It doesn’t matter the size of your ecommerce business or what types of products you sell. Risk is always associated with running a business.
Especially now, risk is apparent. Retailers are dealing with supply chain challenges that are lingering from the ongoing pandemic. And with high inflation and predictions of a global economic slowdown, consumers’ shopping habits are changing.
Now is the time to put a plan into action to alleviate risk. We know it’s not easy. That’s why, we lay out the risks associated with ecommerce businesses and provide a starting strategy on how to reduce those risks.
The risks associated with running an ecommerce business
It’s no secret that inflation is high due to many contributing factors — including an increase in demand coinciding with supply chain shortages and the ongoing war in Ukraine.
Businesses feel the impact of the current economic environment. In late June 2022 in the U.K., 35% of businesses reported their own production and/or their suppliers’ production was affected by the recent rise in energy prices, an increase from 33% in May 2022, according to the Office for National Statistics.
And 30% of currently trading businesses expected to increase prices in July 2022, with 42% of businesses citing energy prices as the main contributing factor to the increase.
With inflation at a 40-year high point in the U.K. and economic uncertainty, you must plan and prepare effectively.
Poor Customer Experience
With so many options to choose from when it comes to buying a product, customers have a lot of expectations from retailers — and they bring those expectations to every purchase experience.
Commerce is effortless. And consumer choice always follows the path of least resistance. Because of this effortless economy, customers want convenience from retailers. 76% of customers say convenience is their top priority when selecting a retailer, according to research from Linnworks. You have to provide that convenience to be competitive.
Convenience, which results in a positive customer experience, takes place when all of your operational processes work together seamlessly, and this includes having enough stock to keep up with demand. A positive customer experience stems from other factors as well, including transparent communication on customer order updates.
Selling Only on One Channel
A one channel strategy limits sales opportunities for your business. When you don’t have a presence across marketplaces and social platforms, potential customers can’t find you.
Selling in multiple channels provides customers with the convenience to shop in the places where they are already spending their time, which is what customers expect from a retailer.
Running Out of Stock
One of the simplest rules in retail is that you can’t make money from stock you do not have and that old stock stored in a warehouse does not get more valuable.
Making sure you have the right amount of stock on hand at all times is challenging. You have to balance having enough inventory so that you don’t run out and cause stock outs, but if you have too much stock on hand, then you risk losing money.
The mistakes caused by human error lead to problems in your operations, especially as you scale. For example, manually updating stock levels on each marketplace you sell you up for overselling because of the risk of human error. Also, other manual processes, like going in and out of spreadsheets to manage orders, leads to inefficiencies when customers place orders at scale.
How to implement an ecommerce risk management strategy
Multichannel Sales Strategy
The entire customer buying process needs to be effortless to meet the expectations of the modern consumer. To facilitate this effortless experience, your business needs a sales channel strategy that involves multiple channels, including social commerce and marketplaces.
Customers like shopping on social platforms and marketplaces like Amazon, Walmart and Facebook. Research from Linnworks shows that 82% of customers like the convenience of social shopping, and more than nine in 10 shoppers start their product search on a marketplace.
Inventory and Order Management Automation
Inventory and order management automation should always be a priority, but it’s even more so during times of economic uncertainty. Retailers need automation software that can connect orders, sales channels, inventory levels, warehouse locations and analytic reports in one place.
A connected automation system ensures your business always has an accurate, real-time overview of orders compared to available stock and can enable trigger events for reordering. When retailers understand the demand for each product along with the amount of time it takes for the product to be replenished, automated alerts can be set up to let team members know when items need to be restocked.
This sophisticated automation prevents your ecommerce business from missing out on sales opportunities. Automated systems can even trigger these orders directly to suppliers, removing another manual step from the inventory management process.
Create a World-Class Customer Experience
Loyal customers are the heart of your business. And it’s common knowledge that it costs more to acquire a customer than to retain one. Building a world-class customer experience keeps loyal customers loyal and attracts new loyal customers who will shop with your business over years to come.
But what exactly is a world-class customer experience? It means meeting your customers wherever they already shop, on their terms. It means asking, How do customers feel about my brand? The answer all depends on the customer experience you provide across the entire journey.
With an automated inventory and order management system, you have complete visibility of inventory levels across sales channels and warehouses. This system helps to avoid critical issues like stockouts and ensures a smooth fulfillment process for the customer. And in addition to the delivery process, when customers look to return or exchange a product, automation helps these requests be managed more efficiently.
Inventory and order management automation helps make the customer journey from end-to-end an effortless experience.
Accurate Inventory Forecasting
You’ll make better business decisions when you use an inventory forecasting process, also known as demand planning. It’s a process that uses data-based information of historical patterns and trends to make inventory estimates for the future. When you plan inventory correctly, businesses see more growth opportunities and save valuable time and resources.
When products are available to ship to customers, this helps the order and fulfillment process run smoothly, helping to create a world-class customer experience.
Get Ahead of Supply Chain Challenges
With the ongoing issues of supply chain internationally, retailers must look at supply chain diversification — a strategy ecommerce retailers can adopt to increase the range of suppliers they order from.
The more suppliers a retailer has, the more risk reduction of backorders. If one supplier fails to meet your demand in time, you’ll have backup options. This means you can commit to quality customer service and more adequately meet customer expectations, even in the midst of supply chain challenges.
In addition to meeting customer expectations, supply chain diversification helps boost cost efficiency by allowing ecommerce business owners to choose from a supplier that meets their current budget. This is especially important during times of economic downturn, when effects of the economy are felt across businesses.
In any economic environment and especially economic slowdowns, modern retailers should be set up for success. To reduce the risks involved with running an ecommerce business, many retailers are taking advantage of inventory and order management software like Linnworks.