COVID-19 health threats, travel restrictions, and prolonged periods of lockdown have caused severe problems for businesses. Especially for e-commerce businesses that rely heavily on courier services and efficient transportation models, the strain on maintaining financial stability is higher. Organizations without a functioning continuity plan have struggled to cope with the disruption. Revenues have dropped drastically. It has become impossible to gauge when the situation is likely to get back to normal. Investors are becoming more anxious by the day, which stresses the importance of a good plan to generate revenue and keep finances in check.
So, how can e-commerce businesses cope during these periods of uncertainty? It is time to rethink key objectives, tighten the purse strings, and lay down more robust plans for sustainability. The kind of e-commerce business, the business model, and the impact of COVID-19 on consumer sentiment should feature in planning. For those selling essential items, the effect has been relatively lower as compared to businesses selling non-essentials, such as electronics, luxury items, clothes, etc. At a time when the job market is unsteady, people are wary of purchasing non-essentials as frequently. Moreover, the impact has depended on the region and the speed of delivery as well.
Click here for a report on the ‘Impact of COVID-19 on the E-Commerce Market’ by Research and Market.
Finances during COVID-19: How can E-commerce businesses tide over?
During this time, there should be less panic and more room for a constructive thought process. So, we’ve shared some useful tips for e-commerce businesses to manage finances during COVID-19. Assess the situation objectively before any decisive action. Doing so will lead you towards the most valuable and practical solutions. You can determine the actual influences on liquidity based on critical factors such as the impact of COVID-19 on sales, inventory management, supply chain functionalities, and payments due to lenders and suppliers. Make sure the latest financial information is available at hand. List this information systematically and use suitable analytical tools to identify and tabulate the impact on operations and finances. After this, you can opt for subsequent measures to regulate cash flow and mitigate risks.
7 Tips for E-commerce Businesses to Manage Finances during COVID-19:
1. Cost-cutting across Departments:
Cutting costs is one of the essential steps that department heads should discuss. Re-evaluating budgets will help identify and cut-out expenses that are unnecessary or those that can be avoided temporarily. These should be handled systematically and by acknowledging the core operational and capital requirements. Here are some useful points to consider:
1. Do not halt or alter marketing and sales campaigns unless required. Observe online traffic and sales conversion ratios to arrive at apt decisions
2. Check to see if there is further room for savings when it comes to electricity usage, office supplies, refreshments, travel expenses, and other overheads. You will have to think outside the box and provide cheaper alternatives.
3. Limit the cost of packaging materials by avoiding the use of premium and customized items. Focus more on practicality
4. Unfortunately, you may be forced to scale back on perks and incentives, considerably. Assure employees of this being a temporary solution and discuss problems with empathy
2. Proactive Discussion with Lenders and Investors:
Reach out to traditional lenders and investors for additional funding to compensate for any slump in revenue. Fulfilling working capital and operational requirements will be the primary objective. Stall other growth objectives that you think can be resumed later; those not bound by legal commitments or warranties can be re-visited later. Until the global health crisis is under control, and you can focus on new investment or expansion intentions, it is vital to think about immediate financial needs.
Collate information about existing loans to assess and compare it to your financial capabilities. Upon reflection, if you feel that it would be challenging to meet the loan schedule, contact your lender immediately. Provide a brief about the financial impact and your further plans for sustenance. Given that COVID-19 is a global crisis, lending institutes are considering repayment extensions. These relief measures have been announced by governments as well, in an attempt to prevent an excessive financial burden on businesses. It is advisable to put a pause on payments and redirect funds for necessary operational expenses. To avoid a mark on creditworthiness, and maintain a good rapport with the lending organization, implement decisions before any payments are missed.
Investors may be concerned about sustainability or revenue, so answer their queries straight away. It will be easier if you have finalized business strategies and contingency plans, backed with comprehensive research and predictions. Make sure you are prepared with financial information and details about the steps you’ve taken to cope with the financial impact of COVID-19.
