#120: [Shopify] Scale with Managed Integration Service

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Claus Lauter: Hello and welcome to another episode of the eCommerce Coffee Break. Now in your Shopify merchant, your company is growing. You're at more sales channel, you get orders from left, right, and center. You're quite happy, and , one of a sudden you find yourself in a situation juggling with a ton of data.

Now the question is, what do you do with all this data? And more importantly, are you sure the data is going from A to B and the way you wanna have that done? So therefore, I wanna talk today a little bit more about data and the integration between different , applications, software, solutions that you use in your business.

And therefore my guest today is Robin H. Smith. He's the CEO and co-founder of VL Omni. He has over 20 years of experience in supply chain management and data integration. He has BA of the University of Toronto and an MA in international relations from Webster University Vienna in Austria. So let's say hello to Robin.

Hi Robin. How are you today?

Robin H. Smith: How are you, Klaus? Very good to be here and, excited to chat with you.

Claus Lauter: Thanks for being on the show. Now. Let's get into it. And first question from my side. What problems are you, , solving for Shopify Immersions?

Robin H. Smith: So the problem we solve is one that. Entry level merchants typically don't see, It's more those that are scaling and those that are potentially using advanced or plus. and that is that their order volume or their transaction volume starts to get to the point where, , they either outlive their manual processes or they outgrow their plug and play solution.

So approximately 50% of sites will use a tech stack that. Plug and play. So they'll use an order management system plugged into Shopify. , they potentially could use a three PL that plugs into Shopify, or they'll use something like Ship station or so on. The other half is then, , those that have infrastructure that are larger companies, distributors, manufacturers

have a larger tech stock but are dipping their toe into the Shopify world and the e-commerce world, whether it's B2B or b2c, and those people are now starting to scale, so they reach a point where there's a tipping point. You just can't keep up with a manual order entry. And the transaction flow because of the need for velocity.

And then on the flip side, then you've got those that already have an integrated stack , that are outgrowing that stack. So where we come in is we allow. For the former to, , design and develop an integration strategy that allows them to scale. And for the ones that already have , a tech stack, , it's to start to look at, okay, how do I scale up the entire tech stack?

Do I need to make the move to an e R P? , at what point does it make economic sense? Where's the ROI around that? You will have sites that will never outgrow that tech stock just because of the nature of the business. I think of a, global cosmetics brand who I'm not gonna name that are quite fine.

Using an order management system. They're three PL pulls or orders, and they're using QuickBooks and they're doing millions in gmv, but. Their tech stack is efficient for what they're doing. You have others that are doing the same kind of GMV, that are struggling. So there's two metrics that you have to think about when it comes to integration.

, and this is well researched. , Cranfield University in the UK did a lot of work for Tesco, , back in the mid two thousands around. , the roi. actually two metrics that people need to think about. One is the number of orders. The tipping point for manual setups is about 20 to 25 orders a day, 20 to 25 orders a day.

People start making mistakes. They transcribe numbers. They just make mistakes with addresses and so on so forth. And I'm sure close you can. Start to imagine the downstream impact of all of that kind of stuff. And then the other metric, which a lot of Shopify merchants and e-commerce merchants don't even pay attention to because they're so fixated on, I'm getting orders.

I'm getting orders, is the basket size in most verticals, any basket size that is under a hundred dollars US where there is a manual process, That company is losing money because of the cost of the infrastructure, the insurance pay, , the cost of goods and so on and so forth. , again, numbers that are well researched, , they vary from vertical to vertical, but the average is about a hundred dollars.

That comes as an eye opener to a lot of CFOs and a lot of financial people. Look at that and they say, Wow, well my basket size is $50 and I'm not integrating those are the two metrics that I always throw out people seem surprised by. ,

Claus Lauter: I think it's a very good example that you gave Dan. It should be an eye opener even for smaller merchants, that integration is not something for big companies, because if you're saying it's like 25 orders and upwards, you're already in a range where you are bound to make mistakes. And as you said, it has a huge impact that goes through the organization.

Customer support one of a sudden will have a higher workload and so on and so forth. So when do merchants should think about the integration into their business or to add integration into their.

Robin H. Smith: That's an interesting question. I think they should be thinking about all times, and I think that one needs to have a strategy. You think of most direct to consumer brands. And what they're gonna do on social.

they engaged with influencers? are they gonna sell through channels like TikTok and Instagram and YouTube and so on and so forth? So everybody fixates on that kind of stuff, and which is fine because that's the front facing part of your business, but if you think of the relationship between a merchant and its customer, it's a trust relationship.

