Managing risks in e-commerce supply chains

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How important is having risk management strategies in place for your e-commerce brand? Well, if you don’t want your company to run at huge losses, most agree that setting up a risk management policy is vital. 

As markets are changing and global geopolitical tensions are rising, the costs of raw materials and energy are increasing. Research from KPMG found that 71% of global companies cite raw materials price hikes as a key concern for 2023, and 92% of business leaders believe rising energy costs impact their brand’s competitiveness. 

The everyday consumer reading global headlines has become very aware of the importance of managing supply chain risks and how many issues could be out of a small business owner’s hands. 

You may feel daunted about planning global risk management strategies as an online seller. But don’t be. There are many benefits to creating and implementing an e-commerce risk management policy. 

This article will explore some of the global supply chain issues you may encounter as a small business owner and how you can best mitigate them to retain your profits. 

What are the risks e-commerce sellers are exposed to?

There are myriad potential risks your e-commerce business could face, particularly if you use dropship fulfillment. These may include, but are certainly not limited to: 

• Demand shocks
• Trade restrictions 
• Operational risks 
• Natural disasters 
• Political instability 
• Changing marketplace regulations 
• Energy shortages
• Raw material shortages 
• Price volatility 
• Cyber attacks 
• Currency fluctuations 
• Acts of Terrorism 
• IP theft 

Some of the most successful entrepreneurs in the world encountered huge setbacks before they made it big. In most cases, taking risks and failing made their businesses more robust and resilient in the long term.  

Therefore, it’s crucial to keep a clear-headed perspective on the levels of risk you could be exposed to as a small business owner. Yes, many things can go wrong, but many can go right if you maintain the right attitude toward risk.  

Being realistic about risk

If, for example, a manufacturing plant you rely on for production faces a sustained power outage, this incident would be entirely out of your hands as an e-commerce seller. 

As an off-shoot of this scenario, you may lose some customers. However, a sustained power cut does not spell the end of your business entirely. 

You can gain these buyers back with the right marketing or a new supplier in a different location. 

The correct way to manage risk to your business is always to have a Plan B. 

To create a Plan B, you must first consider all areas in the supply chain where you have direct input. From there, you can find ways to lower the risk to your business. 

The three P’s of a solid Risk management policy: people, process, partnerships

A good risk management policy for any business considers the people involved, the processes of production, and the partnerships business leaders have in place with other companies. Luckily, even if you are just a lone e-commerce seller, all of these areas are within your control in the broader scale of the global supply chain. 

People

Firstly, you need to consider your output and the hours you put into growing your e-commerce brand. 

• Is there more you could do to lower your risk and grow as a business? 

For instance, as e-commerce competition increases, the cost of advertising is steadily going up. 

Increased advertising costs are a risk to your brand, as they could start to eat into your profit margins. Ask yourself, 

• Do you need to learn more about Google Advertising to ensure minimal PPC costs and bring in the best results? 

Make a list of all the tasks you complete daily, and look for ways to tune up your skills. You should look into online tutorials, invest in automated marketing tools, or even test new advertising platforms to find cost-efficient ways to promote your brand. 

Processes

Next, look at all of the touchpoints your customers use to interact with your brand:

• What tools do you use to build and maintain your brand website? 
• What social media profiles do you run? 
• Do you have any plugins on your website –– like a chatbot? 

All customer touchpoints and more can be optimized to minimize risk. Run tests on things like UX and mobile responsiveness to make sure that you can maintain customer satisfaction in all areas of communication. If anything goes wrong, you need to make sure you have direct channels to let your customers know what is happening and your efforts to fix an issue. 

Partnerships

Examine the links in your supply chain –– from manufacturers to delivery services. 

• Have you built good relationships with these businesses worldwide, and are they holding up their end of the bargain when minimizing their risks? 

• Do you have alternative manufacturing firms you can use if you see increased customer demand in different regions of the world?

• Have you diversified your brand by looking at several marketplaces to host your goods? 

You should also check on your competition, as they could present risk to your business. 

• What are your competitors doing to grab your customers’ attention, and can you outdo them? 

Specific risk management strategies for global supply chains

You can complete a wide range of risk-minimizing strategies simply by remembering the three Ps. Now, we will look into more specific plans for controlling global e-commerce marketplace risks. 

Diversifying your brand

If you only host your products on one niche e-commerce marketplace, you could place your business at more risk. If the site changes the terms and conditions for sellers, you could see your entire income stream wiped out overnight. 

Furthermore, some e-commerce marketplaces are designed and optimized to improve the customer’s experience rather than their sellers’ experience. For instance, a site redesign could see your product pushed further down the on-site search rankings. Competitors within site could also copy your product pictures and descriptions and steal your customers by offering lower prices. 

