While public health has to be the number one priority during the Coronavirus pandemic, eCommerce companies should be making plans to maintain their business during the current economic volatility. With large scale disruption likely, companies will likely face problems with supply and demand that can seriously impact cash flow. To put your business in the best position it can be, here are some things you may wish to consider.
Product availability issues
As an eCommerce company, you cannot operate if you do not have products to sell. The widescale effects of Coronavirus in China, the origin of so many products and components, means that the supply of many retail goods has already dwindled.
As the pandemic spreads and other countries see reductions in manufacturing capacity, supply is only going to get worse. In all likelihood, employee illness, factory closures and travel restrictions will mean that the products eCommerce companies want to sell will be manufactured at a lower rate and be delivered significantly later.
What then can eCommerce companies do to continue their operations? One solution is to start sourcing these products in areas that haven’t been widely affected by the virus and as time goes on, to look at areas where its impact has receded. Having multiple sources also means you don’t lose your entire supply if one manufacturer or wholesaler goes out of action. Sourcing products domestically can also be helpful as they will not face the same shipping disruption as imported goods.
Product cost issues
With fewer manufacturers or wholesalers working at capacity, many of them are taking advantage of scarcity by increasing their prices. In particular, these companies are prioritising customers who are putting in large orders and paying inflated prices. Smaller eCommerce companies, unfortunately, have been put to the back of the supply queue.
To keep supply going, smaller eCommerce companies may have to look at a wider range of suppliers and accept the higher prices being charged. Whether this cost can be absorbed or passed onto the customer depends on how well-stocked your competitors were before the pandemic began and how well they can absorb the increased costs of new stock themselves.
The effects of supply disruption, higher prices and a possible drop in orders means cash flow will be a major concern for all eCommerce companies. To cope with this, businesses will need to reduce spending and find other ways to increase income. With product scarcity likely to be common, there will be less choice for customers. One possible solution that arises from this is to hold on to items that would previously have been put in the sales and to continue selling them at full price to maintain margins.
Another area of consideration is advertising. If there are items in your inventory that are not going to sell because of Coronavirus, travel-related items, for example, then there is little point spending money on advertising them. With all advertising, eCommerce companies need to ensure that ROI is providing the value they need. Focussing on SEO and content marketing to improve organic traffic and shifting towards email marketing which doesn’t have a high acquisition cost, are all ways to bring about efficiencies that can help cash flow over the short term. – Read more
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