Inflation in the US has skyrocketed, reaching the highest level in the last 40 years. This has led to unrest among American consumers, with spending fluctuating in the ecommerce space. New challenges are on the horizon for e-sellers, and Kenny Tsang, Managing Director of PingPong Payments, touches on how online merchants can prepare for the shift in consumer spending and stay afloat.
Q.: How is US inflation changing consumer spending locally and what should e-sellers do to keep business going?
A.: With US inflation climbing to seven percent, the highest level since 1982, the American shoppers’ appetite for spending has weakened. Because of this, it is expected that competition within US ecommerce markets will grow in the coming months. During this time, American e-sellers will have to redirect their attention towards upcoming consumer trends to keep shoppers engaged with their business.
Ecommerce sellers own libraries of immediate data which can point them in the right direction. Merchants can track the popularity of each product, and what added features shoppers enjoy most, such as promotions and discounts, easy-to-use checkout, or next day delivery. By extracting the necessary insights from this data, American e-sellers can identify the wants and needs of shoppers, and meet customer expectations. In this way, merchants will not only keep their businesses afloat, but tap into new opportunities for growth.
Q.: How can merchants improve their inventories in a time when product prices are rising and consumer spending is plunging?
A.: By the end of this year, the online retail sector is expected to be worth a phenomenal $5.4 trillion, meaning that the potential for expansion is still there and customer demand will not cease to exist. In light of this, merchants should keep their inventories high in popular goods and create a system where timely restocks can be facilitated.
Q.: What is the key factor small and medium sized merchants should take into account when building globally-sourced inventories?
A.: In this day and age, a globally-sourced inventory is what keeps businesses successful. Now, with inflation skyrocketing in the US, it is more important than ever for e-sellers to consider other destinations for acquiring their products at a good market value. This does not only maximize profits, but allows sellers to continually deliver products to shoppers, even during local shortages.
Usually, small and medium sized merchants think that building a globally-sourced inventory is out of their reach, but this is not the case at all. In order to create a flow of products that is up to the mark, ecommerce sellers need to build a strong supply chain and forge advantageous relationships with suppliers from around the world.
To achieve this, e-sellers need to have a cross-border payment strategy which is reliable, fast, and convenient for both parties. Never underestimate the value a sound payment provider can bring to a business. At the moment, the average amount of time it takes to pay a supplier has reached approximately 66 days worldwide. The right payments company can help merchants pay suppliers much quicker, in the suppliers preferred currency, and save money on international exchange fees. This is how e-sellers win their suppliers’ trust and keep profits at the desired level, while also saving time on navigating international transfers. Being able to support the needs of their suppliers also helps to limit additional costs associated with suppliers’ need to accommodate for inflation and FX costs when converting funds from product sales to sellers.
Q.: What is the long-term solution e-sellers should adopt for overcoming loss of revenue within the US e-market?
A.: To ride this wave, ecommerce sellers should consider expanding into international e-markets and growing their global customer base. In China and India, the ecommerce sector is expected to hit $3.3 trillion and $120 billion respectively by 2025. Opportunities for growth also exist in Europe, where the ecommerce sector is forecasted to reach $148.3 million in Germany by 2022, and $119.1 billion in the United Kingdom by 2025. Therefore, e-sellers are missing out on opportunities for expansion by catering their businesses just to the American consumer.
Shoppers outside of the US will engage with businesses which offer a fast and easy check-out process, which means that allowing consumers to pay in their preferred currency is key. Again, the importance of choosing the right payment provider should not be underestimated. Receiving payments in foreign currency can minimize profits, as exchange fees are applied, but with the help of a good vendor, this can be avoided.
The aftermath of US inflation on the ecommerce sector is starting to unfold, and e-sellers should observe upcoming changes to the local market and adapt. As 2022 unfolds, business owners should recognize the disadvantages of heavily relying on local markets and suppliers. By choosing the right payments provider, e-sellers can expand their businesses and create a global digital presence. Having this exposure to the international e-market will only increase profits at a time of financial unrest, and allow merchants to stay ahead of the curve.