Ecommerce and COVID, the silence before the storm

Mar 18, 2020

You may have first thought that the Coronavirus was going to blow over. However, now it is affecting everyone so it is time to take measures to cushion the impact as best possible. Especially in the eCommerce supply chain. But how, what and why? In this blog, Optiply provides insight into the current impact of the Coronavirus on eCommerce, what preparatory measures you can take, and what Optiply can do for your business.

Managing a severe increase in orders

The Coronavirus has two sides concerning eCommerce. For example, webshops selling food, supplements, beauty & personal care, medical products, and pet supplies are now busier than ever. These categories are growing so fast that Amazon currently chooses not to accept deliveries to their fulfilment warehouse for product categories that do not fall into this category.

Many other product categories are also expected to see significant increases in orders in the short term. Physical stores such as Ikea, H&M, Nike, Adidas and de Bijenkorf have already closed, and that example will be followed shortly by other large chains. Lock-down is lurking, and it will have an enormous impact on e-commerce. When you consider that now 15-20% of the total retail spend is online and that soon, forced or not, it could quickly become 40%; then you know how hectic it will be at many webshops.
Only webshops in the high-end luxury segment will have a harder time because of the declining consumer confidence. Based on data from China, the expectation is a drop of between 60-95%. However, you may wonder whether it will be as bad for us if a lock-down does not occur. ThIt is likely that product categories that can expect a tough time are expensive shoes, clothing, watches, and sunglasses.

The silence before the storm

You can see that companies are in the dark about their stock management, about what they should or can buy now, and what will happen to consumer sales in the coming period. In some places there are shortages; in others there are surpluses.
The first panic reaction of many webshops that saw a slight decrease in sales is not to make crazy investments in stock. Whether that is wise is questionable. The total retail spend will only lose 20%, but that will be more than compensated for by the enormous shift from offline to online.
So now we are in the silence before the storm. There is a vast opportunity for webshops. If you are too careful, you’ll be sitting on the sidelines looking at how your competitors can continue to deliver. We are currently helping many webshops to determine how they can invest as much as possible in their running products so that they will be able to profit as much as possible in the future. This strategy is complicated because cash is king we often hear. Of course, you want to limit risks. We do this mainly by converting soft runners into cash flow as quickly as possible. Now that it is still possible, now that consumers are looking beyond the bread they need.
Also, the first pressure of the emergency package from the tax authorities has been removed. If it does not turn out as positively as expected, you will be granted a three-month postponement of the payment of income, corporation, wage and sales taxes. There is also the possibility to fund shorter working hours, more accessible provision of loans, and other measures.

What can I do now?

1. Invest in the right products
Replenish as many runners as possible that can be delivered within the foreseeable future. For the time being, freight traffic has not yet experienced an enormous inconvenience, and the expectation is that transport will continue to be regarded as vital, but that may change. See here the current status.

2. Quickly generate cash flow from excess stock
To limit the risks, you want to get as much cash flow as possible from the long-tail. This capital is in these times often better invested in stock buffers for runners or the cash flow of the company.

3. Source for multiple suppliers per product
Start sourcing from multiple suppliers for the same product. This way, you spread the chances of stock availability, future transport restrictions and delivery times. If one supplier does not deliver or delivers too late, you can take care of this with the other suppliers. Optiply even has an algorithm that automatically determines the preferred supplier at any time based on these factors, and also factors such as price and minimum order quantities.

Do you need help in determining from which products you can get cash flow and in which you can best reinvest? We now offer a free cash flow analysis. Everything to ensure that you do not get into trouble, and can make the best of this situation. Ultimately, everyone benefits; the consumer, the webshop, and us as an eCommerce partner.

E-mail to info@optiply.nl or call 085 888 0489.

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