Inventory planning will be the key to eCommerce success in 2022: Here’s what you need to know
The eCommerce industry has been growing consistently for over two decades. But nothing compares to the growth we've seen over the past couple of years.
Before the pandemic, eCommerce made up around 13.6% of global retail sales. In 2020, that figure rocketed to 18%, and it's predicted to be 19.5% in 2021.
People turned to online shopping when it was the only option, and once you start to buy products online, it's rare that you go back to the high streets — what began as a necessity has now become a habit for millions worldwide.
And I'd bet you couldn't find an expert who will predict eCommerce's foothold on global sales will do anything other than increase over the next decade.
However, with high-speed growth comes many challenges — not just to eCommerce founders but also to the whole global ecosystem, which has been at a breaking point all year. As we look ahead to 2022, one of the best ways to combat these challenges is to improve your inventory planning.
What is inventory planning?
Inventory planning is one of the most challenging parts of running an eCommerce business. It involves forecasting the demand for your products and understanding when to place purchase orders for new inventory. Successful inventory planning and management mean you'll always have enough inventory in stock to meet demand from customers.
New: We just launched Wayflyer Inventory — Source great products, faster. Learn more here.
Why inventory planning matters now more than ever
It's easy to look at the global supply chain issues as a 2021 problem. However, as the clock strikes midnight on December 31st, nothing will change right away.
The past couple of years have seen a perfect storm impacting supply chains, and there isn't an overnight fix.
First, COVID-19 caused factory closures and the majority of ports globally to slow down. With so many lockdowns, restrictions, store closures, and people spending more time at home, everybody turned to online shopping, which created more demand for shipping. And quite simply, there aren't enough boats to match that demand.
With more businesses trying to ship more products across the sea, freight has also become more expensive. This means many small to medium-sized eCommerce businesses are getting priced out by more prominent, established brands paying through the roof for any space they can find on boats.
To illustrate this, data from Drewry shows that the price of a 40ft container has risen from under $2,000 in November 2019 to more than $9,000 in November 2021.
And on top of COVID-19 and shipping issues, some areas of China — including manufacturing areas like Guangdong, Jiangsu, and Zhejiang — are subject to electricity rationing measures. This means that production is slowing down as many factories operate for fewer hours per week. It's also causing increased manufacturing costs as China's coal and electricity prices have risen this year.
So it's likely that however you get your inventory, it's costing you a lot more of your gross margin than it did 18 months ago and also arriving much slower. It's possible to eat these costs and delays for a while, but it's not sustainable.
So what can you do? Here are our best tips for getting ahead of the game…