Term
Outsourcing
noun
Outsourcing is the practice of hiring a third party to handle operations, perform tasks or serve customers for a business.
What Is Outsourcing?
Outsourcing is the practice of hiring a third party to handle operations, perform tasks or serve customers for a business. In the world of ecommerce, tasks such as writing product descriptions, dealing with support tickets, developing websites, marketing, and technical support can all be outsourced to a third party.
Ecommerce outsourcing may even include handing over the complete ecommerce operations to an external party in some cases. Many ecommerce businesses need to outsource to cut their costs or save money on new resources that they want to add to their workflow. Businesses in the infant stages cannot hire specialists for every task, making outsourcing a viable solution for such companies.
Outsourcing vs. Insourcing
Outsourcing is the practice of employing a third-party workforce, whereas insourcing uses in-house resources to get tasks done. Let’s use an example of an online-only business to see the difference between both terms. This type of company has web development, administration, product management, shipping, marketing, inventory, and customer service departments.
If you break down a department from these like administration, you will find the number of tasks it is responsible for, like employee management, payroll responsibilities, and human resources. Small stores may use the business owner and one employee to take care of these tasks, but eventually, every business needs to delegate roles to function efficiently.
This is where the owner of the business can determine whether they need to outsource or insource. If accounting becomes too overwhelming, they can insource and bring a professional on board. Sure, it costs more to hire someone in-house, but it’s easier to keep track of things. Plus, there will never be a time when you cannot get immediate access to their service, except for an illness. However, it may make more sense for the small ecommerce store to outsource the same job if the business doesn’t have enough funds or accounting data to recruit an in-house resource for it.
Outsourcing vs. Offshoring
Another practice businesses use to cut costs is known as offshoring. It refers to the practice of shifting an entire department of your business operations to another country. Business owners and many customers confuse this term with outsourcing by assuming that companies only outsource jobs to foreign countries.
In reality, outsourcing and offshoring are completely different concepts, but you can combine the two. Offshoring is usually the choice for businesses that create their own products. The cost of manufacturing and other tasks is quite high in western countries, so businesses often decide to move production to a cheaper region. Common choices for offshoring are China, Mexico, and Taiwan.
Ecommerce businesses can utilize both methods like manufacturing and customer service, and move them to another country. The main goal is to cut costs, so combining the two is usually far cheaper.
Ethics and Outsourcing
In the world of ecommerce, the benefits of outsourcing are prevalent. However, this business practice often receives criticism from the customers, despite creating jobs. The main criticism is aimed at ecommerce companies that outsource customer services to foreign countries, and some generally frown upon the practice of outsourcing.
Most of this criticism for offshore outsourcing relates to hiring cheap labor and making them work under unsafe conditions. The labor laws and the state of the country’s economy play a significant role in shaping the criticism. On the other hand, local opposers of outsourcing claim that outsourcing stops native workers from receiving competitive wages, job security, and other benefits.
Advocates, however, believe that outsourcing can help the economies of all countries by creating more jobs and saving many others. Some companies are truly not in a position to hire full-time employees for different reasons, so these companies have the risk of being at a competitive disadvantage. This risk can lead to a drop in overall revenue and eventually cutting jobs. Moreover, outsourcing can create jobs in the company itself and the company it operates in.
When ecommerce businesses are able to outsource functions like payroll and accounting, they can spend more of their time and effort into improving the business. More focus on the business will lead to more revenue that the business can use for hiring more full-time staff. Finally, when ecommerce businesses cut costs through outsourcing and offshoring, they can transfer this change to the end customer by reducing shipping and product prices. In basic economics terms: when customers save more from your business, they can spend more. When companies receive more revenue, they can create more jobs.
Why Do Companies Choose to Outsource?
Now that you know the basics of outsourcing and what it is and isn’t, let’s discuss what it can do for your ecommerce business.
Saving Money
The biggest motivator for giving tasks to companies and contractors is to save any money you can. Employees need a full salary, benefits, taxes, and some time to settle into a new environment. You may also need to set up a new office or workplace to accommodate employees. With outsourcing, you only have to focus on the job at hand. The outsourced project will get the attention it deserves without you spending on the things mentioned above.
Saving Time
Outsourcing ecommerce operations saves time for you and your employees. When you outsource tasks as a business owner, you can focus on customer research, development, outreach, and other tactics to grow the brand. When the employees can save time, they will be more efficient with the tasks they were hired to do. You will notice a boost in productivity and have more sales and revenue. There will be fewer support requests overall.
Accessing Better Talent
When you only hire in-house employees, your talent pool is very limited. This is more difficult when you are looking for skill but cannot find a suitable candidate. When you outsource a project or job, you get access to a wider pool of potential candidates from around the world. You can grow your store’s sales, marketing and have someone skilled to handle SEO, blogging, and advertising. You can even use remote outsourcing to choose candidates who may be willing to fly and become full-time employees for your company. In short, outsourcing gives you access to a diverse talent pool and lets you have the best minds on the job.
Having Flexible Hiring Process
You will mainly use outsourcing for tasks that need to be performed year-round. However, there will be times when you need short-term help for tasks. This is the case for projects that need immediate attention and come with an expiration date. For example, if you need 500 new items for your store, you will also need someone who can write 500 optimized product descriptions for every item. This will be an urgent task that you cannot give to existing employees based on their workload. Outsourcing will allow you to hire someone freelance who will write the best product descriptions as a one-off project. Moreover, they will be best suited for this type of task.
Staying Competitive
The free market breeds competition, and the internet has only fueled this competition. You can work on your business and your crew around the clock but will be able to accomplish only a bare minimum quota and fall behind. Outsourcing keeps you aligned with business goals by helping you take off the extra load and staying on track. This will allow you to lock horns with the competitors and never fall behind any seasonal deadline. Ecommerce requires real-time optimization, and with outsourcing, you can deliver these requirements on time and with the best workforce on your side.
Ecommerce Outsourcing Tips
Here are some tips on how to outsource ecommerce operations.
1. Identify the Processes You Want to Outsource
Customer service? Production? Product sourcing? Analyze what tasks consume too much of your time and determine if outsourcing them will bring better results for your business.
2. Choose Between a Team and Individuals
Based on the size and type of your business, you may discover that hiring a few niche experts with a specific set of skills is more efficient. But don’t do this to cut costs, as having fewer hands on deck can also cause problems.
3. Post Tasks You Want to Outsource
You can start with freelancing platforms where you post details about the tasks to be done and wait for people to apply. Some platforms like FreeeUp pre-vet applicants, meaning you don’t have to screen candidates before finally interviewing them and making a hire.
4. Share Your Goals and Vision
When you outsource your business operations to remote workers, maintaining a good relationship with them becomes critical. One way to do this is to make them feel they’re a part of your culture by sharing your goals and vision. Once they are on board with your goals, you’d find it easier to collaborate with them to make the business a success.