E-Commerce

Delivery bottlenecks: survival tips for online retailers

Fatih-Kağan Taşkoparan

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Supply chain problems have been with us for quite some time now. At the beginning of 2020, the Covid-19 pandemic brought global trade to a virtual standstill. In 2021, the trade war between China and the US, the consequences of Brexit, increasing global instability and a shortage of skilled labor were added to the mix.

From spring 2022, the devastating war in Ukraine, the resurgence of Omikron in China and increasing price pressure have led to further supply bottlenecks in hundreds of industries.

What is the current situation in summer 2022? What consequences will world events have for e-commerce and how can you prepare yourself as an online retailer? Find out in the latest blog post.

What delivery problems are there and why?

At the moment, it is hard to avoid the impression that a perfect storm is brewing for the global economy. The combination of the ongoing Covid pandemic, war in Europe, exploding energy costs and generally rising inflation, a lack of staff and more frequent cyber attacks on companies are causing concern.

In practice, all of this is noticeable in:

  • congested ports worldwide with ship congestion from Shanghai to Rotterdam
  • Trade disruptions due to sanctions to be complied with, among other things
  • too little freight capacity, for example due to loss of ships and crews

The consequences: According to a survey by the Munich ifo Institute In February 2022, more than 76% of all retailers are complaining about supply bottlenecks in Germany. The situation looks particularly bleak in the bicycle, toy, car and furniture retail sectors.

These crisis(es) are just one of many problems for online retail. Another, no less significant, is of a fundamental, structural nature: even without the acute crisis, global supply chains have become increasingly complex in recent years.

Today, numerous means of transportation, service providers and national regulations interlock like cogs along the entire value chain. This in turn means potential bottlenecks and interrupted supply chains as soon as a failure occurs at any point in the value chain. If one link fails, the entire process inevitably grinds to a halt more and more frequently.

What do the delivery problems mean for e-commerce?

Online retail in general is coming under pressure from two sides due to the current situation. On the one hand, business is being lost due to supply bottlenecks. On the other hand, the extremely difficult political climate is causing uncertainty among consumers: many are wavering between restraint and hoarding.

Martin Groß-Albenhausen, Deputy Managing Director of the Bundesverband E-Commerce und Versandhandel Deutschland e.V. (bevh), describes the situation as follows:

"There are companies that are providers or suppliers of urgently needed goods and are therefore experiencing more demand, and those whose product range currently appears to be of little relevance to people. This situation, which is difficult to plan for, is made more difficult by noticeable disruptions in supply and unchecked increases in the cost of numerous raw materials, transportation services, packaging, energy and other operating costs".

Source: bevh, https://www.bevh.org/fileadmin/content/05_presse/Pressemitteilungen_2022/310522_Pra__sentation_Solingen.pdf
Alt textSchematic representation of e-commerce sales in Germany from 01.04.-16.05.2022 (percentage change compared to the same period of the previous year).
CaptionThe scenario has a mixed impact when broken down into individual products. While office supplies still saw double-digit growth in the first half of the second quarter of 2022, the "DIY & Flowers" segment lost over 15%.

Despite these differences, the overall picture is negative. According to figures from the bevh German e-commerce shrank by 6.7% between the beginning of April and mid-May 2022 compared to the same period last year. With one exception: everyday goods such as groceries recorded an increase of 4.1%.

And yet, amidst all the bad news, there is a glimmer of hope for online retail: compared to D2C concepts (direct-to-consumer) and multi-channel providers (i.e. those that rely on retail stores in addition to online stores), online pure players and marketplaces are proving to be much more crisis-proof.

Source: bevh, https://www.bevh.org/fileadmin/content/05_presse/Pressemitteilungen_2022/310522_Pra__sentation_Solingen.pdf
Alt textSchematic representation of e-commerce sales in EUR million (incl. VAT) in Germany, 01.04.-16.05.2022.
CaptionMarketplaces and online pure players are apparently proving to be more resilient than D2C and multichannel retailers in the current crisis situation.

What can retailers do now in view of the supply bottlenecks?

The quintessence of everything I have said in two words: tough market environment! But how do you stay successful?

First tip: Don't panic! This is not the first crisis and it won't be the last.

Second tip: If the store is not running, there are a few timeless evergreen solutions that you should always keep in mind, for example:

  • Unpack the binoculars: In a crisis situation, it's easy to find yourself frantically trying to put out fires. But this is precisely when foresight and forward planning are crucial. First analyze your specific situation carefully and then set the course in good time. For example, you should already be thinking about year-end business. This is the strongest sales phase of the entire year - what goods do you need then, and to what extent can you store or prepare them now so that you are not dependent on suppliers during the peak phase, but can deliver them yourself?
  • Sharpening the profile: In times of falling sales, the knee-jerk reaction of many retailers is to cut marketing expenditure. After all, savings have to be made! That's true. But not at the wrong end. Now is the time to strengthen your brand, get into newsletter or video marketing and position yourself cleverly.
  • Optimize background processes: Everything that is usually left undone can be made up for during the crisis. Example: If you actually know that your IT is not state of the art, and certainly not resilient enough to survive a hacker attack, then you can catch up now. One of the most important aspects in this context is to work on the consistent digitalization of supply chains. Especially in e-commerce, where customers value speed and transparency, real-time traceability and timely reporting of delays are essential.

And the third tip: consider specific measures to counter supply chain bottlenecks. These include:

  • Passing on price increases
  • Looking for new suppliers
  • Increase stock

And if nothing works and you can only hope that your delivery time remains at eight weeks: Honesty is the best policy! If the misery strikes you, transparency and open communication are the order of the day. Explain the situation to your customers and ask for their understanding. You may be surprised when you encounter empathy in the midst of the crisis.

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