When I go online and. Go to your website and maybe you're selling shoes made in South Africa and, I've got a trust relationship here, , between you and me. I wanna make sure that what you're doing, that what you're selling me is actually accurate. It's, that I'm gonna get my order processed in a timely manner and that you're actually gonna deliver.

So the slightest, , Blips in that process, whether , you don't tell your customer , at a specific time. Yeah, I got your order. It's in process. It's then here's the tracking information. Or the tracking information is incorrect. Shopify has that algorithm that will try to determine who the carrier is and oftentimes it's incorrect.

, it's things like that engender. Trust. And if that trust is not there, then you may get the customer, but you're not gonna get the repeat customer. And , again, an old statistic, you have five chances to get a customer to come back. If in your five chances, you've given them incorrect tracking information, or you're not responding in a timely manner, or you don't have a returns process that's thought out, you're gonna lose that customer.

And the cost of acquisition is high. So, If I step back, everybody thinks about the front end, but they don't think about the delivery and the operational impact on the back end. And as an organization scales, you need to be constantly thinking about what you're doing is going to be impacting the relationship that you've got with your customer.

We had a situation yesterday actually with a customer, big merchant there. We've got presence in the EU as well as an apac. and they decided to install an app that, upsells and the integration is built on a paid order web hook.

Everything is cool on Shopify. The order comes through two minutes later, so the order's already been processed now into their e r p. Two minutes later this order, this upsell tool comes along and adds a line item to the order, charges their.

credit card. But there's no process in there to notify anybody that this has actually happened.

So you've got an order that's already come through that's in the queue to be fulfilled, and now you've got an app that's upselling and adding stuff and modifying, but there's no notification. that's a perfect example of lack of strategy where the merchant just simply thought, Oh, it's a good idea to upsell , to install this upsell app without thinking about the downstream implic.

Claus Lauter: It makes total sense and I think. Example from your side there is the chance that to get a returning customer if something goes wrong in the first place is very low. And obviously customers nowadays, they expect you to have a smooth process. Specifically in the us, , there's your biggest competitors, Amazon Prime delivering overnight.

So any kind of delay or hiccup up will hurt your business. And a lot of merchants, specifically startups, They do not make the money on the first sale. So for them it's important to have the second sale to get in a range where they make some profit. Now, when we are talking with VL Omni about how it is implemented now give me an example.

Most, , merchants are used to some kind of dashboard as a controlling tool. How does that work with your so,

Robin H. Smith: we start from a different premise and we lead with strategy. question that I ask and my sales people ask is, What is the strategic plan of the company? Like, where do you want to go? , are you selling single channel? Are you selling multi-channel? nowadays we see a lot of people tying Amazon in through their Shopify store using Shopify's app, or they'll get a Facebook feed or they'll do pos.

All of these channels need to be thought through when it comes to the integration. So we start with strategy first, which is, okay, what do you want to do? What's your text doc? Is your text doc set up in such a way that , you can handle all of these channels and B, Is it going to allow you to scale in the medium term?

Because if it's not gonna allow you to scale, then you really have other issues that are far bigger than just the integration. maybe you're making a transition to a proper order management system, or maybe you're even transitioning to an E R P, that's gonna have an impact on the. Integration. And , you often hear, Oh, well it's, the ERPs are so expensive and so complicated and blah, blah, blah.

That's true. And it's not true. But, Where we hear that it's, so expensive and so complicated. It's usually from people who haven't thought through. They have no strategic plan of what they want to do. , if you are going to do integration, what we do first is we assess your strategy, your tech stack, and then we look within that tech stack, what are the touch points that we have access to, Because a merchant may want to do A, B, and c.

But the interfaces on the tech stack may only allow me to do X, Y, and zen. that's a huge issue because, often hear, well it's Shopify, it can do part of it is, to manage expectation and to set, , is to set the expectation, but also to, , allow a merchant to evaluate the.

does the volume of business and does the tech stack and where you want to go justify the cost of integration. . Once you get beyond plug and play, which is designed for, , putting people into the lowest common denominator box, is expensive. It's very time consuming. So that's where we start and we will leave people with ideas and strategy around where they need to go.

If somebody fits the model, then what we'll do is we'll do a discovery on what they want to do. , we'll design the integration. It's not custom coded. We use our IPAs where we have standard connectors. Cover about 80% of the integration and then the rest is really tailoring it to their, , actual business practices.

Our philosophy is not to force people to change their business practices, but to allow the integration to mold to their business practices, gives them a lot more flexibility to change things and, That's our process. Once people are onboarded, , we offer a managed service, so we manage the integrations and then our dashboard allows 'em to see the data movements, in almost real time, depending obviously on, the endpoints.

