activities you can hand over to an outsourced partner. You should delegate the non-core ones. Of course, you can still outsource the core functions, but keeping them in-house is generally recommended.

That’s because:

• Doing core activities in-house gives you direct oversight of the business’s key activities.

• In-house performance of core activities gives you direct control over critical business functions.

• It allows for easier and swift decision-making on crucial factors affecting business performance.

• It helps the business to build and retain a competitive edge in the market without relying on an external service provider.

• It allows you to keep sensitive business information from breaches and potential leaks. 

Therefore, if possible, only outsource the non-core business functions. To do that, categorize them into two — the ones that can be delegated and what can be effectively handled in-house. Ensure that you are outsourcing activities that cannot be done in-house or which can be done better outside the organization. 

Step 2: Find the Right Outsourcing Partner 

Finding the right outsourcing partner comes as the second step of your outsourcing journey. This process requires research and evaluations to ensure you find a partner that not only matches your specific needs but exceeds industry standards.

In order to effectively outsource, it is crucial to follow three essential steps when seeking a suitable partner.

1. Researching Potential Outsourcing Partners

First, create a list of potential providers by researching online and asking for referrals. You can also use social media tools such as LinkedIn to find relevant outsourcing partners and read their reviews. 

The outsourcing provider you choose should have the following attributes:

• Reliable

• Good track record

• Reasonable rates

• Flexible and adaptable

• Strong work ethic

• Good communicator

2. Evaluating Outsourcing Partners

After research, it's time to narrow down the list and start examining each of them more closely. Compare and contrast their capabilities, availability, pricing, security protocols, response times, and customer service. All this will give you an insight into each potential provider’s ability to deliver on your expectations. 

3. Signing an Agreement With the Chosen Outsourcing Partner

After selecting an appropriate outsourcing partner, it is crucial to proceed with signing an agreement that comprehensively outlines the project's scope, pricing, performance standards, communication channels, contract duration, and other necessary particulars. This will ensure both parties are on the same page and provide clarity on expectations from either side. 

Step 3: Set Clear Objectives and Expectations

Before finalizing a partnership, it's crucial to establish unambiguous goals and objectives. Defining expectations and desired outcomes from the collaboration will aid in aligning with the third-party provider right from the outset.

Again, to set clear objectives and expectations, there are three steps to take:

1. Defining Project Scope and Deliverables

Clearly define what tasks the outsourced team needs to accomplish and provide a timeline for each task. A well-defined project scope ensures that no tasks are missed, and delivery delays are kept to a minimum.

With a well-defined project scope and deliverables, you’ll find it easy to align the outsourced partner with your business's objectives and help establish and manage the expectations of both parties right from the outset of your partnership.

2. Setting Measurable Objectives and KPIs

Outline quantifiable objectives and key performance indicators (KPIs) to track the performance of your outsourced team. 

For instance, let's assume that you're outsourcing customer service tasks. In this case, you'll need to utilize metrics like customer satisfaction, response time, and resolution rate as an effective way to gauge how the outsourced partner is doing.

Using KPIs will help you measure the outsourcing team’s success and make it easy to identify where improvements can be made. Plus, it will allow you and your outsourcing partner to identify any potential risks or challenges ahead of time.

3. Establishing Communication Protocols

Outline how often the team should provide progress reports, what methods to use for communication (email, phone calls, video calls, etc.), and who are the primary contacts on both sides. This way, expectations of both parties are set right from the start, and communications remain effective throughout the duration of your project. 

Moreover, well-defined communication protocols will also ensure the efficient flow of information between your business and the outsourcing partner so that no tasks are missed, and deadlines are met.

Step 4: Monitor and Manage the Outsourcing Project

After clearly defining the project goals and launching it, it is vital to monitor its progress and ensure that performance aligns with expectations. This guarantees the project remains on track to success. 

The monitoring stage generally involves tracking progress, providing feedback and making necessary adjustments, and maintaining a positive working relationship with the outsourcing partner.

1. Tracking Progress and Performance

Establish a system that allows you to track the project's progress. Monitor metrics like completion rates, response times, customer satisfaction, and other established KPIs to ensure the outsourcing partner meets your project's goals. If any issues arise, address them promptly and involve your outsourcing partner in finding solutions.

Tracking progress is a fundamental part of ensuring that the outsourced partner is working towards the desired goals so that you can get maximum ROI from the project. In addition, it allows you to make sure that both parties understand and adhere to the scope of the project as established at the start of the project. 

Furthermore, tracking the performance progress of your partnership helps in risk mitigation. By monitoring progress, you can identify potential risks and take corrective action to avoid any disruption to your business. 

