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The eCommerce landscape is undergoing dynamic changes as we speak, and the first test of robustness is applied to eCommerce marketplace reconciliation. This is hardly surprising given the diverse payment modes concomitant to the increasing number of sellers who are actively capitalizing on Retail 4.0.
The downside to this diversity, however, are new avenues for committing payment fraud or missing rebate opportunities. Looking at it from the seller’s lens, the emergence and preference for contactless payments cut their work out for them in terms of settling omnichannel payments. Without a payment settlement and reconciliation system, sellers run the risk of revenue leaks, accounting SLA breaches and broken customer journeys that erode trust and hamper experiences.
In this blog, we will deep dive into the role eCommerce marketplace reconciliation systems play in analyzing and driving profitability.
India’s current payment market
India is the fastest growing FinTech market, which is estimated to be worth $1.3 Tn by 2025. The upsurge in digital payment transactions which began from 2020 and continues to rule buyer journeys is attributed to 4 factors, namely
Evolving payment behaviors
FinTech pushing integrated payment modes and making them available to the masses has driven adoption in the physical and eCommerce space.
Technology as a growth catalyst
Cloud hosting, open APIs are enabling platforms to embed finance options and sync with settlement providers to ensure minimal disruptions and discrepancies.
New market players
More players are venturing into digital payment (for example- WhatsApp lets you pay your contact through integrated UPI).
Regulatory initiatives
The Payments Infrastructure Development Fund (PIDF) has been created to upgrade existing infrastructure. Besides which are guidelines for offline payments, regulatory sandboxes and tokenization.
With the increase in BOPIS (Buy Online, Pay in Store) and BORIS (Buy online Return In Store) India is seeing an increase in the number of payment acceptance points spanning scannable QR codes, physical Point Of Sale (PoS), credit, debit and prepaid cards- all of which are contributing to the digital payments growth, according to PwC’s payment handbook.
This brings us to an interesting junction in the eCommerce journey.
On one hand, the payments industry is focusing on two things to help eCommerce merchants to improve customer experiences; contactless payments that reduce waiting time for both offline and online transactions and IoT, connected devices with embedded payments that offer convenience and flexibility. On the other hand is the risk of cracks in the payment layer, compromising customer payment data, leaking data and inviting payment frauds and chargebacks.
A seller shouldn’t wait for order volume to hit a threshold before deciding to automate the marketplace reconciliation process. The system you use should provide the facility to automate the reconciliation of payments and returns while allowing you to conduct a profit analysis to help you determine best selling products that are padding up your profit.
Why is eCommerce Marketplace Reconciliation Important?
Marketplaces levy all kinds of charges on sellers which can complicate matters, especially for SMBs. These fees include
- Platform fees
- Commission per sale which averages 15%. (example: Amazon’s Referral fee).
- Warehouse storage and logistics costs which range between 20-35%
- Promotional ads to boost listings, averaging 15%
In recent times, the schedule of charges have been revised, with Amazon famously raising storage costs and fulfillment fees annually. The top reason for the revision is attributed to shoppers flocking back to offline stores, giving eCommerce opportunity stiff competition and creating a shift in the utilization of transportation and logistics which the marketplace then recovers through its fulfillment model.
Challenges faced by eCommerce Marketplace teams
The first and foremost challenge plaguing sellers is fragmented systems that create a disparity in information that’s available and visible. In a domino effect, the challenge spills over to spending extra hours and manpower on three-way reconciliation of invoices, bank records and payment advice, and eventually reconciling spreadsheet data into an ERP. Think of all the time falling into an infinity vortex!
But with AI-Marketplace reconciliation capabilities, sellers can save themselves the hassle of scanning records, validating data and can raise disputes against actual and expected Profit and Loss. In fact, such systems allow rate cards to be configured against which the actual settlement received can be compared with the expected calculation. In the next section, we’ll examine how an exclusive value-add on dashboard offering, helps sellers reconcile payments and returns from a central dashboard.
Steps to performing eCommerce Marketplace reconciliation
Marketplace reconciliation entails the following steps
Payment reconciliation
Payments reconciliation gives sellers a comprehensive overview of payments received, disputed overcharges and claim statuses against disputes indicating the progress and outcome of claims raised.
By retrieving order details according to the marketplace, warehouse, order ID and marketplace fees, sellers can configure rate cards and make use of the actual and expected settlement to detect and raise disputes over deviations.
This rate card configuration is a lifesaver when it comes to calibrating logistics charges. As every seller knows, logistics charges are based on the higher of either the dead weight (which is the absolute value shared by the seller with product dimensions) or the volumetric weight. The seller just needs to enter this value into the system under their Product Masters. The system takes care of the rest, auto-calculating the volumetric weight and producing the charges for the product based on its weight slab. If any difference arises, sellers can take it up with the marketplace for immediate correction and avoid being overcharged.
Returns Reconciliation
Returns impact the final settlement due to the seller because return rates differ by category and SKU, with some categories like fashion and footwear seeing a higher rate than food or beauty items. As a result, returns reconciliation is a crucial cog in the overall marketplace reconciliation procedure.
Returns dashboard gives sellers a full list of
- Disputed returns: If a return is reported to be delivered back to the warehouse but is verified to not have been received by warehouse teams, sellers can raise a dispute and mark the payment as unsettled. These are called disputed deliveries.
- In-transit returns: Certain marketplaces, like Flipkart, have a promise date to return items to the seller. Any breach of this qualifies for raising a dispute.
- DNEs (Do not expect): Items that got damaged or lost in-transit are verified by marketplaces and reported to the seller. Here again, payment is marked as “unsettled”.
- Claims Raised: This tab indicates the outcome of claims raised against delivery, in-transit and unreceived returns.
Profit analysis
The profit analysis section is crucial to determine which products are making a profit or in loss. It pulls information from the net products sold, received and total orders shipped and returned.
The profit analysis accounts for any applicable deductions and gives the average settlement the seller is owed from marketplaces by the formulae
From the above computation, if the average settlement is less, it’s an indication to sellers that they made a loss on the sale while a higher settlement provides the exact profitability of the product, facilitating informed decisions on inventory redistribution, optimization and stock replenishment.
What to look for in a Marketplace Reconciliation solution
The right marketplace reconciliation tool creates frictionless experiences and should be able to
- Provide insights on payments, returns and profitability by SKU code and order details from a unified window.
- Automate profitability calculations after accounting for chargebacks and applicable deductions.
- Highlight and flag erroneous charges against total orders, total sales made and how many were returned, which impact the final profit.
- Configure rate cards supported with a data dictionary for form fields pertaining to the order’s dimensions, weight and courier fees.
The Future
Automated marketplace reconciliation helps eCommerce merchants gain valuable granularity into deductions, charges and rebates, ensuring accounting compliance and data integrity. It unblocks settlement congestion and ensures sellers get what they are owed, enabling them to maximize profitability.
We have an interesting update coming up on this note. Stay tuned!
