Looking Ahead: Challenges for Ecommerce Sellers in 2022
As decades go by, the ’20s have gotten off to a rough start, with the pandemic unmistakably altering the course of our economy. The resulting consumer-driven retail demand led to supply chain bottlenecks in the likes of which we’ve never seen. As chaos across logistics nodes like ports and intermodal hubs continue unabated, 2022 might have started exactly as 2021 ended.
For ecommerce sellers, the uncertainties are enormous — and so are the opportunities. In addition to navigating the challenges of tracking and monitoring freight shipments worldwide, digital retailers also need to be mindful of consumer trends, which often change rapidly with little to no notice. Presently, there are three significant challenges that e-commerce sellers will have to keep in mind going forward in 2022.
Freight delays could result in outdated inventory
Freight delays have affected virtually every industry, with online retailers facing issues stocking their inventory on time. This leads many ecommerce sellers to ‘forward buy’ stock earlier than usual in the hope of beating delays.
This could be risky. Stocking early in an e-commerce era where consumer trends are highly transitionary can result in wasted SKUs, as the products could be outdated or have fallen out of consumer favor in that period.
The challenge here is anticipating product demand and making sure sellers are holding onto the right inventory, in the right amount, at the right time.
Navigating a hot warehouse market
Location, location, location. This is true in retail, as it is in real estate. It’s essential to have warehousing space close enough to urban consumption centers to keep logistics costs low and minimize further delays. However, finding warehousing space in the current market environment can be a nightmare.
Take southern California, for example. Warehouse vacancies are at an all-time low of 0.7% for Inland Empire, one of the largest warehouse service providers in the state. Across the country, availability is worse at a mere 3.2% vacancy. This also means that the choicest locations are coming with a ruinous price tag.
With industry titans like Amazon, which has a seemingly limitless amount of purchasing power to buy up available space, many e-commerce companies are getting desperate to find warehouse space, with many of them ranging further and further afield, in an attempt to find available space that is within budget.
“I can’t remember a time when it was ever this difficult for tenants to find and rent space,” says industrial real estate veteran Frederick Regnery, principal at real estate services firm Colliers International. Regnery also added that the space shortage is driving up rents at such a fast pace that it’s difficult to quote current rates.
Given how hot the industrial real-estate market is and the supply chain congestion isn’t going away any time soon, this challenge will likely persist beyond 2022.
A possible drop in retail sales
The third challenge for e-commerce sellers in 2022 could be the hardest to take for some businesses. During the height of the pandemic and post lockdown, the U.S. saw a dramatic rise in the manufacturing purchasing managers’ index (PMI) due to the overall increased spending power of the consumer base. This can be attributed to several factors, including the economic stimulus checks, freezing of student loans, rent and mortgage moratoriums, and other pandemic-related policy changes.
Unfortunately, growth isn’t permanently sustainable and has to plateau or slump at some point. With various government stimulus programs coming to an end and inflation rates at a several-decade high, the overall purchasing power of the average American household will drop to 2017-2019 levels. Simply put, consumers will not be purchasing at the rate and volume that they have been over 2021.
What happens when ecommerce sellers finally receive the excess inventory they had ordered well in advance, only to find consumer spending and demand has plummeted?
While the future may look grim, this is a brilliant opportunity for companies to improve their business. For example, embracing new technology can help increase operational insight and better assess demand-supply volatility through higher levels of visibility. Better visibility will not only help when it comes to ordering the right amount of inventory at the right time but can help to increase efficiency across the board, making it easier to weather the storms to come.