If you're doing an SFTP file transfer. Well, you're not gonna get real time. It's gonna be batch driven. Although if you're doing web hooks or you have API or you have a web hooks out of your e R p, then yes, you're gonna get a lot more. Real time visibility. So all of these things come into play in terms of what basically needs to be done, but we offer that service as a managed service so,

that the merchant doesn't have to worry about it, and we charge a SAS fee for it.

Claus Lauter: Okay. I like the approach that you're coming in, obviously with the, , knowhow and experience from working with other merchants, and then coming with a strategic consultation on looking at the situation, what's happening there, and then taking it from there with the puzzle pieces that you basically see in front of you now from your experience and more from a startup perspective, growing into a bigger organization, what are the biggest roadblocks or the biggest mistakes that you.

Robin H. Smith: , lack of education, lack of understanding what they want to do and why they need integration. Shopify, when they launched their e r P integration program two years ago, took away the conversation around why integration is important, was excellent because people like us didn't have to justify what we were doing.

and what we've been doing for a very, very long time. the challenge now is to get people to understand what exactly they're. to really get in and understand, Okay, if you wanna move orders from Shopify into your e r p, what are all the things that you need to think about? Your tax authorities, your ship methods, , your payment methods.

all of these kind of things come into play because when you're integrating to an E R P, now you are making decisioning on how that order is gonna show up. how do you handle fraud, for example? Are you just gonna let everything go through? Or are you gonna block things based on, , Shopify's fraud algorithm or if you're using signified, for example.

So all of these kind of things come into play , and what we often find with many merchants is once we get into it, , they're overwhelmed almost by the decisioning that has to be made. On the flip side of that, We have a lot of merchants that come to us that are very dissatisfied with the integration that either an agency has built or, , their e r P vendor has built because for all the same reasons I just noted, tax isn't hitting properly.

Taxes coming in and the number is off. Well, probably because you've got rounding issues. , you know, so how do you.

deal with that? , my ship methods are not going to the right GL accounts, it's all this detail that makes your business efficient. you have to do a dirty, deep dive into it.

, and it's that dirty, deep dive. And as my business partner says, the devil's in the details, , that's where all the trouble is. So it's these kind of things. Our process is really to educate the, , as we're doing the discovery, we're educating them on why we are asking the kinds of questions that we.

Now I can imagine that someone coming or properly every client is different because there is about 7,000 different apps in the store and everyone has a different configuration and set up of their business. So to clean up that mess my. A while brings me to the question, what's the usual timeline from somebody approaching you and saying, Listen, I have a problem here, before getting to a point where you say, Okay, now we have a flow that works.

, it depends on the size of the merchant, depends on the complexity of what they want to do. I mean, we've had sites that go in, in a month. We've had sites that take a year. We just rolled up a very large retailer here in Canada with 179 stores using Shopify. And that was a year's project., there were so many moving parts there were.

Real time interaction with their SAP environment. for things like inventory updates. All of this stuff needs to be thought through planned, developed, tested u a t testing than going into, I think the bigger the merchant, the more moving parts, there are both. , from a silo perspective, the bigger organizations you get into, marketing does this, They look after Shopify store, it does this, then you have operations.

The thing about e-commerce is it touches every single department within an organization and they need to be all on the same playing field. So my example earlier of installing an upsell app, which was probably done by their marketing depart. And they never told anybody. So now all of a sudden the operations people are saying, Well, our orders are wrong.

There's something wrong with the integration. It's not working properly. , , you dig into it and, Okay, well, Here's the process. This is what happened it varies. And then the other element that I'd say is the level of engagement. if you've got the right people, like any project that's IT related or marketing or site build, if you don't have the right people, it's gonna take much, much longer.

Claus Lauter: What kind of homework does emergent need to do before they approach you?

Robin H. Smith: That's a good question. , I don't think people do enough homework. A lot of people actually rely on the sales pitches. they get taken in by a slick, cool sales pitch., I think the homework is know what you want to do first. And make sure that you've thought through to step back and to think through what your customer journey is like.

Something that astounds me constantly is the number of merchants that actually go on their own stores and buy things. And the marketing guys and the design guys, they dream up these sites that look be. But think about the process. And there are very, very few merchants that actually will do that.

Now there are agencies that build that into their process, I don't know of very many merchants that will actually have their people sit down and go through the customer journey on their website. And if you?

don't know what your customer journey is, then discussing integration as well. I want Shopify to talk to this.

what do you wanna move? What do you wanna do? Is it orders, fulfillments, inventory, price, promotion, products, cancellations, list goes on and on and on and on. And then within each one of those, , how do you dissect the workflow? That's the homework that I would say people really need to do, is to step back, look at what they're doing from a customer journey perspective, and how does that intersect with integr.

