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Staying Resilient: Is Your E-Commerce Store Ready for COVID19? Preparing Your Business For The Coronavirus Outbreak

Ann Pichestapong
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March 18, 2020
E-Commerce Operations
Operaciones de e-commerce

The World Health Organization has recently declared COVID-19 (also known as Coronavirus) a public health pandemic. The damage will also extend to the global economy with many countries already forecasting a zero or negative GDP growth this year. McKinsey estimates that the ‘best-case’ scenario of the US GDP growth in 2020 will be -23%.

What’s concerning about the ongoing pandemic is this is the first time a public health crisis is affecting the e-commerce world. Last time the major outbreak happened was in 2003 with SARS, when e-commerce was just barely taking off.

The country worst affected by the virus, China, is also the largest global supply hub. With the looming risk of disruptions in the global supply chain and manufacturing, many online businesses have started to worry about their decreasing inventory and having their goods replenished – if at all.  

So what can an e-commerce store owner do to prepare themselves to minimize disruptions to their businesses? We turn to e-commerce merchants and experts who are at the forefront of this battle to give us their advice on what they are doing to get through this crisis.  

Scenario analysis

Online retailers need to think ahead and do a scenario analysis, a ‘what-if’ exercise.  These are the unknowns that you have to account for:

-       The impact of Covid-19 on the supply chain is not fully known. Many factories have shut down with the remaining few running at reduced capacity.

-       As factories are shutting down or reducing capacity, it will take longer to re-supply. Logistics providers may also experience delays.

-       The economy will definitely slump post-outbreak, no one really knows the extent of the damage.

If your business is experiencing a downtime, the best way to survive this storm is to think about different scenarios that could happen to your business. Questions that help you plan better include:

Short term:

-       Can I fulfill my immediate orders over the next few weeks?

-       Can I work with my logistic provider to ensure these orders are fulfilled?

-       How fast will my stock run out? Can I replenish them?

-       Do I expect any delay in future orders?

 

Long term:

-       How much cash runway do I have? If things are still bad in 3 or 6 months, can I survive? Do I have to let my team go?

-       Can I find alternative suppliers to diversify the risk of going out of stock?

-       When things get better, how can I re-engage my customers again with the right email sequence, landing pages etc.?

 

John Moss, CEO English Blinds, is already thinking ahead by planning for the long term  “Firstly, online brands need to be prepared to look at the big picture and plan for the longer term as well as attempting to mitigate the immediate impact of the crisis”

However, this may not be doom and gloom for all. Jamie Burns, VP Sales of BulkMunitions, said his business is actually experiencing a boom due to this crisis. He’s seen a 10x traffic increase and 4x conversion increase. This means his inventory will run out fast.

To prevent this, instead of limiting quantities a customer can order, he’s turned to dynamic pricing to curb demand. The increase in price has also helped him resupply as the cost to replenish his stock has skyrocketed as a result of this chaos. “While many folks are afraid to raise prices, out of fear of upsetting their customers, we feel we HAVE to raise prices in order to be able to continue to serve our customers well. We have experienced very little fallout from our customers so far.”

This boom is echoed by EdgarRayo, from GroomsShop, an e-commerce store for unique gifts “While so many events have been cancelled this month due to social distancing efforts, we're still getting enough orders because it still matters to have people know they are being remembered on special occasions in spite of the virus shutdown by having gifts shipped to them.”

 

“While many folks are afraid to raise prices, out of fear of upsetting their customers, we feel we HAVE to raise prices in order to be able to continue to serve our customers well. We have experienced very little fallout from our customers so far.” Jamie Burns, VP Sales, BulkMunitions

What about nearshore and onshore sourcing? Find viable sourcing alternatives

 

The biggest impact this pandemic could have is your supply chain. Are you directly sourcing from China? If not, are your suppliers sourcing from there? As the world’s largest manufacturing hub is battling a health crisis, it’s inevitable that there might be delays in your shipments.  

To prepare, would it be possible for you to start sourcing away from China? In the world of procurement, concepts like “Nearshore sourcing” and “Onshore sourcing” are alternatives.

Both terms refer to outsourcing to a country that’s closer in distance and time zones to your main base of operations. If you’re based in Europe, are there low-cost countries close by that you can source from instead of China such as Portugal, Poland, Greece or the Czech Republic. If you’re in Asia, this could be India; Sri Lanka Malaysia; Vietnam or Thailand.

If you are already based in a low cost country, use your network and contacts to find domestic manufacturers. Near-shoring or on-shoring may result in a higher cost of goods sold (COGS) but it will allow for flexibility and business continuity which far outweigh the increase in cost.

 

80/20 rule

How many SKUs do you currently stock? Revise your sales projections for the next 3 quarters. Focus on fulfilling current orders and expect downtime as we’re weathering through this crisis.

Since the full effect of this global health crisis is still unknown, it will be wise to cutdown on unnecessary restock and preserve cash. Review last year’s performance and identify the top 20% of your SKUs that bring the most revenue.

