According to a report titled, ‘E-Commerce Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2023-2028,’ the global e-commerce market is valued at $ 16.6 trillion as of 2022. With each passing year, this market value is only growing. As an e-commerce business owner, you’re probably looking for ways to grow your business too.
Here are some tips to keep in mind when trying to avoid losses in your e-commerce business.
#1 Forecast Demand
Forecasting demand is one of the most impactful and cost-effective ways to improve your bottom line. Having a clear understanding of how much inventory you need available on hand at any given time will help you avoid costly overages, meaning you’re always getting the most out of every dollar spent on inventory.
If you want a demand forecast for specific products and services, it’s important that you come up with a clear strategy as soon as possible after launching an offering. As soon as there is a new product launch or an increase in sales volume from existing offerings, begin by collecting data about customer behavior surrounding those offerings.
Then, use this information along with other market research to build a model that will give you accurate estimates for future orders based on past performance trends and historical data points.
#2 Keep Inventory Velocity High
You can avoid losses by making sure your inventory velocity is high, which means the rate at which you sell out of products. In this case, the term “inventory turnover” is used.
Inventory turnover measures how many times per year a company sells out of its inventory. It’s calculated by dividing the dollar value of sales in a period by the average inventory value for that same period.
For example, if you sold $50 million in merchandise during 2018 and had an average inventory value of $5 million at any given time during that year, your annualized inventory turnover would be 2 ($50 million divided by $5 million).
You should aim to have as high an annualized inventory turnover as possible to ensure that demand for all products on your website meets or exceeds supply at all times.
#3 Use Big Data to Anticipate Problems
Good business sense tells us that we should be able to predict problems and prepare for them before they happen. In fact, this is the basis of risk management and insurance in all industries. When it comes to e-commerce businesses, however, there are certain factors that make predicting losses more difficult than in other industries, such as a lack of historical data or the existence of complex supply chains.
Big data can help you gain valuable insights into how your company operates to reduce losses from risks associated with customer behavior and strategic decision-making across departments. It may also reveal new ways for your company’s managers to collaborate with one another on projects, such as forecasting real-time sales figures based on historical trends or tracking inventory levels based on past customer requests.
#4 Don’t Skimp on Customer Service
One of the easiest ways to increase sales is by providing a positive customer experience. In fact, it’s estimated that more than 70 percent of consumers now consider customer service when deciding whether or not to purchase from online stores. They also believe that if companies offer good support, they will be willing to pay a higher price for their products and services.
You might even outsource this job to a customer care center. IBIS World reports that the customer care center industry in the U.S. is valued at over $10 billion. These care centers have all the assets necessary to manage your customer care needs. You only need to train or show them the way your business operates, and they can handle the rest themselves.
#5 Assess Your Supply Chain Management Needs
Before you can avoid losses in your e-commerce business, you must first determine the extent of your supply chain management needs and then make adjustments accordingly.
For example, if you’re a small enterprise that has just started selling products online, your supply chain management is likely quite simple. In this case, it may be sufficient to hire one or two new employees who have the experience needed to manage the production process and expedite shipments.
On the other hand, if your business has grown significantly over time but still does not have a large staff dedicated to supply-chain management tasks, this would indicate that there is room for improvement.
When it comes to e-commerce, losses are often the result of poor decision-making. Even Amazon reported a loss of over a billion dollars earlier this year, as reported by the Associated Press.
Thus, you can never tell when the losses will come your way. The best thing to do is to try your best to avoid such losses, and the tips discussed above can give you a headstart with that.