The global health crisis has affected businesses all over the world – in some ways good, and others bad. Prior to 2020, the e-commerce landscape had already been steadily carving its own piece of the pie and changing the scope of retail and consumer behavior dramatically. After entering a period where consumers had, and continue to have, safety and convenience at the top of their minds, e-commerce undoubtedly benefited from this, ultimately speeding up the growth of this channel exponentially.
E-commerce thrived in 2020 due to store closures and the overall public fear of contracting COVID-19. Online sales in 2020 hit $791.70 billion, up 32.4% from the prior year. This is still the trend in 2021 as figures from Q1 show a 39% increase year over year, and there doesn’t seem to be a slowdown in sight. Even as the pandemic lockdowns and closures have started to end, consumers have appeared to permanently shift the way they shop for and buy products.
While this seemingly silver lining to the pandemic appeared great for business owners, the increase in demand has also led to a delay in supply chains and created an astronomical logistical issue. An increase in sales is what every business owner strives to achieve, but what happens when you can no longer keep up with the supply to satisfy that demand?
A recent survey examined the economic and operational impacts of COVID-19 and found that 35.5% of manufacturers are facing supply chain disruptions. What exactly does this mean? It can lead to several delays for sellers leading to:
- Disruptions and operational changes
- Lower margins leaving less capital to reinvest in inventory
- Longer delivery times
- Impairment on the import and export of goods
- Climbing costs
- Labor shortages
Ultimately, the combination of all these challenges puts sellers and their businesses under a new type of stress test. To continue to keep their traffic and sales high, they must also stock inventory to keep up with the demand. Sellers are forced to invest more into inventory to accommodate for the longer lead times, as well as account for any unexpected delays. Any amount of lag in inventory can truly harm the performance of a business, and the increase in lead times just makes the outlook even more grim.
To take the bleakness to another level, sellers who work with suppliers in China are seeing even worse lead times. These extreme delays have also made shipping costs exceedingly high for Chinese suppliers due to lack of containers and increased demand. According to this report, average lead times for inputs are at least twice as long as compared to “normal” operations for Asian, European, and domestically sourced inputs. Unfortunately, these costs will likely continue to climb as we approach the peak season for inventory orders as sellers prepare for holiday and Q4 sales spikes.
This means that sellers need to begin paying back balances on inventory that they haven’t even had the chance to sell yet. For this reason and more, sellers must rely on outside capital or credit lines to top up on their inventory. This nearly impossible task puts sellers in a pinch as many don’t have access to capital to do this.
While this feels insurmountable to sellers, there is hope and there are options. SellersFi is here to support you so that you can continue to scale your business and not get in the weeds with high inventory costs and logistical delays. To aid our sellers during this tricky time, we’re extending our Interest-Only payment period at the start of each loan you draw from 90 to 120 days!
*Terms and conditions apply.