2. Providing Feedback and Making Necessary Adjustments

As an eCommerce business, you should ensure that you provide timely and constructive feedback to your outsourcing partner. It will help them identify any areas of improvement and ensure that they stay focused on the objectives you set for the project.

Constructive feedback also reinforces their understanding of your expectations and helps them achieve the desired outcomes. Plus, it helps maintain a positive relationship between you and your outsourcing partner, which is essential for the success of the project and your business.

3. Maintaining a Positive Working Relationship With the Outsourcing Partner

Establishing and maintaining a positive working relationship with your outsourcing partner is crucial to the success of the project. Foster open and honest communication between both parties and be clear with your expectations.

Furthermore, be open to suggestions and ideas from the outsourcing partner so that you can both come up with solutions that benefit both sides. That way, you can effectively collaborate and generate the best results possible.

It’s also fundamental to thank your outsourcing partner for their efforts and recognize their contributions to the project. It will help build a strong relationship with them and ensure they continue producing the desired outcomes.

Finally, in case of any issues or conflicts, use a professional approach to address them. Adopting the proper dispute resolution techniques will help you resolve any issues quickly and keep the project on track. It will also help you avoid misunderstandings and create trust between both parties, which is essential for any successful outsourcing engagement.

Step 5: Evaluate the ROI of Outsourcing

After completion of your project, it is imperative to evaluate the ROI of outsourcing. This involves calculating the costs and benefits, analyzing the impact of outsourcing on business growth and profitability, and making informed decisions about your future outsourcing plans.

1. Calculate the Costs and Benefits of Outsourcing

Analyze the potential savings resulting from outsourcing your project, including reductions in labor or operational expenses. Additionally, factor in any indirect costs incurred, such as training or administrative expenses. Finally, compare the total costs to the benefits achieved through outsourcing to determine the feasibility of this approach.

Accurately evaluating the costs and benefits of outsourcing can offer clarity on investment decisions. It also enables you to effectively assess your outsourcing partner's performance to confidently navigate the future of your business.

2. Analyze the Impact of Outsourcing on Business Growth and Profitability

After determining the expenses and rewards of outsourcing, it is crucial to evaluate its effect on your business's expansion and profitability. Take into account variables like income potential, customer contentment, product excellence, and time-to-market for a comprehensive analysis.

This analysis will help you understand if outsourcing is helping your business reach its goals and if it's bringing the desired results. Moreover, it will pinpoint areas where adjustment is necessary and provide insights into how you can make outsourcing strategy work better for your business in the future. 

3. Making Informed Decisions About Your Future Outsourcing Plans

After carefully assessing the ROI of outsourcing, it is crucial to make well-informed decisions for future outsourcing plans. This includes analyzing any potential modifications to optimize project performance and determining the value of investing in a long-term outsourcing partnership.

Ultimately, assessing the ROI of outsourcing helps you gain the knowledge needed to make informed decisions regarding your project's direction and development. This ensures optimal resource utilization and desired results are achieved.

And those are the steps you need to follow when finding an outsourcing partner for your eCommerce business. Generally, outsourcing is a smart strategy to optimize your business operations and drive cost savings. With a well-planned approach, outsourcing can deliver massive rewards and catapult your business to new heights.

The Top Free Tools To Help You

As an eCommerce business owner, you probably know that managing outsourcing activities can seem overwhelming. But fortunately, there are multiple free tools that can make it a breeze and even enjoyable! 

Here are some of the top free tools - besides industry-specific platforms such as TransportStake, Publicity Marketplace, FunctionalSourcing, EducationStake, and SmartMoneyMatch to consider:

Canva

As an online business, 94% of your store’s first impressions are design-related. That’s why you need to create stunning visual appeals for your eCommerce, and Canva comes in to help you do just that. With the tool's intuitive drag-and-drop editor, anyone can effortlessly produce captivating designs, even without design expertise. Plus, the tool boasts a rich library of templates, images, and fonts, providing a fantastic platform for those seeking to elevate their visuals and leave a lasting impression.

Trello

Trello is a great collaboration tool for teams working on eCommerce projects. It offers an easy and organized way to keep track of tasks, share resources, and communicate progress. With its boards, cards, and lists, Trello makes it easier for remote teams to work together seamlessly in real-time.

Google Analytics

Google Analytics is the ultimate tool for tracking your online store's performance. By leveraging the power of this tool, you can get insightful data and reports you'll find helpful for enhancing your website, boosting sales, and providing an improved customer experience. Its user-friendly interface and detailed analytics ensure a comprehensive understanding of customers' behaviors. 

Hootsuite

Hootsuite is perfect for managing multiple social media accounts at once. You can easily monitor conversations, schedule posts in advance, respond to messages quickly, and measure results - all from one dashboard. In addition, the tool makes an exceptional choice for efficient social media marketing with its outstanding customer service.

