The year 2020 has become an ultimate test not only for people but for any business. While some of the industries have suffered, some have got a huge push for thriving and unprecedented growth. The e-commerce sector is on the top of that list. Let’s see how to stay afloat and prepare your business for the post-pandemic world.
From time to time it seems that the scenario for 2020 was written by Netflix folks. The crisis each business has faced this year was unpredictable and unprecedented.
When most people all over the world were locked inside their houses, we finally understood the great importance of ̶t̶o̶i̶l̶e̶t̶ ̶p̶a̶p̶e̶r̶ online shopping.
In fact, for a short period of time, online shopping became the only viable option for purchasing necessities.
According to the Salesforce Q1 Shopping Index, e-commerce revenue in Q1 2020 grew 20%, compared to 12% growth in Q1 2019, including 16% web traffic growth and 4% shopper spend growth. In Q2 2020, the U.S. e-commerce sales demonstrated a 45% growth in just three months.
Amazon's Q2 worldwide revenue surged by 33.5%, with online grocery sales tripling. Consumers stormed online to buy food during the pandemic. 48% of buyers ordered groceries online at least once a week during this period. As a result, Amazon increased its grocery delivery capacity by 160%.
Despite the coronavirus-related costs, which amounted to $4 billion globally in the quarter, Amazon’s net income doubled to $5.24 billion in Q2 2020 from $2.63 billion in Q2 2019.
One of the reasons for contributing to higher profits was the cutting back of expenses on marketing, traveling, and meetings. Higher sales also boosted net income for sure.
Brands with a strong online presence and a powerful e-commerce infrastructure have also experienced flourishing revenue growth.
Those companies that didn't prioritize the development of their online channels, and offered limited shopping options, as a result, lost billions of dollars and failed to retain their customers.
The bottom line is this: the coronavirus pandemic has reshaped the world of business, drastically shifting the focus towards online shopping as all organizations were forced to adapt to the new reality.
Ultimately, we’ve encountered a few unanswered questions:
When companies were forced to immediately respond to the unseen challenges brought by the pandemic, business owners finally realized the real value of crisis planning, risk mitigation, and financial stability.
There are many different types of crises that can have a negative impact on your business, such as financial crises, crises related to employee malpractices, or catastrophic crises (like the one we are experiencing now).
To mitigate their impact and avoid dramatic results, you should have a stable psyche and a crisis management framework in place. This framework must be comprehensive and contain the full list of key steps and measures that will enable you to quickly respond to the suddenly emerged crisis.
📃 Crisis Management Handbook is that framework that essentially serves as your business’ detailed action plan when the next crisis knocks on your door.
The Crisis Management Handbook may be divided into three parts: pre-crisis preparation, crisis response and post-crisis strategies.
In hot pursuit of the pandemic story, write a post-crisis report to identify what went well and what areas need improvement. After severe catastrophes, such as a pandemic, corporate goals and objectives may need to be reevaluated.
During the pandemic, many retailers had to fire the majority of their salesforce and hire new workers, such as delivery people, to satisfy the arisen need. Such a shift resulted in unnecessary costs that could have been prevented. To avoid such costs, invest in devising retraining programs that will enable you to effectively fill in the labor gaps caused by a crisis.
Helping your workers quickly change their profile and take upon a new role will save your company from unnecessary employee turnover and potential downtimes. Additionally, most office-focused businesses discovered the advantages of switching their employees to remote work.
Among such benefits are boosted productivity, encouragement of the work-life balance, reduction in overhead costs, and increased employee morale.
By May, roughly 40% of Americans had switched to remote without a prospect of returning to the normal workplace (not normal anymore, it seems).
Remote work will remain a huge trend for the nearest future, and business owners can use it as a new effective way to conduct their operations.
Most commonly, e-commerce businesses outsource software development, since finding needed tech expertise locally may be quite challenging and insufficient.
This business model has been popular since the 1990s and proven to be super effective if done properly.
💡 Outsourcing means extending your in-house team by hiring specialists with superior expertise and diverse experiences from various geographic areas.
Your e-commerce website must deliver the best shopping experience to your target customer. e-commerce outsourcing agency can offer a wide array of services, such as design, software development, and consulting by integrating a dedicated team of developers into your existing teams or building IT solutions from scratch.
