May
28, 2021
7 min read
Opinions expressed by Entrepreneur contributors are their own.
The preference of customers for ecommerce increased exponentially in the last year because of the pandemic caused by the COVID-19 , but even when everything returns relative to normal and physical stores open, the reality is that the preference for this business model will be maintained or will continue to grow over the next few years.
According to a report by the Mexican Association for Online Sales (AMVO), electronic commerce in Mexico reached 316,000 million pesos in 2020, which represented a growth of 81% compared to the previous year.
And according to a study by Euromonitor , the closure of nonessential retail stores led consumers, many for the first time, to buy everything from accessories to home decor online in 2020. Brands and retailers made investments in innovative ways to market their products online. line. By embracing live streaming, as well as fitting rooms and virtual stores, companies from Amazon to Ralph Lauren learned to replicate consumer favorite aspects of in-store shopping – including shopping with friends, going to showcase advice. of sellers – completely online.
As a result, e-commerce growth at the expense of brick-and-mortar commerce will continue even when stores reopen in 2021. Consumers will continue to adopt more and more digital tools, which can now make e-commerce not only more convenient but also more entertaining like shopping in stores. This can present several challenges to entrepreneurs who want to take advantage of the exponential growth that electronic commerce has had and will continue to have.
One of the challenges that companies face to accompany this growth is working capital. As they grow, they need more inventory and in most cases, the working capital is not enough to meet the increase in inventory volume. This is especially accentuated for entrepreneurs who, although they have their own brand, import products from countries such as China. In many cases, there are cycles of up to 4-6 months to obtain the merchandise, but the payment of the same is usually made 30% in advance when an order is included and 70% within 30 days of the order. . This means that to finance growth, investment is multiplied to amounts that cannot be paid with the operation’s own flows or with loans from financial institutions.
Consumers will continue to adopt more and more digital tools / Image: Depositphotos.com
Another difficulty they currently face is putting together a professional e-commerce team to manage inventory across various channels or platforms as their work pace increases. In some cases, entrepreneurs who do not have this expertise turn to expert agencies in the operation of their brands. Although it is a very good solution for specialist product entrepreneurs, this means that they do not develop technical e-commerce capabilities that are increasingly relevant to have them internally.
On the other hand, companies need to become professional in order to handle exponential growth. Entrepreneurs often manage to set up a small business that is dependent on them, but does not have the necessary processes to grow. These processes can be, on the one hand, the implementation of systems to improve the order of products or logistics, as well as financial and accounting systems to understand profitability and cash or working capital needs.
A strategy to grow the brand
The digital field shows today more than ever an opportunity for entrepreneurs to get there, grow and catapult their brand and if they plan so, that others can invest in them and that this can be a more profitable and exponential business model.
A very interesting objective that entrepreneurs can achieve today is to generate exponential growth and then sell their companies’ business exit strategy. Until 1-2 years ago, consumer companies or private equity funds did not see attractive companies that base their sales strategy on marketplaces, but this changed radically. Currently this market is extremely interesting, and entrepreneurs can put together a strategic plan to sell their property to a company, investors or simply to consolidate the brand.
There are companies with extremely solid strategies that partner with successful investors in the sale of branded products digitally, such as Wonder Brands , in order to boost their growth through an exponential scaling process. These investors, being of Latin American origin, focus on the local market and fully understand the dynamism and growth of the Latin digital buyer. They are next-generation organizations that have the latest brands to serve the new group of buyers through different channels and thereby create diversified asset portfolios.
The implementation of the strategy is achieved by injecting in the associated companies a significant investment for inventory and working capital, in addition to providing added value in the professionalization of the company, such as in technology, digital marketing, supply chain and administration. Additionally, it allows the owners of the companies in which it invests to obtain significant economic credits in the short, medium and long term.
This added value gives companies a status even at an international level that is like another triumph for the entrepreneur who developed that idea, since according to AMVO , for online businesses, the reach to international markets such as North America where almost 75% of articles are exported or to Western Europe with more than 10%, the independence of its local market and the increase in sales through buyers in different parts of the world, as well as hard currency earnings, are the main advantages in the market.
These types of alliances generate a very significant capital gain for the brand, since as we have seen, selling a company is one of the greatest recognitions that a founder can achieve. It is considered a success to consolidate a company and get someone to invest in it or even buy it, since that shows that your idea stood out from the others in an environment as complex as eCommerce.
