Small e-commerce businesses have always faced stiff competition from larger, established players. But the past year has been especially challenging, due to volatile economic conditions and a decrease in consumer spending. As a result, small businesses are feeling real pressure to find new opportunities to stay relevant, differentiate themselves from the competition and grow their share of wallet while optimizing their supply chain and sourcing operations.
Here are four ways for small businesses and B2B e-commerce sellers to do all that in today’s market.
1: Go where the growth is by prioritizing essential products
The U.S. consumer index shows that consumer spending has been shrinking over the past year. With inflation and other economic concerns weighing on the minds of consumers, 53% of people say they are holding back on nonessential spending, according to a recent PwC survey. But spending on essentials has not seen as drastic a drop. The same survey found that grocery spending, for instance, is down only 24%. The takeaway is that businesses can maintain or increase their sales by offering products essential to consumers.
Essential products typically include home and pet supplies, baby products, renewable energy products, auto parts, building and construction materials, medical supplies, oil and gas, food and beverages, industry machinery and electric tools and supplies. Nonessential products include consumer electronics, apparel, beauty products, toys, sports and entertainment products, furniture, jewelry and eyewear and accessories. These are seeing a slowdown in demand.
Indeed, as small businesses continue to navigate the challenges posed by the current economic climate, it is becoming increasingly clear that essential products are the key to success. According to data from Alibaba.com, businesses that have focused on essential products have seen an impressive 40.3% rate of active B2B buyer growth, while those sourcing nonessential products have seen just 16.5% growth.
With consumer spending habits shifting and demand for nonessential products shrinking, small businesses must rethink their inventory-management tactics and prioritize in-demand essential products to maximize their profit margins. By doing so, they can capitalize on the current trends in the market and increase their chances of success.
Small businesses must be agile and strategic in their sourcing operations to stay competitive and relevant in the current market. By prioritizing essential products and optimizing their inventory management, they can position themselves for success and thrive in the face of adversity.
2: Implement product-specific strategies
Today’s business owners are grappling with the harsh reality of lower active-buyer growth rates on nonessential products. But there are ways sellers of nonessentials can boost their sales. By focusing on product differentiation, companies can gain a competitive edge and attract more customers. This can be achieved through a variety of tactics, such as customizing products, sourcing high-quality materials, improving packaging and implementing a robust consumer-ratings program to generate interest and drive purchasing decisions.
According to a recent data analysis by Alibaba.com, suppliers with customizable products, such as those in the consumer electronics category, saw a whopping 110% increase in product inquiries compared to their competitors with products that merely met the expected standard. What’s more, in both the apparel and consumer electronics categories, suppliers with higher customer ratings received over 200% more inquiries than those with low ratings.
When it comes to nonessential purchases, even consumers who are constrained by their budget still want a high-end product experience. Customizing your products, sourcing high-quality materials and improving your packaging can all provide the look and feel of higher quality and help you build your reputation.
For business owners in the essentials category, it’s critical to focus on being a cost leader to maintain a competitive advantage. Take the auto parts sector, for example. Businesses with an absolute cost advantage over their peers received 11.7% more inquiries about their products. Similarly, for businesses in the home goods sector, lower average-transaction values corresponded with year-over-year growth. This means that businesses selling essential products should not only compete on individual item price but also offer value to consumers who are purchasing multiple items.
If you’re a small business owner, it’s important to be strategic and adaptable in your approach to sourcing and inventory management. By differentiating your products and focusing on cost leadership, you can stay competitive and relevant in the current market, regardless of whether you sell essential or nonessential products.
3: Work with trusted suppliers and embrace emerging trends
Staying on top of the latest trends and shifting consumer demand is imperative for business owners. One way to do this is by frequently discussing product innovations with suppliers. By working closely with suppliers, businesses can gain valuable insight into emerging trends and get a head start in the development of new products that meet consumer demand.
But it’s critical to find trustworthy suppliers that can provide this level of support, especially for small businesses. Reliable suppliers have a deep understanding of their industry and the changing consumer landscape and they’re able to offer guidance on product development, design and sourcing. They’re also able to provide cost-effective solutions that meet quality standards and delivery deadlines.
Working with the right supplier can provide significant benefits for small businesses. It can help them stay competitive by introducing new and innovative products that resonate with consumers. It can also help them streamline their supply chain and reduce costs by leveraging the expertise and resources of the supplier.
4: Optimize supply chain operations
Small businesses often have limited resources, so it’s crucial for them to make smart sourcing decisions. One way to do this is by identifying service providers that offer the best pricing and terms for their business purchases.
By choosing the right suppliers, small businesses can reduce their costs and increase their profit margins, then invest more in their business to increase growth. Moreover, smart sourcing decisions can help businesses improve their operational efficiency and achieve a competitive edge in the market.
When considering sourcing options, small businesses should evaluate their needs and prioritize their purchases accordingly. They should also consider negotiating with suppliers to get better pricing and terms and look for alternative suppliers that offer similar products or services at lower cost.
Once they find good suppliers, it’s essential for small businesses to establish long-term relationships with them to ensure consistency and reliability in their sourcing. This can help businesses build trust with their suppliers, which can lead to more favorable pricing and terms in the future.
Let’s flip that line from Charles Dickens. It’s the worst of times but it’s also the best of times. A recession may be looming—that’s what we’ve been hearing for the past six months—but a downturn can be a great opportunity for small businesses to distinguish themselves, take market share and thrive in the future by implementing the four strategies outlined above.