Mailchimp

Mailchimp is an excellent tool for email marketing. It allows you to easily create personalized campaigns, track performance, and build an engaged audience of subscribers. With its intuitive features and automated options, Mailchimp makes it easy for businesses of all sizes to successfully grow their email list and increase sales.

Asana

Asana is great for project management with its range of tools that make managing tasks, tracking progress, and collaborating with remote teams effortless. Its simple interface and helpful customer service make it the perfect choice for businesses looking to plan and execute projects more effectively.

Zendesk

Zendesk is an excellent customer support platform that helps streamline your customer service process. It provides a comprehensive range of services, including live chat and ticketing systems, enabling customers to receive efficient and timely assistance. And with its user-friendly interface and highly useful features, this powerful tool also empowers businesses to enhance their service experience and ensure customer satisfaction.

PayPal

PayPal enjoys widespread popularity and trust as an online payment service provider among eCommerce businesses. It provides secure payments with low transaction fees and lets customers purchase quickly and easily. Plus, this indispensable tool has a user-friendly checkout process that makes online shopping more convenient for buyers and sellers alike.

Bitrix24

Bitrix24 is an all-in-one platform that helps you manage your business activities from one place. You can use it to contact clients, track projects, create invoices, collaborate with teams, and more. Bitrix24's comprehensive features make it the perfect choice for businesses looking to increase efficiency.

Related Questions

How do you calculate ROI from Outsourcing?

ROI is calculated by dividing the profit from outsourcing activities by the cost of outsourcing. This will give you a percentage that can be used to measure the success of your project and determine whether it’s worth continuing.

For instance, let's assume that an eCommerce store invested $7,000 in outsourcing its product design. Picture the same store generating a profit of $10,000 from the same investment. The return on investment (ROI) in this scenario is an impressive 43%. 

Let’s break it down below:

ROI = (Net income/Cost of investment) x 100

Net income = 10,000 - 7000

= 3, 000

ROI = (3,000/7,000) x 100

= 43%

That’s to say, for every dollar ($1) invested, the store earned 43 cents ($0.43) in profit, which is a remarkable outcome that demonstrates the effectiveness of investing wisely.

What is a good ROI for eCommerce?

A good ROI for eCommerce is typically between 20-50% depending on the type of products and services you offer. A higher ROI means your eCommerce business is more profitable, which can be used as a sign of success.

To achieve optimal ROI, it's crucial to consider various influencing factors. They include:

• Initial investment: When the amount of money you invest in a project is high, ROI is likely to be high as long as the additional investment brings better efficiency, quality, and other vital factors that will bring higher returns.

• Market conditions: Where the market demand is high, ROI will be higher. In a crowded market, however, your returns may not be as lucrative. Therefore, it is crucial to establish unique qualities that differentiate your business from rivals.

• Time horizon: The duration of your contract with your outsourced partner also affects ROI. A project with a long-range perspective can potentially generate greater profits in the future compared to a short-term agreement, particularly if the project involves substantial initial expenses.

• Tax implications: Different countries and regions have different tax policies affecting your ROI calculations. When outsourcing to a foreign country, it is essential to consider the various tax regulations and financial implications that may arise.

• Currency fluctuations: With the increasing globalization of businesses, currency fluctuations can also cause a shift in ROI. When seeking outsourcing opportunities in countries with fluctuating currencies, accessing the potential impact of currency shifts on your return on investment (ROI) is crucial for successful planning.

Is outsourcing good for an e-business firm?

Outsourcing presents numerous advantages for eCommerce businesses, such as cost reduction, enhanced efficiency, and access to proficient specialists. Moreover, it enables companies to concentrate on core business operations. 

Nevertheless, it's imperative to ensure that you choose the right ally and projects to delegate for guaranteed success. Conduct thorough research to select a reputable and dependable partner equipped with the essential experience.

In addition, to ensure success in your outsourcing project, it's crucial to establish, adhere to, and assess explicit goals and expectations. This approach will enhance your chances of attaining a robust ROI and yield the maximum benefits of outsourcing. 

Ultimately, outsourcing can provide your eCommerce business with a strategic advantage and promote long-term profitability.

Conclusion

Outsourcing can be an effective way to maximize your eCommerce business's potential. But before implementation, assess if your business requires the strategy and evaluate its impact on your ROI. A thoughtful reconsideration can lead to better decisions. Also, analyze the tasks you want to outsource and follow the proper steps when choosing an outsourcing partner.

With the proper procedure, management, and tools, outsourcing can be a real game-changer for your eCommerce business. I hope you found this guide helpful in getting started with outsourcing. If so, share it with your friends and colleagues so they can also get some insights into outsourcing and its impact on the ROI for an eCommerce business.