EDI is growing in the e-commerce market: for some e-shops it is a competitive advantage, for others it is a necessity

29. October 2020

E-commerce entrepreneurs have to deal with challenges such as sudden increase in orders during Christmas or Black Friday, increasing returns or communication with tens to hundreds of suppliers. Therefore, large Czech e-shops were inspired by the fast-moving goods segment and deployed proven EDI - a standardized system for electronic (and mostly automated) exchange of orders or invoices. Among other things, this system speeds up the storage of goods for e-shops, simplifies the exchange of business documents and reduces the cost of human labor. 

E-shops and their challenges in supply chain management

The turnover of Czech e-commerce has been growing for several years by about 15% per year. The covid pandemic then accelerated this trend. Therefore, e-shops currently face many challenges. Among others, for example:

  • a massive increase in demand during Christmas, Black Friday or Easter and thus overloaded warehouses,
  •  a large amount of returned goods (for example, in fashion, customers return up to 22% of goods),
  •  complex communication with dozens or hundreds of suppliers (often from abroad),
  •  pressure for fast delivery of goods to the end customer,
  •  specific requirements for the form of documents (for example, serial numbers for electronics),
  •  strong competition from, for example, price comparators.

If e-shops automate their processes, they will be better able to handle these situations - they will withstand peaks, speed up the delivery of goods and save operating costs (large e-shops in the hundreds of thousands of crowns per month). Automation is an integral part of scaling services, especially if the e-shop is looking for foreign expansion.

With the growth of turnover, the costs of e-shops also increase, typically for example with administration. EDI is a valuable ally in this, because it automates much of the work associated with growth. That is why EDI is used today by all large e-shop players such as Alza, MALL, Rohlík or Pilulka.

How EDI helps e-shops

EDI helps especially in communication between the customer (e-shop) and his supplier. E-shop operators most often exchange with suppliers:

  • orders,
  • delivery notes
  • and invoices.

Thanks to EDI, they exchange these documents in a structured electronic form without the need for manual rewriting to / from information systems. In practice, it looks like this:

1. The customer prepares the order in the information system and sends it via EDI. The EDI provider immediately converts the document into an ORDERS message and sends it to the supplier, to whom the order is automatically loaded into the information system. In addition, he may receive an e-mail notification or a mobile notification.

Thanks to EDI, the customer is sure that the order has been delivered. The supplier also has less work, because he loads the order into his information system with one click and does not have to rewrite it.

2. As soon as the supplier processes the order and sends the goods, he sends via EDI a notice of delivery of the goods (DESADV = electronic delivery note). The customer thus has several hours to prepare in advance for the physical receipt of the goods. In addition, the data from the advice is written to the warehouse system, so the warehouseman just beeps the individual boxes with a reader when receiving them, which makes them in stock and immediately sees any discrepancies. With the SSCC extension, it is even enough for the warehouseman to read only the code on the pallet without having to unpack and check each package. Receipt of goods is thus many times faster.

3. Finally, the supplier issues an invoice in the information system and sends it via the secure EDI communication channel (INVOIC). It is not possible to change the invoice in any way or send a forgery, for example from a similar-looking e-mail address. The electronic invoice is automatically loaded into the customer's information system, it checks itself according to the order and delivery note, and the accountant only posts it. Automatic checking saves the e-shop a lot of time and eliminates unnecessary administration or errors that otherwise arise during manual processing of documents.

What is the role of EDI in the current e-commerce market

In the Czech Republic, the largest e-shop players began to switch to EDI in 2014 and 2015. Our ORiON EDI tool was at the birth of EDI in Czech e-commerce. It was gradually implemented by MALL, Alza, DATART, Rohlík, Košík, Pilulka and others.

EDI has become a necessity for these e-shops. They commonly communicate with hundreds of suppliers, and thanks to the deployment of EDI, communication between them is many times faster and error-free. This is crucial, for example, for managing the pre-Christmas period, which represents about a third of the turnover for these e-shops.

>> Read how EDI was implemented in Alza. <<

For smaller e-shops, EDI may not be necessary, but for them it means simplification of work, greater overview of the ordering process and cost savings. ORiON EDI uses for these purposes, for example, the e-shop Spokojenypes.cz.