3. Exploring Financing Options during the Crisis:
Banks and other traditional lending institutions may be more skeptical than usual in providing finances, due to the significant increase in late payments, deferrals, and insolvencies. Here are alternate ways to induce new funds into e-commerce businesses that will help sustain operations and provide means to recover from the financial impact of COVID-19:
Collateral-free financing and growth capital options:
These are meant for small to medium-sized businesses and provide flexible and tailored options. There are fewer hassles in terms of the paperwork required, approvals, and disbursements because most of the procedures are digitized. Klub is an excellent example of a pioneering and flexible revenue-based financing platform. Drip Capital is also aimed to fund growth, provide working capital for various business needs, and offer valuable market insights to users.
Grants, Initiatives, and Loan programs:
It is important to be aware of programs in the region of operation. Governments, large businesses, and micro-lending organizations are offering relief loan packages and other fundraising initiatives to keep businesses operational during these tough times. There are forms available online and helplines to check eligibility and criteria. Among others, SBA, Business for All, and Kiva are some provide useful solutions and recommendations.
4. Re-evaluate Inventory Management:
The demand for some products would have escalated, and others dropped due to the impact of COVID-19. Keep close tabs on movement to maintain optimum inventory levels, since this is closely tied to the revenue generated. Make sure not to over-stock or under-stock. The levels should be based firmly on the researched numbers, featuring the predicted impact of COVID-19 on consumer trends for the next six to twelve months.
Conduct a thorough stock analysis to
1. Determine the need for new orders from suppliers
2. Re-consider change in existing order patterns
3. Eliminate dead stock from warehouses
4. Discuss offering more products in bulk
5. Re-align marketing strategies
6. Offer discounts
7. Conduct sales for out-of-season and perishable items
5. Use of Other Platforms for Selling Products:
In case you find it challenging to navigate through cash-flow problems or determine the viability of short-term changes, you can use other online platforms with a more extensive customer base and sales network to sell some of your products. This will give you some breathing space financially and also keep those stocks moving. For instance, a variety of products can be listed on Amazon and Bonanza.
6. Addition of Products related to COVID-19 Health and Safety Measures:
Right now, customers are looking for relief and protection against COVID-19. Try and introduce related products, like masks, gloves, disinfectants, face shields, etc. Depending on the type of products you usually list, you can also sell items such as social distancing posters, floor signage, high-quality cleaning supplies, and protective suits. Initially, start with smaller inventory quantities and compelling e-mail marketing. You can increase stocks and colors gradually after analyzing the demand.
7. Collaboration with Suppliers and Shipping Partners:
As e-commerce businesses are trying to cope with the effects of COVID-19, so are other organizations. Due to disruptions in the cash-flow cycle, it is crucial to communicate with suppliers and shipping partners for discussing renewed payment terms. Do not forget to emphasize your trustworthiness, and prove your worth to them by compiling records of previously completed transactions and shared revenues. In case you need to negotiate new payment dates, provide them with necessary financial information to back your request and make sure you follow through on any promises. Refrain from avoiding inquiries, as staying in contact will inspire confidence in your efforts and assure them of future success.
Before we conclude, here are some additional COVID-19 crisis management tips that you can apply:
1. Identify new revenue streams for better sustenance
2. Review the benefits of debt consolidation and take advantage of lower interest rates
3. Keep in touch with customers through social media platforms
4. Video ad campaigns are useful to keep customers engaged
5. Post-COVID-19 E-commerce Business Strategies should incorporate accelerated growth objectives, such as expansion and aggressive marketing
6. Make sure employees are well-informed about health and safety measures at the workplace. Dedicate personnel to monitor adherence to norms
These tips for e-commerce businesses to manage finances during COVID-19 can be applied based on suitability and overall impact on finances. The economic situation across the globe will take some time to resolve, so businesses that adapt quickly have a better chance of surviving and growing even through this tough period. It is time for decision-makers to step-up, and consider effective measures for business continuance.
Christina has been working as a freelance content writer for more than seven years, continuing enthusiastically to present insightful information in a creative manner. She is knowledgeable about various fields and has ample amount of experience creating original content. Her main focus is creating detail-oriented, well-researched and apt content as per key requirements. Most of her experience is associated with corporate business development, strategizing, proactive decision-driving tactics and topics related to trending market concepts, each specifically designed with the target audience in mind.