5 Actionable Insights for E-Commerce Sellers Ahead of the Holiday Season
Just like that, the holidays are around the corner. If you're an e-commerce merchant, these next few months should bring plenty of opportunities for you to sell. The bustling shopping season starts on Thanksgiving itself (yes, you better believe it) and lasts until Christmas. E-commerce sales during this period generally have been a boon for merchants. This year looks to be no different. In 2021, consumers spent $109 billion just in the period between Thanksgiving and Cyber Monday alone.
However, the opportunities of the holiday season also breed some challenges. E-commerce businesses must adequately prepare for a much larger volume of orders than usual. They also must work especially hard to maintain customer satisfaction, since a bad experience during the holidays could easily break a loyal customer. One thing known for certain is that customers are expecting big discounts. It would be wise for e-commerce businesses to do their due diligence in making sure they're prepared well in advance to stack up against their competitors and offer competitive prices.
Here are five insights e-commerce businesses should keep in mind as the holidays approach:
1. See How One Part of the Supply Chain Affects Others
Retailers can often get tunnel vision when it comes to supply chains. It's common to be preoccupied with the stages in which you're more likely to be actively involved with, such as sales and fulfillment. However, it's important to note that the supply chain refers to the entire journey a product goes through before it reaches the consumer. It involves manufacturing, freight, storage, fulfillment, payments, and even marketing.
Everything will be in a rush during the holidays, and issues will likely occur at any point in the supply chain. Look at how the entire supply chain works and create a plan to optimize every point. Check how one part can have an impact on the rest. Finding ways to optimize at an early stage can significantly affect the latter.
For example, you can become more cost efficient by negotiating more favorable terms with your suppliers. Doing this can give you flexibility when facing a deluge of orders these holidays. Securing a "Net 60" term, where payment for an invoice is due after 60 days with your supplier, can help you offset the potential delays in the payout of your marketplace. Amazon.com or Shopify can take weeks to release your payout fully. Such delays can cause a cash crunch, especially if you sell a lot. With such payment terms from your supplier, you'll be able to absorb any such delays.
2. Add Some Buffer to Your Stocks
Products can sell well during the holidays. You may think that selling out is a good problem to have. However, keep in mind that running out can bring more harm than good. Stockouts tend to have a negative net effect on your business. Potential customers looking for your product will quickly move on to a competitor. You'll end up missing out on making a loyal customer.
Leverage technology to figure out how best to stock up. You can use forecasting technology to crunch past sales data and current customer interest to project how much inventory you should be keeping. You should typically have more than a month's worth during the holidays. Avoiding stockouts by taking on more inventory may require some investment. Still, the net gain from building customer loyalty, avoiding ranking drops, and running marketing campaigns without interruptions may be well worth it.
You should also note when you can make inventory available to your customer. Rising holiday demand can create a stock shortage even from the supplier or manufacturer's end. This is why some businesses order their fourth-quarter stocks well in advance, even as early as the first quarter of the year.
Furthermore, consider your marketplace's requirements, such as when your products need to be available for a particular sales event. In the U.S., Black Friday products that are Fulfilled by Amazon (FBA) must be at Amazon's fulfillment center by early November. You should be planning all these movements ahead of time.
3. Have a Plan When You Sell Fast
Even if you've added a buffer to your stocks, there's a chance that your sales can exceed expectations. You should consider other ways to restock quickly. It's good to have an actual "game plan" should you happen to sell fast.
You can coordinate with your supplier to get access to additional inventory efficiently. For example, suppose you're ordering your buffer stock. In that case, you may be able to have your overseas manufacturer or supplier store your orders at their facility instead of having them shipped immediately and storing them in your local facility. In the U.S., warehouse space costs a lot more than overseas storage.
In addition, you should weigh the benefits of air freight over sea freight. Conventionally, shipping via sea freight looks more attractive due to its lower costs, but you must consider how long before your stock arrives. The holiday rush typically puts pressure on logistics companies, and delays are to be expected. Sea freight can take weeks.
Check if the added cost of air freight outweighs the sales lost due to a stockout. Budgeting for expedited air freight during this time may be a good idea. You can even choose to partition your order and have part of it shipped by air as your emergency buffer stock until the bulk of your inventory arrives via sea.
Having extra stock shouldn't be something to fear. If you have some potential overruns by the end of the season, you can create campaigns to liquidate inventory, like discounting or bundling. Some suppliers are open to buy-backs since they can redirect the products elsewhere.
4. Beware of Marketplace Fees
If you sell on marketplaces like Amazon, always check how much and when certain fees kick in. For instance, FBA fees can be between 30 percent to 40 percent of the sale price. While customers may find FBA items a bit more attractive, you should see how using FBA can cut your margins. Even if you sell more, you may end up getting less profit due to the high fees the marketplace charges.
Aside from these fees, be mindful that Amazon also charges storage fees for items that don't get bought within a provided period. Storage fees depend on many factors, including size, weight, average daily units, the month, and dangerous goods classification. The storage rates can also be two to three times higher from October to December.
In summary, Amazon can be a costly option for both fulfillment and storage. Therefore, check your capacity to handle these independently. If you have the means or find it more profitable to take on these matters yourself, go ahead.
5. Optimize Your Operations
Lastly, you should look into improving all possible areas of your operations. This involves evaluating your participation in the entire supply chain and looking for ways you can be better in each of its phases before the rush starts. You don’t want to simply react to what the holiday sale season brings; you should bring it in yourself.
Once you have your inventory sorted out, you can prepare for other concerns. If you think you'll feel the brunt of the work during fulfillment, you should consider expanding your capacity. You can hire people in the short term to help you. Even relatively minor things like setting up your staging area in your warehouse or storage space for better movement can result in greater efficiency.
Don't discount shoring up your after-sales capacity, as you may be battling on two fronts. If you sell well during the Thanksgiving weekend, it's possible for requests for customer support and returns to come in just as you're still in the thick of it. You may deal with sales and after-sales concerns right around Christmas.
You shouldn't overlook marketing as well. Your efforts should constantly be driving sales. Let your product ads run without interruption on your chosen platform. Avoid tweaking the ads, as this should allow the ads to learn your target audience better. Changing or updating the text of your ads due to stockouts and supply chain issues can hurt your campaigns. Changing and retargeting your ads can also cost more money.
Taking Full Advantage of the Season
Surely, the next few months should be an exciting time for e-commerce businesses. But to make sure you end up smiling at the end of it, you should be spending time planning your strategy on how to tackle the season right now.
This year's holiday sales rush has been projected to be more drawn out, lasting throughout the season, rather than being constrained to limited time events as in the past. You may expect to be busy for longer this year.
The insights shared can apply to any e-commerce operation. Some matters may require you to invest more in your business. If cash or capital is an issue, you may consider partnering with a funding or growth platform.
As with most things, preparation is key to success. This way, you can maximize what the holiday season brings. Hopefully, that would be more profits for your venture.
Yaron Shapira is the CEO of 8fig, a growth platform built to radically scale e-commerce brands.
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