Fueled by a global pandemic and increased levels of disposable income, the ecommerce industry exploded over the last two years. The news that platform giant Shopify laid off 10% of staff, citing slowed ecommerce growth, is perhaps a warning signal, especially when combined with the current recessionary outlook. How can ecommerce businesses navigate the choppy waters ahead?
Slowing down
The pandemic saw unprecedented growth in the ecommerce industry, which saw growth climb an incredible 43% in 2020. Such rapid growth led many businesses to expand quickly, in fact, 70% of global retail leaders surveyed said they made less than optimal decisions to ramp up ecommerce during the pandemic.
While growth in ecommerce has and will continue, growth will almost certainly slow, driven by a return to pre-covid levels of disposable income and now a global cost of living crisis. The situation is grim.
Ecommerce stores will of course be impacted as consumers focus on managing household budgets and cutting down on discretionary spending. However, smart ecommerce business owners will not only be able to simply weather the storm but actually use the changing circumstances to grow and diversify. Now is the time to be strategic.
Growth will rely more than ever on adaptability to the current market. Finding opportunities in the challenge and learning to discover new ways of conducting business will be essential to the growth of a business.
What businesses can do
There are many ways that smart businesses will continue to thrive in the current market. There will, of course, be some shrinkage but as with all economic changes, there are numerous opportunities to grow and develop.
- Review your SKUs
Review your product SKUs and determine which product lines could potentially face the most inflationary pressure. Assessment is key, an accurate prediction of which goods will perform well in the coming months based on SKUs will save your business from unnecessary loss.
As inflation continues to rise, consumers will be cutting down on non-essential spending. The current model of consumption is unsustainable and companies will have to quickly adopt new models to survive. Swapping impulse-buy branded fashion apparel for longer-lasting and better quality goods would allow businesses to step into the new sustainability trends and tap into this new and growing market.
- Make sure you price correctly
Consider how you price and promote goods. While an immediate reaction may be to raise prices across all SKUs, this will likely lose the trust and loyalty of your consumers.
Instead, opt for promotion and pricing mix strategies. This will ensure that the business remains strong on a net basis and continues to attract new customers. It’s crucial to understand which prices to increase and which to promote based on the right product segments.
- Get to know your supply chain
Make sure you understand your supply chain, inventory, and selling costs through and through.
This will allow you to critically assess input costs and stabilize margins. In practice, this can be done in many ways, switching from air freight to sea, shifting away from the Amazon FBA program to decrease selling costs or ordering a lower stock of low-selling items.
In the current economic situation, as the growth of the market begins to slow and inflation pressure is felt more than ever, it is critical that businesses remain adaptable and, most importantly, well-informed. Staying open to opportunities and finding new ways to conduct business is essential to the survival and continued growth of businesses.
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James Hickson is the founder of Bloom, Europe’s leading revenue-based funding business. Bloom provides founder-friendly capital to digital entrepreneurs. With tools to help brands understand how their business compares to benchmarks as well as their financial health with Bloom’s Open Banking analytics capabilities, they are well-positioned as Europe’s leading digital commerce investor.
