When you think of ERP (Enterprise Resource Planning), you might imagine a powerful integrated software that connects every part of your business to streamline operations. However, ERP is more than just software - it represents a philosophy of connections. The entire premise of an ERP encourages you to view your operations and functions as a conductor would an orchestra, bringing together every element to create harmony and efficiency. At its core, ERP fosters a more holistic approach to managing your business.
Businesses within the retail industry, in particular, are especially reliant on ERPs due to the complexity and interconnectedness of their operations. As a retail business owner, you need to face challenges like managing inventory, dealing with international regulations (if you’re operating globally), juggling with multiple sales channels, customizing customer experiences, and so on. ERP helps you see your business as a unified whole, not a collection of fragmented parts, enabling better management and growth.
With that said, ERP isn’t a magic solution. It won’t fix every problem, but it can highlight inefficiencies and areas for improvement. So, when is the right time to adopt an ERP?
Let’s get into it.
While we would love to tell everyone to get an ERP, it’s not a one-size-fits-all solution. ERP systems streamline operations, expose inefficiencies, and help you focus on growth, but timing is key. Understanding your business’s growth stage and pain points will help you decide if it’s time to level up with an ERP.
In this article, we’ll dive into three key stages of retail growth based on our experience with customers, exploring the tools commonly used at each stage, and the signs that signal it’s time to adopt an ERP (or maybe even change your current ERP).
At Tailor, we’ve worked with many retailers who have navigated these challenges as they scale.
In the early days, your focus is on laying a strong foundation. You’re experimenting with your products, managing a small number of products and SKUs, and most likely running things solo or with a very small team. Revenue is often minimal or even in the negatives at this stage. Manual processes are the norm, and off-the-shelf tools are usually sufficient to meet your needs.
Sales, Fulfillment & Supply Chain
At this early stage of your business, you are likely using platforms like Shopify or Etsy to manage your online sales. These platforms provide a more optimized experience for small-scale operations, offering things from product listings to payment processing and order tracking. Shopify even includes its own shipping service, while Etsy directly integrates with carriers like USPS and FedEx for simplifying fulfillment and shipment tracking. These tools are easy to use, making them ideal for businesses with low order volumes and straightforward fulfillment requirements. With no need for third-party logistics or external providers, these services help you run operations smoothly.
Accounting & Finance
In terms of your accounting and finances, your revenue may not yet be substantial enough to warrant advanced accounting software, so you’re likely relying on basic tools like spreadsheets or Airtable to track your finances. These tools are suitable for small businesses managing limited transactions and relatively simple financial data.
Manual Operations
In this early stage, challenges are relatively minimal, given the smaller scale of operations. Your product offerings are limited and your product variations are also usually simple, which means the complexity of managing inventory is manageable. Revenue is still growing, and much of the focus is on refining the product and building your brand. So, while manual data entry, like tracking revenue or reconciling inventory, may be part of the process, it’s a manageable trade-off because you are focused is on proving your product rather than tackling significant operational challenges.
Not every retail business at this stage is ready for an ERP. If you are operating primarily as Direct-to-Consumer (D2C) with a relatively simple product offering and few complexities in product variation, pricing, or fulfillment, an ERP might be overkill at this stage.
Tools and e-commerce platforms or integrated point-of-sale systems, may be sufficient to support your needs. These platforms are often more affordable and easier to implement, making them a better fit for businesses that are just beginning to scale or are focused on a single channel of distribution.
The “Expansion Stage” is where your business transitions from a one-person operation to a more structured organization with increasingly complex operations. Additionally, your revenue per month may range between $1 - $5 million, or your company might have between 10 to 50 employees and is actively scaling, experiencing significant growth in both employees, revenue and customer base. Product-wise, you could also be managing a mix of core products, seasonal items, and/or limited-edition releases, each requiring distinct stock management and fulfillment strategies.
Sales
In terms of your sales, you are likely still using platforms like Shopify and Etsy to manage your online sales channels. These platforms offer integrated sales management features, including payment processing, order tracking, and basic customer relationship management. However, you may enter into wholesale deals, retail partnership, and other B2B opportunities as the brand gets more established. You may start to dabble into solutions for multi-channel selling, like BigCommerce, which helps you manage various sales channels from a single interface, streamlining your operations and improving scalability.
