Organizational Implications of E-Commerce

In my last article, I talked about the basics of E-Commerce and discussed some big picture questions for non-profits that are interested in implementing it. Now let's dive deeper into the adoption process.

Online shopping has become a part of life for many people today. As the market needs for convenience grow stronger, E-Commerce seems like a sound organizational investment for non-profits, especially for arts organizations that have the ability to develop branded and unique products. However, E-Commerce effects more than staffing and resources in a non-profit organization. To understand how E-Commerce impacts the operations in the non-profits, I sat down with some museum professionals to further explore the hidden concerns of managing retail and E-Commerce services.

Organizational Structure

E-Commerce is a retail tool designed for the private sector. Retail is a fast-paced, profit-driven environment that is constantly changing and requires agility and flexibility to react to current trends, which suggests some difficulties for retail teams working under the non-profit structure to be nimble with the slower and more complicated process to get approval and verification on its action plans. A museum retail professional, who worked at a museum under an intuitional umbrella gave an example of this multi-layered verification process during an interview. His museum store was trying to expand its online channels to include selling on Amazon under the understanding that a store account was already established on Amazon. He spent time researching the feasibility to include a new online retail channel and talked with every single related department in the institutional system, only to find that no one in the institution knew how to reactivate the existing Amazon store account.

Some museum retail professionals are concerned that they often work in a silo. Retail often operates with profit centric goals and schedules, which in a non-profit structure is not as heavily mission driven as other non-profit’s programs and the difference in goals could estrange them from their colleagues. It is easy for departments like Development, Marketing, Education, or Curatorial to overlook the opportunity of incorporating the retail department early in the event planning process. For example, it is common for the retail department to get last minute notice for stocking a particular book for a speaker series or extending store hours to accommodate for an event, which suggest a lack of communications between the departments. Lori Braszo, the General Manager of Retail Stores from Carnegie Museums of Pittsburgh, mentioned that one of the ways she try to solve that lack of communications is to have a retail staff attending the visitor services meetings to increase interaction with other departments. The retail staff can learn more about the museum and what is happening, but also share what the retail department is doing and what the store can offer to deepen the visitor experience and services.

In addition, Retail and E-Commerce both rely heavily on the brand identity of the organization to stay competitive and unique within the industry. By including retail in the communication and planning process, E-Commerce is another way to increase the organization’s offerings, strengthen the brand, expand the organization’s online presence to reach an international audience, and enhance the experience for the present constituents.

Human Resources

The E-Commerce team is usually structured with five to six key components: online marketing, data analysis, customer relations, content generation, program operation, and (for some organizations) product development. Compared to private sector companies that have entire departments dedicated to operating E-Commerce, non-profits typically have a small team running the physical store, E-commerce, and inventory control.

Staffing was one of the concerns brought up in every interview conducted. Chad Phillips, the ex-Director of Retails at Cooper Hewitt, the Smithsonian Design Museum, mentioned that he would love to have a staff in the retail department dedicated in search engine optimization to increase awareness and drive traffic to the E-Commerce site. Many employees in the museum environment don’t have the experience in retail operation and promotion. This also applies to retail marketing, so even though the museums’ Marketing & PR teams are marketing experts, they need extra time and retail knowledge to promote museums’ online stores effectively.

Lori Braszo also brought up the difficulty of maintaining E-Commerce without an in-house IT staff. Her museum developed an E-Commerce platform in-house and partnered with Magento, a digital commerce service company, to link with a Point of Sale System that tracks sales and fulfillments, manages inventory, and automates purchasing. However, relying on external IT support means that regular system upgrades are not monitored; the system doesn’t always integrate with the museum system, and the museum has to reach out for troubleshooting when the E-Commerce platform malfunctions.

Products and Competition

What makes more sense for your organization to offer through E-Commerce: products or services? Even though retail and E-Commerce are for-profit activities, they should still be closely related to the mission and image of your organization that houses them. This consideration also leads into the concern of product selection; will the organization be selling branded products or generic goods? Both types of products have their problems and benefits. Branded products can either be associated with the organization or a specific exhibition/performance. They are memorabilia of the experience of the space. One of the interviewees testified that branded products are the best-selling items on their museum E-Commerce store, because they are unique identifiers of the museum brand, even though they are closely related to a specific place or time and only appeals to those who have visited the site.

Generic and specialty goods are usually products that have been tested in the market and appeal to the general customers, but they might not resonate with the organization’s mission and are often carried by other competing retailers. Most non-profits don’t have the volume and budget to have the same buying power as their competitors from the private sectors. So when a non-profit is carrying products that can be found elsewhere, e.g. the Taschen art books, it is common practice for customers to compare prices online. Unless the customer wants to support non-profits, they will go to the retailer with a lower price tag. The Children’s Museum in Pittsburgh used to have an E-Commerce store carrying specialty toys and products. However, after realizing their products faced direct online competition from E-Commerce giants like Amazon, eBay, and Alibaba, the Children’s Museum of Pittsburgh shifted their E-Commerce to seamlessly integrate with the museum’s database and focus on services such as for purchasing museum memberships, gift cards, admissions, and event tickets online. The Children’s Museum of Pittsburgh has now established their E-Commerce as a service to enhance constituent experiences.