Suppliers are also switching to EDI

In order for EDI to fulfill its purpose, it must be implemented by customers and suppliers alike. The more suppliers switch to EDI, the more efficient EDI is for customers. That is why at ORiON EDI we offer our customers the ROLL-OUT service. It works by contacting the client's suppliers in a controlled manner and making the transition to EDI easier for them. This service has clearly defined KPIs, including a schedule. The customer does not have to use his own capacities and the involvement of suppliers will be arranged by professionals for him. This will speed up the involvement of suppliers and increase the ROI of the entire EDI project.

However, suppliers do not switch to EDI just to maintain good relationships with business partners - EDI also benefits them. It simplifies their receipt of orders and invoicing and they can also use other services such as Roger Payment, which finances their invoices before maturity. Therefore, it sometimes happens that suppliers persuade their business partners to implement EDI. In addition, the smallest suppliers who have persuaded their customers to use EDI can use the cheap and simple webEDI internet solution. It works as a web application without major input costs.

Thanks to the above, EDI has spread like an avalanche in Czech e-commerce. Large e-shops switched to EDI, then their suppliers switched and they convinced other business partners. In addition, many medium-sized e-shops wanted to follow the example of the most successful ones and introduced EDI as well.

What trends await e-commerce in the coming years

The covid pandemic strengthens the trend of dropshipment and marketplaces on the Czech market. These services also enable smaller sellers to offer and sell their goods in large e-shops for an agreed commission. Amazon, for example, works on this principle. Sellers use huge traffic or technical solutions of the e-shop, as well as the power of its marketing.

Generally:

  • In dropshipment, the supplier only stores and sends his goods to the customer. All communication related to the order is handled by the e-shop, so the customer often does not even know that he bought from someone else.
  • The marketplace transfers much more responsibility to the supplier, who prepares the product page himself and determines the price of the goods himself. The customer immediately recognizes that the goods are delivered by someone other than the e-shop operator. Communication with the customer is also handled by the supplier himself.

Dropshipment in the Czech Republic is offered, for example, by Alza. "We act as a seller towards the end customer, so we offer goods on our e-shop and display the stock availability of the supplier, who then prepares and sends orders from his warehouses directly to the customer or to our collection points," says Jan Pípal, Business Development Manager Dropshipment from Alza. 

"This year, we have significantly accelerated and simplified the process of engaging partners, our turnover from this form of sales has tripled since the beginning of the year and we have processed tens of thousands of orders. We are thus expanding our product range and see this as a huge business opportunity for business partners, including smaller retailers, ”continues Pípal.

"However, in order to manage the volume of new work without any problems, it is necessary to automate the processes of processing related documents, which allows us to exchange EDI documents electronically. Joining EDI is easy and we will be happy to help potential business partners with it, ”concludes Pípal.

The marketplace is then represented on the Czech market by, for example, MALL with the MALL Partner program. It is not a marketplace in the true sense of the word, but it is very close.

"We have 1,300 dealers involved and give them a lot of freedom. Each partner has their own administration interface, in which they manage their products themselves or upload them to the offer. When a visitor looks at the product from the outside, he immediately sees that the goods are not sold by MALL, but by the partner. Our partner is thus building his own brand, only selling through an e-shop with a huge reputation, traffic and background. At the same time, for example, he is sure that we are handling complaints about him, “explains Jakub Kováč, Head of Sales and Marketplace from MALL Group.

The pressure on e-shops in terms of delivery speed will also increase in the future. Many large players score points with customers by delivering goods on the day of ordering or no later than the next day. For example, Rohlik.cz has a business built on this advantage. The main reason for their transition to EDI was to speed up the stocking of goods and to be able to distribute it to customers immediately. And it would be very difficult without automation.

Switch to EDI with the most professional

At GRiT, we launched an EDI avalanche on the Czech e-commerce market. We have implemented ORiON EDI in Alza, MALL, Rohlík and we will implement it for you as well. Contact us and we will discuss the possibilities of supply chain automation with you without obligation. Follow in the footsteps of those who rule Czech e-commerce today.

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