Global marketplaces offer good merchant services. However, the sites will respond to seller infractions rather than preemptively stopping them. Therefore, it may be wise to diversify your presence online and invest in marketing your brand to make it memorable in its own right. 

Host your brand on at least three platforms, even if you are starting out in business. 

Website

Create a dedicated shopping site powered by a reliable e-commerce SaaS brand such as Shopify or BigCommerce. This central website will be the main hub for managing your orders and inventory –– the first and arguably most crucial link in your supply chain. 

Marketplaces

Next, host on well-known marketplace platforms like eBay or Amazon, as they can help you gain new customers by bringing up your products in their on-site search results. 

In-platform services like Fulfillment by Amazon can also warehouse and ship your products for an additional seller cost. Using multinational firms in your supply chain helps minimize risk to your small business. These companies invest in the latest automated technologies, optimizing to lower supply chain risk –– making it a safe bet for sellers trading in international and domestic markets. 

Social Media

Finally, consider selling through social media marketplaces such as Facebook and Instagram. These sites bring in high traffic, and you can increase your brand’s organic reach by posting engaging content and building your follower count. 

Social media marketplaces also allow you to tag products in photos and provide a link for viewers to click and buy without leaving the platform. 

Brands, large and small, need a social media presence to minimize their business risk –– customers need an easy way to find you and get in touch if they have any questions about your products. 

Performing supplier risk assessments

When selecting partners to manufacture and ship your products, there are many strategies you can implement to get the best results and reduce risks to your supply chain. Firstly, use a reliable wholesaler platform like Alibaba to help you find reputable suppliers worldwide. 

These sites allow e-commerce brand owners to vet potential suppliers through direct communication channels. Here, you can ask to see their compliance documents –– such as business and export licenses. 

Alibaba also provides Trade Assurance, a free transactional protection service that boosts trust between buyers and suppliers. 

Alibaba Trade Assurance specifically offers buyers protection for when:

• As per the agreement with your supplier, your items are not delivered on time.
• Your goods fall short of the quality requirements outlined in the contract you have with your supplier.

You can also look into each supplier’s risk management policies in more detail. The four main areas you should be looking for in a manufacturer’s risk management policy include: 

• Quality: How has the manufacturer outlined its risk assessment policy? Is it thorough enough?
• Alignment: How does the company’s current risk assessment policy align with your unique concerns as a business owner? Do they have adequate provisions to protect their staff, for example? Are they using environmentally sustainable practices?
• Efficiency: Are suppliers updating their operational technologies to improve overall factory efficiency? Keep up-to-date with the latest news in the logistics industry to identify tools that could help them minimize risk in their operations.
• Veracity: Find out how often manufacturers and wholesalers test and improve their risk management strategies. Ask if you can see the results of their tests. 

When satisfied with their responses, you can send them a wholesaler agreement to sign and return. 

Performing product risk assessments

Every e-commerce seller varies in their level of attachment to selling specific products. Some, for instance, are passionate about their business niche and have a set idea of the kinds of goods they want to sell, regardless of consumer trends. On the other hand, some e-commerce sellers are happy to test and change product lines regularly. For both brand owners, using a product research tool can be very beneficial in managing risks associated with changing consumer demand. 

Zik Analytics, for example, has a tool that analyses every product found on AliExpress and gives ratings on its popularity with customers worldwide. You can use this tool to pinpoint reliable sellers and check the worldwide demand for certain types of products. 

Investing in e-commerce protection policies

You may also want to look into small business insurance to minimize risk to your e-commerce website. Services like Cyber Fortress offer business owners compensation for prolonged internet downtime, as incidents like social media site crashes can hugely affect daily advertising spend. 

E-commerce insurance sites use machine learning to calculate your premium costs and site risk profile. Their experts can tell you if your site would benefit from an updated SSL certificate, fewer widgets, or a more secure payment gateway. 

You can also seek insurance policies to protect your goods in transit. Everyone remembers the story of the shipping container lodged in the Suez canal recently. Ensure your business is protected if your products get held up in your logistics cycle.  

Controlling risks associated with international payments

Collecting and making payments in different world currencies also incurs supply chain risk. Payment gateway hacking or fluctuating currency exchange rates can affect your company’s operations ––unless you use a reliable and secure cross-border payment service like Zyla. 

With a Zyla Account, you can open multiple local currency accounts for free, making it easier to pay partners, suppliers and staff. So, whether you’re buying products from overseas or organizing shipping, the Zyla Account’s got you covered. Open an account today and you could be approved, set up and trading internationally in 24 hours. Get started or find out more by calling (855) 797-3366 today.