Supply chain key barrier to SMB e-com

Published on the 04/06/2020 | Written by Heather Wright

Supply chain barriers SMB_IDC

E-com’s up, but can we get that last mile under control?…

IDC’s Louise Francis has a message for New Zealand and Australian small businesses: Think like big business when it comes to ecommerce and the role technology can play – and get an audit of your existing e-com systems underway.

Small businesses across Australia and New Zealand found themselves switching to online selling in the face of Covid-19, in a move Francis, IDC New Zealand country manager, says is likely to have long term impact for the market.

PayPal this week reported that ecommerce boomed in Australia as most businesses closed and Australian’s were told to stay home. The digital payments company says it saw a 54 percent rise in sales processed by small businesses on the PayPal platform during Covid-19 restrictions.

“We’re in a cocoon at the moment and it’s a good opportunity to do that refinement now.”

New Zealand too, has seen ecommerce boom. The Covid-19 Commerce Insight from Emarsys and GoodData shows retail online activity in the past seven days up 81.6 percent year on year – despite most stores now being open again. In Australia retail ecommerce for the past seven days was up 63.5 percent. At its peak in mid-April New Zealand ecommerce sales hit 189 percent.

Internationally, countries have seen online presence increase by 20 to 30 percent, though Francis notes that depends on the country and their current online presence.

She believes there will be some stickiness in the move to e-commerce, but it won’t be completely smooth sailing, with the solutions many small businesses have implemented being short term fixes, and a wider issue of supply chain problems, particularly in the last mile.

That last mile in particular proved problematic, with delivery delays across both Australia and (especially) New Zealand, where deliveries across town could take – and in some cases still are taking – two weeks or more.

“A lot of businesses will have become disillusioned with the whole delivery, and if they were thinking about really building up e-commerce post-Covid they will be thinking it’s only as good as that last mile of delivery.

“They’ll be asking: ‘We can get things out of the door within 24 hours, but how long is it going to be before we can guarantee to our customers again that they’re going to get delivery within 24, 48 hours?’”

Many businesses have relatively linear supply chains at the moment and Francis says IDC is recommending companies do an audit of how systems have performed during Covid-19, identifying any weaknesses, such as the supply chain issues, and putting in place plans to cope should a second wave – or another crisis necessitating lockdown – occur.

“You don’t want to be in the position where you are relying on a singular supply chain model that doesn’t provide diversity or flexibility,” she says, adding: “The couriers that you’re using when times are good are not necessarily going to be the same couriers that you should be using during a lockdown.”

Many smaller courier companies continued with speedy delivers throughout lockdown.

Francis is also calling on courier companies to take ownership of the problem – and fix it.

“This has highlighted weaknesses in the supply system and there are going to be a lot of questions asked about what they’re going to do about it going forward.”

She’s predicting ‘a lot more’ automation, use of robotics and use of blockchain for track and trace.

“While there is probably a lot more track and trace detail internally, the customer visibility is not there, and that’s something customers are going to demand: Greater visibility into what’s happening to their deliveries, because they need to answer to their customers and say this is what is happening,” she says.

“There is going to be more online ordering and e-commerce going forward and if [delivery issues] aren’t fixed quickly it’s going to be a real customer service issues especially for SMBs who are going to be a lot more sensitive to any delays or dissatisfaction from their customers. Coming out of Covid-19, that’s the last thing they need.”

Improved visibility of orders will also be crucial. “We’ve seen that when you don’t have that transparency there is a lot of uncertainty about delivery.

“Small businesses need to start thinking more like big business in how technology is going to play a role in e-commerce going forward.”

She says while SMBs often feel they don’t need technology to succeed – and Francis admits to a certain extent that’s true – if we’re going to grow in the digital economy, even SMBs need to be seriously looking at the likes of automation, robotics, the use of IoT and blockchain.

“Anything that creates transparency in the supply chain is going to be critical, not just for the global opportunity but even for local sales.”

Going to the market(place)
Francis is also predicting the growth in e-commerce will be accompanied by more marketplaces – something already seen globally but yet to make their presence felt as much in the local markets.

“Digital marketplaces are a really effective model in other countries and I think we’ll see a lot more formalisation around those business models to help out SMBs and give them that access to advice and also provide the scale to get good pricing and access to tech generally accessed by large enterprises.”

Real time inventory management is also likely to become an increasing focus, though Francis acknowledges they remain largely a big business solution. “So how do you scale down an inventory management system to meet the needs for a small business?”

Prepping for a brighter future
Francis is encouraging SMBs to start moving now in order to capitalise on the Kiwi and Australian brands – and our respective successes in dealing with Covid-19 – going forward, saying the C19 successes will be part of building our future brands.

“We need to take advantage of that brand awareness in the global economy going forward and e-commerce is going to play a massive role. That’s what is going to draw us out of the recession, or even if we go into a depression.”

While initial e-commerce for small businesses will be focused on the local markets, with the logistics of a world still dealing with the pandemic – and ongoing exorbitant air freight charges – making exports less attractive initially.

However, she says that’s a positive, providing time for SMBs to refine their e-commerce and  their marketing message.

“We’re in a cocoon at the moment and it’s a good opportunity to do that refinement now, when the global economy opens up, local businesses are going to be well prepared to go into that economy after that experimentation.”

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