Updated: Apr 14, 2022
The last 2 years has been a perfect storm for the e-commerce business model because most people have spent a huge amount of time at home, whilst still getting paid, and wondering what they can buy to stop them dying from boredom!
So you have a captive audience, who are desperate to make a purchase to keep them mentally and physically stimulated, they aren’t allowed out of their houses and so couldn’t visit a bricks and mortar store even if they wanted to. So, they turn to on-line stores to make their purchases and have them delivered directly to their door.
Now, this overwhelming positivity resulting from the ‘perfect storm’ conditions created by the pandemic is being balanced out by the current crisis in Ukraine, and the huge increases in raw material and fuel costs resulting from all the sanctions against Russia, and disruption to the supply chain.
This is important for two reasons; firstly, consumers are moving more into a state of fear and scarcity and so are likely to spend less, reduce their fixed costs, and save. There is no more furlough, and no more hand outs from the government. Some people are out of work, some people are back to work, and so now they either don’t have the time, don’t have the money, or both! Add this into the frugality created by the current crisis and you see a perfect storm brewing on the other side…
The second reason this is important is because it’s increasing costs for all businesses, and massively impacting their supply chains meaning their products are more expensive (resulting in reduced profit margins and/or increased retail costs), and stock deliveries are taking longer and are less reliable than they were a few years ago.
Increasing your costs isn’t a great move bearing in mind that people are less willing to spend the money they do have at the moment, but reducing your profit margins isn’t healthy either as you now have to sell even higher volumes of stock in order to reach your Break Even point.
So, what can e-commerce businesses do to mitigate risk, maintain or increase sales volumes, and reduce expenses?
Here’s a few things I have recommended to clients who’ve found themselves in this situation:
Reduce your outgoings; arrange payment holidays where you can, make a list of everything you’re paying out each month and stop paying for everything that isn’t an absolute necessity, reduce energy costs by switching to more efficient alternatives for your building/plant/machinery and see what grants are available to help fund this (the UK is on a huge drive to reduce carbon emissions right now so there are several grants and pots of funding available to you if you look)
Know your numbers; you need to know how much profit you’re making on your product, and you need to know how much profit you need to make to Break Even… which means you also need to know your Break Even level. Work out your Revenue Potential, and realistic capacity to serve your customers and do everything in your power to keep your sales and profits above this level
Stay ahead of the curve; you need to know what your customers want, how your industry is changing, and what you need to be doing to stay one step ahead.
Combine and upsell; combine products to create bespoke packages for your clients that give you a unique selling point (USP) over your competition, and make sure you’re suggesting complimentary products and services during the checkout process
Re-target abandoned carts; this is huge. 7 out of every 10 shoppers will not complete their transaction the first time around - that’s a whopping 70% of your website traffic! You need to make sure you have set up effective re-targeting campaigns to re-engage these warm leads and convert them into paying customers
Align your products and campaigns with seasonal trends; sell bunny rabbit teddies and eggs at Easter, sell Christmas hats and festive decorations at Christmas time, sell hearts and jewellery leading up to Valentines Day. Don’t miss a trick and go for the low hanging fruit!
Business is always tough, whether online or offline, and there will always be bumps along the way that will catch you off guard and force you to change lanes. The most successful businesses and entrepreneurs are excellent at changing lanes BEFORE they hit the bump because they’re in touch with their audience, they know what they want, and they make the effort to look into the future and prepare for what may come by positioning themselves well, utilising current trends and technologies, and mitigating their exposure to risk.
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