For John Moss, this is the time to be conservative.“Four months down the line when demand for what you sell hasn’t changed and/or you’re having problems with logistics and delivery, can you hold that volume of stock, afford to pay the invoices for it, and not have to worry about shelf life or seasonality?”

 

Lower CAC by turning off ads and focusing on existing customers.

 

The 80/20 rule also applies here. If you look at your marketing spend and channels today, identify the top 20% channels that bring the best ROI. Your customers may limit their impulse purchase or buy less frequently which could reduce your LTV (Lifetime value).

You should think about reducing your cost of acquisition. Invest more on tools and activities that will help you convert more from existing customers. Retargeting ads should be active and revisited to target visitors who already expressed interest in your website.

Most importantly, what you can do now though is to make sure that visitors who land on your website will convert. Ensure they have a good experience when they come to your website and help them discover products faster. It goes without saying that you also need proactive customer support to respond to customer inquiries that will start flowing in.

“Shifting the focus on online sales should become number one priority as shoppers are already staying away from physical retail." Greg Meade, Crossnetgames

 

If you’re running physical stores, cutting down on staff hours (or close the store) could be a good option for now as customers are staying home. Greg agreed “Shifting the focus on online sales should become number one priority as shoppers are already staying away from physical retail. Brands already realize they need to invest more in improving their online marketing funnels and customer service to answer the increased demand for online purchases.”

This could be a good opportunity to also engage with existing customers. Keep them engaged with targeted emails, clear updates and good content.

 

Encourage staff to work from home

Safety first has never been more true. You should exercise preventive measures as prescribed by your local government. This is the time to experiment with remote work if your organization hasn’t already done so.  

Encourage employees to work from home. There are many free tools out there that facilitate remote working. Use Slack, Skype and Zoom for video calls. If your team is big and you’re looking for a more collaborative tool, try Jira or Webex.

Greg Meade from Crossnetgame checks in with his staff daily “Communicate more often on C-level and with staff - events are changing rapidly and communication with regular updates contributes on taking the most relevant decisions. Switching to a daily communication should be a top priority.”

“That’s the biggest challenge for me. At the human level, we need to be serious about isolation. This is not a joke. This is something not to mess with. And, there’s a human social responsibility. Even if you’re a healthy person who’s at low risk for this to really, really harm you, be careful about.” Andrew Faris, CEO of 4x400

If you are new to videoconferencing, here is a great guide so you don’t look like you just woke up when taking the call with your colleagues. Also, the BBC has done a great write up on how to manage your team as everyone works from home and ensure high productivity.

 

“That’s the biggest challenge for me. At the human level, we need to be serious about isolation. This is not a joke. This is something not to mess with. And, there’s a human social responsibility. Even if you’re a healthy person who’s at low risk for this to really, really harm you, be careful about.” Andrew Faris, CEO of 4x400

Communicate with your customers

When it comes to communication, honesty and transparency rule. Expect that your customers will be:

1.     Worried about the delay in their orders if they’ve already purchased

2.     Concerned about out-of-stock, time to delivery if they’re thinking of buying

Remedy to both concerns is clear communication. If you know or suspect a delay in shipment, make it clear on your website and your checkout page.

Be conservative with delivery time as your logistics provider could be struggling to keep up with the orders. For John, honesty trumps everything during uncertain times. “What is most vital for eCommerce businesses at this point is being honest and transparent with your customers”

While this is common sense, remove products that are out of stock and those you don’t think will be arriving in time from suppliers to meet orders. Katie Holmes from OutwitTrade agreed “you definitely want to keep your customers in the loop if you anticipate supply problems - the worst thing that could happen is if you can't fulfill orders.”

What is most vital for eCommerce businesses at this point is being honest and transparent with your customers, John Moss, CEO, English Blinds

 

One upside about e-commerce is that most of the operation can be managed online. Give your customers plenty of alternatives for them to contact your team. Customer inquiries will flood in more than usual.

Be extra responsive and contactable through phone, email, live chat and keep your customers updated with email newsletters.

While the full impact of COVID-19 still largely unknown, it presents an opportunity for online retailers to show customers integrity, honesty and brand value. Customers who have a positive impression of your brand during this uncertain time will remain a loyal customer for a long time.  

As John has rightly pointed out “Finally, remember, the impression that you give now when things are uncertain for everyone can mean a customer retained or a customer lost in the long term when things begin to return to normal.”

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About the author

Ann is the co-founder and CEO of DataCue. Her unique background as a data scientist and an ex-management consulting helps her use sophisticated technology to solve real business problems. Her passion is to open up the power of personalization from only big tech companies to everyone.

Sobre el autor

Ann es co-fundadora y CEO de DataCue. Su experiencia única como cientista de datos y consultora la llevado a usar tecnología sofisticada para resolver problemas de negocio reales. Su misión es extender la poderosa herramienta de la personalización, hoy relegado a grandes compañías, para todas las empresas del mercado.

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