The eCommerce industry has proven to be one of the most resilient sectors, with 2021 seeing one of the largest booms of activity in eCommerce history. Australia’s eCommerce revenue alone reached $AUD40 billion[1], compared with the $28.6 billion pre-pandemic[2].

This poses as an incredible opportunity for Australian businesses yet comes with many challenges; namely the global supply chain issues plaguing every business.

So how can local eCommerce businesses ensure that they have enough inventory for the rest of 2022?

The unfortunate reality is that supply chain issues rampaging around the globe are not a 2021 problem that will miraculously resolve itself overnight. The latest lockdowns in Shenzhen[3] are a primary example of this.

The aftermath of lockdowns, restrictions, and widespread factory closures meant that there were not enough boats to match the level of demand. The lack of supply has disproportionally impacted SMEs, with more established brands willing to pay for any space they can find on freights subsequently driven prices up to exorbitant rates.

In fact, the ACCC recently found that freight rates for the most common global routes were approximately a shocking seven times higher than it was just one year prior[4].

While it might be possible to absorb the elevated costs and delays for a while, it is not sustainable by any means.

So, what can you do? Here are our best tips to get ahead of the game:

  1. Plan early: In 2019 and 2020, inventory for Black Friday would typically be ordered around August. This year, this is likely to shift to April or even earlier. Plan ahead to minimise delays and avoid dissatisfied customers. This line of thinking doesn’t just apply for holidays; identify when larger orders usually come through to ensure sufficient stock levels.
  2. Maximise supply chain visibility: The biggest problem isn’t when inventory is late; it’s when you don’t know it will be late. Having access to this information will ensure that marketing campaigns and outgoing communications can be adjusted as to manage customers’ expectations accordingly.
  3. Investigate alternative freight options: Historically speaking, eCommerce businesses would only elect for air freight if inventory were needed ASAP or if the product in question is light in weight and high in margin. This year, air freight would most likely become a necessity for at least part of your inventory fulfilment.
  4. Explore local production: Shifting manufacturing to local warehouses or fulfilment centres is certainly one way to circumvent these challenges. However, these shifts can take months and you’ll ideally have as much inventory as possible to ensure a smooth transition for customers. Such decisions will also have a long-term impact on how the business fundamentally operates.
  5. Research all available financing options: A significant portion of a businesses’ capital will always be locked into inventory – creating a compounded cash flow for larger orders or orders that are delayed. This is especially true for SMEs who have to deal with strict payment terms from their suppliers – 30% upfront and 70% on shipment. You know you need to buy stock, but it’s a real challenge to have the cash to make these purchases.

    External financing can be daunting as it may result in a situation where you must give up security, sell equity, or put a line through said assets. This is where revenue-based financing comes to its own.

    Revenue-based financing provides the required funding to secure inventory whilst being repaid using a percentage of daily sales. Essentially, it enables growth without many of the drawbacks from traditional funding options. And since revenue-based financing is paid back as a percentage of sales, it can also help lower risk. If there is a slow month, less is paid back.

Running out of inventory is sometimes perceived as a badge of honour but it cannot be further from the truth; it’s the worst thing that can happen to any business.

Customers are demanding a seamless experience and are growing less patient with delays and issues that have been present for a long time. Businesses that have access to proper stock and inventory will automatically be in a better position to take advantage of this eCommerce boom then their competitors.

In short, the businesses with inventory will win.

Stephen Duke is director of marketing & growth at Wayflyer.

[1] eCommerce DB: The eCommerce market in Australia

[2] NAB Online Retail Sales Index (December 2018)

[3] Shenzhen lockdowns to further shock supply chains

[4] ACCC 2020-2021: Container Stevedoring Monitoring Report