E-commerce agencies are constantly keeping up with the latest trends and can easily optimize your web store to match consumer expectations and implement the newest technology for a more dynamic and smoother online shopping experience.
👉 Here we compared the advantages of outsourcing tech skills to a dedicated team, agency, and freelancers.
“Cash is king”, so the saying goes. According to a study by the U.S. Bank, cash flow issues lead to 82% of small business failures. e-commerce businesses are no exception. This is why cash plays the key factor in keeping your e-commerce business afloat, especially during a financial or other crisis.
There are a set of analytical tools that can help you avoid this problem:
When crises hit, sales is the first account to be affected. When sales decline, profits follow the same trajectory since operating expenses more often than not remain fixed.
To ensure that your business isn’t unprofitable, continuously monitor your biggest expense categories, such as:
Perform regular analysis of your Income Statements (P&Ls) to monitor the changes in each expense category. If they consistently exceed the budget figures, look into ways to adjust your business strategy to reduce those expenses.
Monitoring your operating expenses with due diligence will provide your business with a safety margin and, quite possibly, freed up capital.
Each dollar you earn and spend goes through a particular cycle that will depend on the nature of your business. If, for instance, you sell products on credit and carry inventory not paid for immediately, your cash cycle will include the 3 main accounts: Accounts Receivable (A/R), Accounts Payable (A/P), and Inventory.
Each of the 3 accounts has its own $ turnover, measured in days, that are then used for cash gap analysis. To calculate the cash gap or lack thereof, apply the following formula:
Cash Gap = A/R Days + Inventory Days - A/P Days
If the resultant value is positive, your business has a cash gap that must be financed internally or externally (each day = Total Cash Fixed Costs / 365). That incurs even more costs (dividends paid to equity investors or interest paid to creditors).
But not to worry - there are practices that can help you shrink the cash gap:
Always aim to allocate some part of the money for an emergency fund at least for 3 months of your operating expenses, ideally more.
In fact, did you know that Bill Gates kept a cash reserve of 1 year worth of operating expenses during the early years of Microsoft operations? Google it! (or maybe Bing it…)
👛 You could use a cash reserve to meet unexpected short-term financial obligations or pay for expenses when tough times come around. It's a much better and safer way than incurring more debt from creditors.
While that’s much easier said than done, the pandemic period shows that cash reserve is one of the most crucial tools to keep your business’ engine running.
In a nutshell, it’s essential to understand both the short-term and the long-term effects of the economical, social, and technological changes caused by the coronavirus pandemic.
• What are the current trends in the e-commerce industry and markets now? How have your customers’ preferences and tastes changed?
• How are your competitors reacting to these changes?
• How can technology help you transform and thrive?
Here is just a couple of suggestions 👇
Who could predict that bread machines will be one of the most vital things for people during the pandemic? Positioning matters.
Check it here first. Did you know that 40 percent of consumers will wait no more than three seconds for a web page to render before abandoning the site? Web store speed is a very important factor for customer’s loyalty and search engine ranking.
We mean specs, photos, videos, testimonials, work on your SEO, landing pages, email sign up pages. All these elements can significantly enhance customer user experience and lead to a higher conversion rate.
Make sure that the mobile version of the store works smoothly or think about mobile app development, as people are spending more time on their phones.
Check keyword search trends regularly to quickly adapt to the customers' changing demand and social trends. The easiest way is to use Google Trends for it.
Take care of the measures like multi-factor authentication, installation of security plugins, regular website updates, login attempts restriction, etc. Recently 2,000 Magento stores were hacked because of the running on a not-supported version of Magento.
Because of the pandemic, many years of change have been compressed into just a few months.
The best way to catch up with those who have thrived immensely during this crisis (say ‘hi’ to Jeff Bezos), is to start planning your actions for the next one.
And you are correct in saying that nobody can accurately predict the impact of a crisis. But incorporating practices and processes that will help you measure, learn, and adapt to the surfaced events is key to building a sustainable, long-term business strategy as well as position your business to succeed in a new economic reality.
🎓 Yesterday is not ours to recover, but tomorrow is ours to win or lose.
Lyndon B. Johnson, the 36th president of the United States
* * *
Read the next article: How to choose the e-commerce platform to run a web store? James Bond helps to decide.