Claus Lauter: No, very true. I'm coming from, , the convert rate optimization point of view, and I see that quite often that people assume that's their visitor, that their client know what to do on the website in the front end, and. That's not necessarily the case. So obviously diving into this and getting and feeling what's really happening with screen recordings and so on so forth, and then maybe also looking at the back end, what's happening there might help a lot.

Now, what kind of connectors do you support when it comes to technology stack on the backend?

Robin H. Smith: We do a whole variety of ERPs. We do Microsoft, D 365 Business Central, , finance and operations. We do sap, E c C. We have defined our own, , file layouts specifically for e-commerce, for legacy environments. , a lot of legacy environments have file layouts that are designed for B2B because that's where they.

Those don't necessarily work in the world of e-com. , we have also developed our own EDI transactions, , specifically for e-commerce. So we actually have a lot of sites where we've integrated Shopify to their EDI systems because that's the only way to interface with their backend apps. And then we've integrated to WMS programs, , Salesforce Marketing Cloud, things like People vs.

For wms. , the current list is on our, , site, it changes, but I would say e r p, front end to e R p, is the most important. We also integrate Amazon Seller, central, and vendor., those seem to be the two biggest channels. , most people selling on Amazon are probably not gonna be selling on Walmart because of Walmart's exclusions.

, eBay seems to be. Focus more and more on automotive when it comes to e-com, and that's a whole specialized niche and most of the really specialized e-com applications for automotive or have already have those connectors built. So you think about, , car type, model year, vin, and then all the associated parts. I mean that's very specialized, that kind of stuff.

Claus Lauter: I can imagine, so obviously the merchant who just reached 25 orders a day is not necessarily the right client for you at this point. Who's your perfect customer? Your perfect client?

Robin H. Smith: , our perfect customer is one that is scaling. , we don't measure, we don't really worry about GMV because they could , a very low gmv but with very complex needs on the back end. , we look for complexity. We look for, , applications in the tech stack that we can integrate to. , but we also look , at merchants that are transitioning.

, they're struggling with what they've got currently and they're looking to either make a move into a larger tech stack, a more sophisticated tech stack, , or they are struggling with existing integrations. We do a lot of replacement stuff. So either it's been built by the agency, it was a snapshot in time.

It no longer suits the business practices, , or can't handle the volume. It doesn't have the redundancy. I mean, the reality is that webhooks failed. You need a recon process to go back and check to make sure that you've got all of those, , fulfillments, fulfillments fail on a regular basis with silent errors.

You don't even know that they've failed. So again, you need to have the processes to go back , and validate that you've actually processed typically we see merchants having those kind of problems and then very high volume. I mean, we have some merchants that do 10, 20,000 orders a. So very, very large volume.

They may be very low value orders, which if you think of what we talked about at the beginning where the roi, if you're getting a very, very high NU volume, a high number of orders, but very low value integration is absolutely essential. So yes, there's edge cases, , and then the other market that we serve, Established mid-market companies that are in B2B that are looking to get into e-commerce.

We do a lot of B2B stuff as well. There's a lot of mythology out there that Shopify can't handle b2b. , Shopify has new B2B APIs on Plus, , there's an excellent plugin outta the uk, , for doing, , B2B called Spark Layer. , and we have a fair number of B2B sites, and , it comes back to that consultative approach is, Okay, what do you want to do on the front end and how do you structure Shopify?

Given some of it's inherent inadequacies, which is not unique to Shopify because every platform's got its drawbacks, , of looking at, okay, how do you align those systems so that you can achieve what you wanna achieve?

Claus Lauter: Now I see that real Omni, obviously is more than just an technology integrator. The coach, the consulting part of it , is huge there, and I think a lot of people don't know what they don't know. So therefore I think it's good to have a partner on their. Where comes with a fresh set of eyes, looks at the business and say, Okay, that's where the problems are.

Robin, thanks so much for your time. Where can people find out more about me?

Robin H. Smith: well thank you very much. Close for having me?

, our website, vl omni.com. , we have. Scads of resources, thought leadership, , YouTube channel via alumni. There's lots of video presentations, , presentations that we've done at conferences talking about strategy. simply reach out to us. We answer questions, people chat with us.

I'm happy to answer an email. it takes. Few minutes. so those are our two properties. we're on Instagram, we're on Twitter, , so there's lots of channels.

Claus Lauter: Cool. I will put all the links in the show notes. Then you're just one click away and people can reach you there directly. Thanks so much, Robin. I think that was very insightful. What you can do and what you should do as a merchant with integration and, , talk soon.

Robin H. Smith: Perfect. All the best. Thank you very much.