Since 2023 the economy has been largely stagnant, with all but a few specialist sectors experiencing limited growth. Growing your business in such an economic climate can be stressful and challenging. This series will explore different types of businesses and the considerations they would likely make during the growth phase. With our extensive expertise at Hazlewoods and within the Business Solution Team, we are well-equipped to guide our clients through every stage of their journey, from start-up to sustained success.
As we explore these examples, you may find yourself wondering how these points apply to your business. Irrespective of where you are in your journey, whether growing your client base, seeking capital investment, or looking to acquire a new product, we are here to help and welcome a conversation.
A Local Retail Shop’s Journey to E-Commerce
In today’s digital age, expanding a local retail shop to an e-commerce platform is not just a trend, for many, it is a necessity to maintain competitiveness. The transition opens new opportunities for growth, customer engagement, and revenue streams whilst also creating challenges when it comes to financial reporting, cost control or stock management. To make the leap to the online world, retailers need to consider how to successfully access the wider market whilst monitoring their margins and stock.
Embarking on the e-commerce journey often begins with selling on local platforms like Facebook Marketplace, eBay, and Amazon. These platforms offer a low barrier to entry, allowing sellers to reach a broad audience with minimal upfront costs. The platforms also come with challenges such as intense competition and platform fees which can impact profitability.
As demand increases many businesses opt for an outsourced fulfilment solution such as Fulfilment by Amazon (FBA). With FBA, Amazon takes care of product storage, packing, shipping, and other fulfilment needs for sellers and makes the sellers’ products Prime-eligible. It’s convenient, accessible, and enormously popular. Using such services can reduce the risk of moving online and requires limited capital to get up and running.
With further growth, many opt to establish their own online presence through a dedicated website. Whether you are a brand-new business trying to sell online using platforms or an established retailer looking to sell online; the Business Solutions team will help you to navigate through the competitive world of e-commerce.
Three keyways we can assist you in your journey are:
1. Making sure you are looking at the best Key Performance Indicators for you business:
A client decided to sell via Amazon, believing that the Fulfilment by Amazon (FBA) route would be the easiest way to get started. After a couple of months, sales were buoyant; however, they seemed to be short of cash. We were assisting with the preparation of management accounts on a quarterly basis. At the next quarter-end, one of the key performance indicators (KPIs) we reviewed was the gross profit margin. By including the FBA fees in the cost of sales, it became evident that while the pricing model was profitable when selling directly, it resulted in a gross loss when accounting for the additional costs of selling through FBA. This then allowed them to adjust their business model to return to profitability. They continued to sell through Amazon but were selective about the products that were sold.
2. Efficient Stock Management:
Stock management becomes increasingly important when adding distribution channels to your retail business.
The Business Solution team can help recommend and implement integrated stock systems that sync your online and offline stock to avoid stock discrepancies, integrates your stock system with your accounting solution and allows real-time stock tracking to manage stock levels, predict demand, and reduce overstock or stockouts. Such systems allow you to make informed decisions based on real-time data.
We can also develop key performance indicators (KPIs) to monitor inventory turnover rates, helping you assess how efficiently inventory is being managed and provide detailed analysis on costs ensuring your decisions can be based on reliable data.
3. Managing Operating Cash Flow:
E-commerce can require significant capital investment as well as put strain on your working capital. Good cash flow management practices is an essential component of successful e-commerce businesses.
The Business Solutions team can assist you in creating detailed budgets and financial forecasts to manage cash flow effectively.
Online sales can be unpredictable, with fluctuations based on seasons or trends. Our favoured forecasting tools allow you to create scenarios to plan for these variations helping you maintain a steady cash flow.
Conclusion:
Transitioning from a local retail shop to an e-commerce platform requires careful planning and execution. There will undoubtedly be challenges along the way for your e-commerce selling, however, the rewards of a successful e-commerce shop can be substantial, offering greater control over your offering and customer relationships. Whatever the challenges Hazlewoods’ Business Solutions Team are here to help, every step of the way.
Written by Iwona Noble – Manager in the Business Solutions Team
Are you considering growing your business? Get in touch to find out how we can help you.