Fulfillment & Supply Chain
As the demand for you product increases and your SKU count and order volume grow, so does the complexity of your fulfillment and shipping processes. At this stage, basic integrated tools like Shopify’s Fulfillment Network (SFN) or Amazon’s Fulfillment by Amazon (FBA) can still help optimize inventory storage and order fulfillment. However, you might begin to notice the fees associated with them as these costs impact profitability. It may actually nudge you to transition into more cost-effective and specialized third-party logistics (3PL) providers, which offer greater flexibility, scalability, and customization to meet your demands.
Accounting & Finance
At this stage, you’ve adopted tools for your accounting and finance processes. Solutions like QuickBooks offer essential features like expense tracking, revenue management, and cash flow analysis, all in one platform. They also integrate with sales channels, providing real-time financial data to support better decision-making. However, these tools are still limited because they are not designed for comprehensive accounting management, which can introduce new challenges as your business grows.
Inventory Management
As your product assortment expands and you sell through multiple channels, managing inventory is difficult. Without an integrated system, keeping track of stock across different platforms can lead to issues like stock-outs, overselling, or excessive inventory. This lack of real-time visibility into inventory can result in missed sales opportunities and customer dissatisfaction, directly affecting your bottom line.
Operational Efficiency
As your teams expands for sales, marketing, fulfillment, and finance, using fragmented tools can create operational friction. The lack of integration between systems leads to data silos, delays in communication, and an increase in manual data entry. Managing these workflows efficiently requires adopting systems that integrate across departments, automate processes, and provide real-time insights. Without this integration, bottlenecks can occur, reducing overall effectiveness.
If you are finding it harder to manage inventory across multiple platforms or experiencing friction due to disconnected systems, as stated in the challenges above, an ERP could be the solution. By centralizing operations and automating key processes, an ERP system can help coordinate inventory tracking, improve cross-departmental coordination, and reduce manual work. These efficiencies are critical as you scale, ensuring that growth doesn’t come at the cost of operational smoothness.
B2B Operations & Pricing Complexity
If you are operating as Business-to-Business (B2B) with custom pre-orders, complex pricing structures, or unique order fulfillment needs, an ERP could be essential for streamlining operations. B2B businesses often face more intricate requirements, such as tailored pricing models for different customers, bulk orders, or managing complex inventory levels across multiple channels. In a case such as this, an ERP system can help manage these complexities more efficiently by centralizing information and automating processes, reducing the risk of errors, and providing greater visibility into operations.
Example of a B2B company: A Custom Promotional Products Company
This type of B2B company specializes in creating branded products like custom t-shirts, mugs, tote bags, pens, and other items with a company’s logo or design. Clients are typically other businesses looking for promotional items for events, conferences, or corporate giveaways.
Custom Pre-Orders: Clients may need to place pre-orders for large quantities of promotional items ahead of a major event. This could include custom designs, specific color requests, or tailored packaging that requires lead time planning and coordination.
Unique Order Fulfillment Needs: Some items might need specialized inventory management, like keeping stock of blank products in various colors or sizes, and others require unique packaging or shipping instructions. Additionally, managing production timelines for custom orders and ensuring delivery by specific dates adds another layer of complexity.
Complex Pricing Structures: Pricing for custom orders can vary vastly based on the quantity of items, the type of product, and any additional services. The price per unit might also drop as the quantity ordered increases, but custom or unique features might increase the price significantly.
At this stage of growth, your brand has gained traction and you have established a loyal customer base. Expanding your reach and scaling your operations to meet growing demand is a primary focus and the complexity of your business operations continue to increase. You are optimizing your marketing efforts, and refining your customer experience. You may be bringing over $5 million in revenue per month, and your team may be much larger - ranging from 50 to 200 employees. Additionally, you may be exploring international markets, launching even more product lines, or working with multiple retail partners.
The tools, integrations, and processes that served you in Stage 2 are now causing significant friction in your workflows. The added complexity impacts your efficiency, making it clear that your systems, operations, and technologies need to evolve to support the next stage of growth.
Sales
By now, your business likely operates across multiple sales channels, including e-commerce, brick-and-mortar retail, and possibly even international sales. With an increasing customer base, the demand for automation, real-time insights, and seamless integration across platforms becomes crucial. You may still rely on tools like Shopify or BigCommerce, but at this stage, these platforms cannot be sufficient on their own to handle the complexity of pricing, promotions, and customer segmentation.