Besides selecting products that reinforce a non-profit’s mission and positioning the E-Commerce service within the organization, deciding on a pricing strategy, especially the shipping fees, is another important process in planning for an E-Commerce store. Many larger E-Commerce companies now offer fast delivery or free shipping, which non-profits can hardly compete with. Many non-profits struggle with setting shipping rates that are both financially feasible for the organization and reasonable for the customers. For example, an order of a $2.95 LACMA Neon Glitter Pencil on the Los Angeles County Museum of Art online shop will come with $6.95 flat rate shipping to Pittsburgh. This disproportional shipping fee with the product price will stop a customer from purchasing and is also undesirable for the museum to absorb the cost of shipping and lose money on every transactions. According to a global research project conducted by WorldPay, 56% of online shoppers abandons their shop cart without completing a transaction when faced with unexpected costs like shipping and handling fees. This statistic suggests small to medium size non-profits that are selling generic products and unable to offer the better shipping rates will have difficulty competing on the same level with their competitors. Remember, once a non-profit launches an E-Commerce store, it is competing on a global level with every E-commerce platform in the private and public sectors.

Inventory and Shipping

Inventory control is more than just putting merchandise in a designated cabinet or storage area. Most retailers track their inventory by stock keeping units (SKU), which are unique codes associated with an item for sale within a specific company. SKU is used to effectively track a product’s activities and availability; it also ensures stock levels by monitoring inventory shrinkage, sales transactions, and whether the products need to be replenished. The SKU can be incorporated into Point of Sale system or Excel spreadsheets to produce analytical sales reports and inform management of profitability as specific as to the individual variations of the product such as color, size, and material. Not all non-profits selling merchandise will need to establish a tracking system with SKU, especially when the organization has less than 10 items, but SKU can help to streamline retail activities from the storage to sales floor and are generally required for E-Commerce service system like Magento and Volusion.

The Society for Contemporary Craft in Pittsburgh has been using a simple unique combination of SKU, which starts each SKU’s first letter with the product category, followed by the first four letters of the artist’s last name, and an assigned consecutive number. So if the item is the first kind of ceramic cups made by ceramist Nicole Aquillano, Society for Contemporary Craft will make a unique SKU for it as “caqui-1”. Every organization can have different ways of creating SKU, and it should be designed to integrate with the infrastructure and practices of the organization.

Besides from tracking products with SKU, inventory control also relates to the shipping and handling processes. An organization will need to stock and replenish packaging materials such as bubble wrap, tape, and boxes for their E-Commerce store; it is important to set up procedures on how the products should be packed to ensure consistent customer experience and reduce waste on packaging material. On top of inventory management, think about how the organization can enhance visitor experiences through the shipping and handling process; the product and the packaging are generally the only ways the E-Commerce customer can have a physical experience with your organization. Therefore, non-profits should evaluate their budget to consider branded packaging materials, like tissue paper or stickers with organization logos, to enhance the organization’s brand identity and use it as a creative marketing channel to reach customers that are potentially interested in the organization.

As the organization starts to plan for an E-Commerce store, they should also create clear policies on returned and damaged goods, order cancellations, refund processing, and fraud prevention. An E-commerce store is an earned income source for non-profits. It is important to regulate the inventory, establish proper policies for different scenarios, and generate accurate financial recordings to make sure the organization’s E-Commerce store can operate above the breakeven point. Lastly, always think how the organization’s departments can cross promote each other’s programs and help to create an E-Commerce store that is efficient, financially reasonable, and an extension of your brand.

Target Audience

It is also worth deciding your target market; to whom are you selling your products or services? E-Commerce stores have the ability to reach the entire world, but organizations should strategically select market segments that they can realistically reach or attract. Is the organization targeting potential constituents from across the country or locals who know the organization already? Both groups will be looking for very different experiences and services.

Starting an E-Commerce store can be a difficult and extensive project that consumes time and resources. It might be worthwhile for an organization after considering all the points mentioned above, but as Lori Braszo said, “E-commerce helps to build your brand, and it gives you a presence in the broader international community. It is important to have that presence, but just decide how much you want to invest to keep it relevant and running. I feel like people expect everybody to have an E-Commerce site now, it is almost like you cannot not have it. It’s like a public service to have it.” In the end, it depends on the organization’s mission, goals, available resources, and constituent base to decide on whether E-Commerce is the right project.


Banner image by MVCOSHOP, licensed under Creative Commons via Wikimedia Commons.