Why eCommerce Companies Need to Rethink Their Financial Strategy

As the economy continues to struggle, many eCommerce businesses feel pressure. Increased inflation, supply chain issues, and changing sales tax nexuses are all significant concerns. However, there are always opportunities for those who are willing to adapt.  

Advanced eCommerce accounting software solutions and the right financial professionals can help you navigate these challenges and emerge on top of the eCommerce food chain. As eCommerce evolves, the current economy presents emerging businesses with acquisition opportunities and an ever-growing market flooded with consumers shifting to an online purchasing model.

Financial Strategies for eCommerce Companies

If you’re looking to navigate the challenges eCommerce businesses face in the current economic climate, you need foolproof financial directives and a confident approach. Continue reading to learn how we can guide you through the stormy weather of the current economy and get you to the sunny beaches of beyond.

Combating Inflation

eCommerce business owners in all industries must be acutely aware of the challenges inflation presents. While COVID might have peaked, inflation is anything but transitory. Instead, it’s growing. Much of this is due to the supply chain issues facing eCommerce companies, and the war in Ukraine. But regardless of the cause, the Consumer Price Index was the largest it’s been since 1982.

Housing, cost of labor, energy – you name it – prices are up! Business programs such as the Paycheck Protection Program have resulted in artificial stimulation within the markets. Because the government has been giving consumers money, businesses have been able to sell despite inflation. With those programs winding down, it remains to be seen whether consumers will continue their buying habits. This type of activity has recession written all over it, and eCommerce businesses would be wise to implement contingency plans.

eCommerce companies should plan on continued inflation, which means higher inventory, labor, and shipping costs. Essentially, you should plan on everything being more expensive through the rest of 2022 and further.

Beware of Interest Rates

To reduce inflation down to a benchmark target rate of 2%, the Federal Reserve has already implemented four interest rate hikes in 2022, including two consecutive “jumbo” rate hikes of 0.75% in June and July. This proposed solution seems precarious, one that entails fighting inflation while ensuring the economy continues operating smoothly. Because of this, eCommerce businesses must closely consider how raising capital will affect their cash flow.

eCommerce business owners should be aware of more expensive business loans and credit lines. They should consider refinancing loans due to historic lows and try to lock in rates for the debt if they can.

Supply Chain Problems

No surprise here, the supply chain issues will likely persist for the rest of 2022. As long as stimulus cash percolates into markets, demand, as well as prices, will stay high. When you add the uncertainty of the current situation in the world to the equation, it’s easy to see how backlogs in factories and ports will affect prices as well. While the COVID situation has improved, there’s no indication that the supply chain issues are going anywhere soon.

Because of this, eCommerce businesses need to be extra careful about inventory planning. You should order in further advance, carry more inventory to account for delays, budget for increased costs, and stay informed of price increases.

Utilize Acquisitions

Recently, there have been numerous acquisitions for businesses conducting eCommerce. Since there is substantial cash flow in markets, aggregators have begun buying direct-to-consumer businesses. In other words, if you are consistently turning a profit, you’re in high demand right now. Private equity firms are also looking for returns on their funds raised.

With the continued increase of eCommerce businesses, the long-term benefits of acquiring eCommerce businesses are appealing to larger companies and institutions. Whether you’re looking to buy an eCommerce store or sell your own, it's a good time to consider both. 

Increasing Payment Methods

Customers will continue seeking more convenient payment methods in thefuture. eCommerce businesses need to respond to the increased demand. Providing a full suite of payment options is an easy way to increase sales. Decreasing customers’ checkout time builds trust with your brand and ensures your customers notice how convenient you make their purchasing experience.

eCommerce companies should also be on the cutting edge of technology. Here are some of the payment options eCommerce companies should consider implementing into their businesses:

• Apple pay and fingerprint payments through smartphones: half the iPhone users out there utilize Apple Pay for purchases, with that number growing every year. eCommerce businesses would do well to implement advanced payment methods into their company payment structure.
• Bitcoin and other blockchain currencies: cryptocurrencies continue to affect consumers’ daily lives and your eCommerce business should capitalize on this growing number. More and more companies are considering these valid payment options.
• Fintech options- Fintech options such as Klarna make it possible for customers to buy now and pay later. PayPal, for example, has implemented a “Pay in 3 offer” making it easy for customers to spread out their transactions over longer affordable durations.

Instant Analytics and Sales Optimization

Business analytics tools are continuing to improve and eCommerce companies need to build their arsenal and streamline the sales process. These tools used to be slow in collecting and aggregating data. Now they give you instant results that show you things such as how your customers are responding to your online ads.

If you combine these tools with machine learning, you can make more informed sales projections and determine where you are losing sales, minimizing your bounce rate and cart abandonment.

Financial Professionals Can Help Your eCommerce Business Succeed In the New eCommerce Landscape

The past few years represent a seismic shift in the business landscape. The pandemic has fundamentally changed the way consumers view their shopping experience. With the overall market volatility caused by the pandemic, there is a tendency for companies to shy away from the challenges they face.

Change opens doors for advancement, and eCommerce companies that take advantage of these emerging opportunities will achieve the success and growth they desire.

Hiring a team of financial professionals such as Fully Accountable maximizes your ability to take advantage of the new eCommerce landscape. Navigating the eCommerce landscape can be tricky and present high-risk rates. With supply chain issues, changing tax nexuses, and high competition, you need proven strategies from financial professionals who know how to get you results.

If you’re struggling with your business in these uncertain times, contact us today and put your eCommerce business’s financial success in the hands of controllers and fractional CFOs who understand how eCommerce is changing. The opportunities are ripe for plucking, you just need to know where to find the fruit.