One of our clients in the fashion industry, who operates in both online and physical retail spaces, found that their existing tools were struggling to keep up as they expanded. Their operations were becoming increasingly fragmented, and they found it difficult to scale their pricing and inventory management across different sales channels. They realized that their current systems lacked the necessary flexibility to support the complexity of their sales strategy.
Fulfillment & Supply Chain
Your inventory is large, and your supply chain is complex to say the least. You might be working with multiple suppliers, managing larger volumes of orders, and dealing with a myriad of shipping and fulfillment requirements. You have surpassed using fulfillment partners like ShipStation and are reliant entirely on 3PL or even in-house warehouses, which requires a dedicated warehouse management solution.
One of our clients in the jewelry industry, which had previously relied on third-party fulfillment services, began facing challenges as their order volume grew. Their fulfillment partner was unable to handle the increased volume efficiently, causing delays and errors in order processing. To mitigate this, they explored a more centralized system that integrated inventory, order processing, and shipping across multiple channels, reducing bottlenecks and improving their customer experience.
Accounting & Finance
Managing finances at this stage is vital as your revenue grows, operating costs rise, and you manage relationships with more suppliers and customers. While tools like QuickBooks or Xero may have served you well earlier, they may no longer offer the financial oversight required at this level. Effective cash flow management, budgeting, forecasting, and handling multi-currency transactions, especially if you’ve expanded internationally, is essential.
Operational Complexity
Your business at this point has a number of tasks, employees, and touch-points that has grown exponentially. What worked for a small team is now a bottleneck for a larger operation. This complexity makes it difficult to maintain efficiency and accuracy without introducing more manual work, which is both time-consuming and prone to errors.
One of our clients in the fashion sector faced similar growing pains. As their team and product catalog expanded, they found that manual data entry between sales, inventory, and accounting systems was becoming unsustainable. Their reliance on fragmented tools led to inefficiencies, errors, and a slow-moving process.
Data Silos
Your sales, inventory, fulfillment, and finance tools are all operating independently, which means data is completely fragmented across systems. This siloed data makes it difficult to get a comprehensive view of your operations, hindering your ability to make informed decisions. For instance, discrepancies between inventory levels and sales forecasts can lead to overstocking or stock-outs, impacting customer satisfaction and your revenue.
A client we work with in the accessories space faced challenges with data fragmentation as they scaled. Different departments were using separate platforms, making it nearly impossible to synchronize operations effectively. This resulted in stock-outs, fulfillment delays, and errors in customer orders, which ultimately hurt their brand.
Yes. The challenges at this stage are significant, especially if you have solidified your brand and have a loyal, recurring customer base. Interestingly, you may actually already be using ERP modules or lightweight solutions like ZoHo or Odoo, but if you’re still facing issues with operational complexity and data silos, it’s a sign to reassess your ERP approach.
New Markets
Operating on a global scale is a strong indicator that your business may need an ERP system. It comes with a unique set of challenges, including navigating new regulations, tax requirements, fulfillment complexities, and managing multiple currencies. Relying on existing tools to handle this growth is often unsustainable. Failing to comply with laws, such as tax obligations or data regulations, can lead to hefty fines, reputational damage, and customer churn. The right ERP system can prevent all of that.
One of our clients, a global accessory brand, faced significant challenges with cross-border tax requirements, currency conversions, and managing diverse product lines across different markets. They realized they needed an ERP to help handle these complexities and ensure seamless expansion into new markets.
Deciding when to adopt an ERP is a significant step for any retailer and hinges on your business’s stage and growth trajectory. While the complexity and cost of an ERP might not make sense in the early “scrappy” days, it becomes valuable as your operations grow more complex.
At the right time, the right ERP can streamline processes, eliminate inefficiencies, and provide insights, from inventory tracking to financial forecasting, empowering you to make data-driven decisions.
The right ERP can be the key to your company's growth.
Not sure if it’s the right time for an ERP? Let’s talk - schedule a consultation and demo with Tailor to see how our ERP platform can streamline your operations, enhance scalability, and drive efficiency at any stage of growth! https://www.tailor.tech/demo
