Dysfunction at ports, shipping container scarcity, and factory closures are among the factors contributing to retail delays and shortages worldwide. According to experts, it could take years for the overall supply chain bottleneck to clear up. Yet supply chain blockages are just the tip of the iceberg when it comes to the challenges that eCommerce startups have to wrestle with in 2024.
Most founders are navigating how to predict and meet demand, bring new products to market, and manage supply chain strains. While there are many challenges, they’re universal to every eCommerce founder — and there are solutions out there if you have a trusted partner by your side.
1. Rule Changes Mean Paid Media Insights Are Failing to Predict Consumer Demand
The introduction of iOS 14.5 changed the game for paid media advertising on Apple devices. Apps like Facebook now require user permission to track activity across other websites and apps, significantly limiting the data available for accurately predicting demand and targeting customers with ads.
Flurry, a mobile app analytics platform, found that only 22% of worldwide iOS users and 16% of U.S. users opted in to app tracking as of early 2024. Previously, approximately 70% of users were sharing data with advertisers. This significant drop-off limits the amount of personalised data available for targeting customers through paid media.
Essentially, the ability to target customers on Apple devices with personalised digital ads has plummeted, making it harder for eCommerce companies to drive quality traffic to their sites and convert that traffic into purchases. This reduced data also complicates inventory management, as predicting how much stock to order becomes more challenging.
To compensate, companies must invest more in product development to increase the average order value, ensuring a range of complementary products that encourage larger basket sizes at checkout.
2. Startups Need to Invest Extra Time and Resources into Bringing New Products to Market
Rolling out new products is essential for staying competitive, but the process is often challenging for eCommerce founders due to high costs and lengthy timelines.
Costs: Entering new product markets often involves significant investment in materials or capital equipment. For instance, textile companies face minimum order quantities, while manufacturers may need to invest in tooling or moulds.
Timelines: Product development involves multiple phases, including sampling, prototyping, and bulk production, each requiring time and iterations. Under normal conditions, this is complex, but current supply chain disruptions exacerbate these challenges, making product development unpredictable and unreliable.
To tackle these issues, strong supplier relationships and access to capital are crucial.
3. Stock Is More Expensive Due to Skyrocketing Freight Costs and Strict Supplier Terms
Freight costs continue to rise, placing strain on eCommerce companies. Demand for sea freight outpaces shipping container availability, pushing prices higher. For example, shipping a container from Shanghai to Los Angeles was 80% more expensive in March 2024 than the previous year. Container shortages and port delays force companies to consider expensive air freight, further squeezing margins.
New founders also face challenges in negotiating favourable terms with suppliers, adding financial strain to inventory orders. High costs can push companies into survival mode, preventing investment in new product lines and stifling future revenue growth.
4. Factory Closures in Manufacturing Countries Are Creating Production Backlogs
Pandemic- and infrastructure-related disruptions continue to impact factory operations in manufacturing countries, causing significant delays. Forced factory closures in regions like China and Vietnam have led to massive backlogs. Founders need to stay alert to conditions in their manufacturing locations to anticipate and mitigate delays.
For instance, China's power rationing due to coal shortages and Vietnam's COVID-19 restrictions have extended production timelines. Understanding these conditions and their impacts is crucial for effective inventory planning.
5. Long Lead Times Are Making It Harder to Keep Products in Stock
Supply chain disruptions have created long lead times, complicating inventory management. Companies often require multiple materials from various suppliers, each with different lead times. Delays in any component can disrupt the entire supply chain, risking stock shortages or over-ordering.
For industries like health and beauty, sourcing globally adds complexity. Delays from any supplier can lead to out-of-stock items, driving customers to competitors or causing spoilage of related inventory.
6. Lack of Visibility into Supply Chain Practices Is Creating Consumer Distrust
Consumers increasingly demand transparency about the sourcing and manufacturing processes behind the products they purchase. Gaining supply chain visibility is challenging, as not all suppliers readily disclose their practices. However, eCommerce companies must prioritise transparency to maintain consumer trust.
According to a survey by Ipsos, over 75% of respondents believe brands should be responsible for their manufacturing processes and ensure environmental friendliness. Meeting these expectations requires eCommerce businesses to have detailed insights into their supply chains.
How to Solve eCommerce Inventory Management Challenges in 2024 and Beyond
Develop Strong Relationships with Manufacturers
Strong manufacturer relationships are crucial for effective inventory management. Negotiating favourable terms on freight costs, purchase orders, and sampling can set your company up for sustainable growth.
- Visibility: Better relationships help gain insights into lead times and potential backlogs.
- Improved Terms: Strong ties can lead to friendlier purchase terms and cost-sharing for freight.
- Transparency: Regular communication with suppliers enhances visibility into supply chain practices.
If you can't absorb rising shipping costs, discuss cost-sharing with your manufacturer. Relocating manufacturing operations may also be necessary.
"Strong manufacturer relationships are crucial for effective inventory management."
Use Growth Financing to Solve Working Capital Problems
High inventory and shipping costs, coupled with long lead times, necessitate flexible financing options. Traditional funding often comes with high interest and rigid repayment terms, unsuitable for managing these challenges. Growth financing offers a solution, with repayments tied to a percentage of daily sales, easing cash flow strain.
At CapRelease, we offer flexible funding tailored to eCommerce needs, ensuring you can repay based on sales performance.
Leverage Inventory Planning to Stay Ahead of Demand
Effective inventory planning is essential to manage stock levels throughout the year. This approach helps mitigate the impact of supply chain shortages and limited consumer demand insights from paid media.
- Forecasting: Use analytics to predict stock needs, order quantities, and contingency plans.
- Buffer Stock: Maintain sufficient inventory to handle delays and disruptions.
CapRelease provides detailed insights into customer lifetime value, SKU-level data, and best-selling products, aiding in precise inventory planning to maximise ROI.
Improve Product Quality and Lower Inventory Costs with CapRelease
Inventory management challenges are complex and interconnected. To navigate these issues effectively, eCommerce businesses need a cohesive strategy that includes robust financing options, strong supplier relationships, and comprehensive inventory planning.
CapRelease helps founders address these challenges at their root, providing solutions that lower costs and improve access to capital, ensuring sustainable growth in the eCommerce landscape of 2024.
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