Increasing energy prices, rising interest rates and a hugely volatile global oil and gas market are some of the factors currently driving an acute increase in the cost of living, impacting everything from the price of heating our homes to the weekly shop – the fundamental pillars of everyday life.
This is set to have a profound impact on ecommerce retailers’ bottom lines, as consumers look to cut back on non-essential, luxury items and even to reduce spending on essential items. Impulse buying may soon be a thing of the past, and people will generally be more frugal when it comes to spending their hard-earned cash.
The downward trend in consumer spending will only become more pronounced as the year progresses, leaving ecommerce retailers facing reduced sales at a time when they are also dealing with increased operating costs, and still battling to recoup their losses in a post-pandemic retail environment.
So the question is, with reality already starting to bite, what can online retailers – from global brands through to side hustlers – do to plug the sales gap?
1. Diversify your UK sales channels
The current climate is a wakeup call for ecommerce retailers to review their current selling platforms and to look to setting up a presence on additional UK marketplaces. This is a simple yet effective way to open up new opportunities and to counter the dropping demand from your existing sales channels.
For example, if your business is active on eBay and Amazon, consider expanding to include additional nationwide sites like OnBuy, Etsy and Facebook Marketplace. You could also look to identify regional or local marketplaces, or specialised sites that you could plug into. A more diversified multi-channel approach is an effective way to organically drum up sales and help balance your books.
2. Reassess your product line
Take this opportunity to re-evaluate your product lines to check whether your current portfolio is consistent. For example if you are offering up luxury brands alongside more practical, essential products, the message you are sending out to your consumers will be confusing, and it’s likely you’ll put some buyers off. Having a coherent product line will help you tell a clear story about what your business stands for, enabling you to better clarify and target potential consumers, and also increase the likelihood of return shoppers.
3. Look beyond the UK’s borders
It might seem counterintuitive to consider entering into new markets during such a volatile time, but this really is one of the best ways to shore up your business, spread risk and tap into new audiences. Your sales in the UK may be dropping off, but perhaps your core products are well-suited to a particular overseas market. It’s key to think creatively about reaching new audiences to drum up interest – and moving into new regions is a prime way to do this.
While there was a slight downturn in international shipments after Brexit, now could be the right time for ecommerce companies to capitalise on nascent pan-European and global sales opportunities.
4. Do your homework
It goes without saying that not all overseas ventures are created equal, and something that may pay dividends for one business may be loss-making for another. The key thing before making any rash decisions is to pinpoint your bestsellers, and to understand where consumer demand lies.
To get a grasp on how your existing product line is performing, first look to any available in-house data. Also remember that larger marketplaces like Amazon will have great insights you can tap into to better understand what products are trending, and which are falling out of favour with shoppers. To complement these data sets and give you a helicopter view, consider purchasing ecommerce data trends to help you to understand broader shopper habits. These data trends will also help you to pinpoint markets where there is likely to be a demand for your products.
Once you’ve identified your target market, the next step is to pinpoint the sales channels that will best enable you to reach your audience. Across the EU alone, there are hundreds of domestic sales channels catering to different products and audiences – from Cdiscount in France to Otto in Germany – so it really is critical to do your research or even consider seeking expert, local advice.
5. Lighten the load
In this challenging economic climate, entering a new market needs to be both seamless and cost effective or it’ll exert so much pressure that the venture becomes unviable. Unfortunately, the tasks involved in trading outside the UK can be considerable – from integrating into multiple sales channels to accessing local couriers in key markets. Undertaking all of this in-house can quickly become a costly and time-consuming job.
Outsourcing logistical and operational work to trusted providers who already have a footprint in your target market can take these headaches away and free you up to focus on your core business. For example, some fulfilment providers can plug you into an entirely new international market within days, enabling you to start selling and shipping without delay, and crucially, without having to greatly increase your resources or overheads.
6. Set up a physical presence in your target market
Today’s consumers expect 2-3 day delivery as a bare minimum, and they don’t want to pay for it. So, if you’re sending out each product individually from the UK, slow delivery and high shipping costs will mean you’ll miss out on new customers – unless of course you’re selling something truly unique and highly desirable.
That’s why it’s a good idea to find a fulfilment partner that can offer you low-cost storage, allowing you to ship your product in bulk to your target market ahead of making the sales. This means you can meet customers’ expectations of fast and affordable delivery, but without incurring the substantial upfront costs associated with buying up space in large warehouses.
7. Take action before reality bites
Online retailers are undoubtedly facing challenging times ahead. Bearing this in mind, it is critical for ecommerce retailers to get on the front foot now, introducing new revenue streams and making positive changes that will help them to stabilise their businesses, before the rise in the cost of living really starts to bite them on the bottom line.
Mark Elward (CMILT), chief commercial officer ofHuboo