The eCommerce industry faces a global supply chain disaster
In a situation as serious and damaging as the early 2020 lockdowns, the Delta variant of COVID-19 has driven Asian production - as well as the flow of both materials and consumer goods - to the point of collapse.
Following the natural disasters in both China and Germany, and a cyber-attack which targeted key ports in South Africa, Guy Platten, Secretary General of the International Chamber of Shipping, described the current situation,
“A perilous moment for global supply chains."
Perilous indeed, to give the situation some context as to the extent of the challenge, stories have surfaced that global sportswear giant Nike could quite literally run out of trainers to sell, owing to the worsening COVID-19 crisis in Vietnam.
It’s no time to run out of cash
What does this mean for the online seller? For certain, this is no time to run out of cash.
Delays to the realisation of monthly revenue are damaging for online sellers, fulfilment times, logistics and the means of delivery are undoubtedly a headache in the current global situation.
Delays in fulfilling orders, particularly in international markets, could mean that a time of great success, as 2021 has undoubtedly been for eCommerceers, could also be a time of genuine risk.
Supply chain difficulties may mean unfulfilled orders, which in turn means anything from dissatisfied customers and bad reviews online, to lowering Amazon seller rankings, and worst of all, leaving sales on the table because of a lack of stock.
TradeBridge CEO and Co-Founder Mark Coxhead commented
"I don’t think that anybody fully expected the kind of disruptions that started in 2020. Nor did I think that they would in fact be worse now and not largely better, it's confounding. If multinational businesses with very deep supply chain expertise are struggling, then for the smaller business and the eCommerceer, things could be particularly tough.
In another sense, as we saw in 2020, these kinds of difficulties bring huge opportunities for smaller nimbler online sellers, who have good contacts and funding, who can manoeuvre to source the product that no one else has, and that everyone wants. In eCommerce every economic cloud can have a silver lining."
Supply chain disruption will create opportunity next quarter
"In the coming quarter, I'm really interested to see (because of the disruption in global supply chains) the performance of eCommerceers who typically smaller, independent operators, especially if they have that agility to really seize their moment and take advantage of new opportunities.
In these disruptive times you need two things.
The first is you need the nimbleness and the connections to source the product.
That is however no good if you haven't got the working capital deliver it."
A lack of working capital can cost the eCommerceer
"At TradeBridge we saw this in evidence throughout last year, particularly when the pandemic really hit hard in Europe.
We received calls day after day from people who had recognised the opportunity to source and sell things like PPE, eCommerceers would win contracts, amazing contracts that they never dreamed about before, but they didn't have the financing in place to seize their moment.
They simply couldn't fund the move, they couldn't take advantage of the opportunity and lost it. We could see and understand their desperation, because they could see the size of the opportunity, and had to watch it slip away.
In the middle of a crisis, to then start look for finance, it’s too late.
In terms of working capital, it is vital to be proactive rather than reactive, to secure funding right early, even if you don’t immediately use it, to capitalise on an opportunity.
It’s so much more difficult to try and gain finance in response to an opportunity.
Seizing the moment to establish new suppliers
"When you're establishing new suppliers, if you spotted an opportunity to market the chances are you’re not the only one.
When there's a real race for that supplier, to secure those goods, secure that transport slot, and everything that makes the move successful, then it's often not the player who has the best relationship, it’s is the player who has the available working capital that succeeds.
The player that can put down a deposit, or secure a bigger deposit, or act more quickly that wins the day. Whether that's to secure stock that’s in particularly high demand, or whether that's to secure shipping space, again which is incredible demand at the moment. If you've got that working capital everything becomes much more possible."
The danger of over trading and running out of cash
"It’s the classic trap for a small business and something that that every growing business needs to be aware of. Firstly, online sellers need to manage their cash closely. Secondly, eCommerceers need the right type of working capital facility, and in particular a working capital facility that will grow as their revenue grows.
There's no point just borrowing enough to purchase stock. When what online sellers really need is to have enough working capital to see the whole cycle through and that will grow as your revenues grow."
The right working capital solution funds growth
"The alternative model of the 6% fixed fees eats almost all the online seller’s profits, and often trap the eCommerceer into a cycle of up to six months-worth of ongoing re-payment. Which may not actually fit with their cash flows demands at all
The solution is a true revolving working capital facility. Where the eCommerceer can drawdown nothing or can draw down everything available up to the facility limit.
Then depending on cash flow demands, can be repaid in full quickly, or in instalments, or the online seller can simply delay paying anything, to maximise their opportunity. It’s totally flexible depending on the working capital and cash flow needs at the time.
It’s a huge advantage in this kind of uncertain market. For the online seller to know what their cash requirements are going to be for the next six months is practically impossible in this kind of environment. At present things are so changeable and there's so much stress in the supply chain, that six months is an eternity."
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We will be talking to TradeBridge's CEO and Co-Founder about whether the rise of eCommerce has finally ended the reign of high-street shopping?
If you have any questions or would like to get in touch, contact us at grant@tradebridge.com or visit tradebridge.com/ecommerce