The link between seasonality and cashflow for eCommerce businesses
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The link between seasonality and cashflow for eCommerce businesses

Consumers often change their behaviour and spending habits based on the season and time of year. Whether you run a B2C or B2B company, there will always be certain weeks or months where business seems to be booming, and others where sales are slow.

Ensuring you have planned for these peaks and troughs is what’s vital. For eCommerce companies, doing so means you can make the most of high demand and work through the quieter times with more confidence. It’s about understanding the impact of seasonality and making it work for your business.

What is seasonality in eCommerce?

Seasonality in business simply refers to how the time of year impacts your business and its sales. The true impact of each season will differ based on the industry you operate in, with unique high and low points of the year for each.

When the season works in your favour, higher revenues and footfall can come your way, but at other times of the year, you may see a sudden quiet spell, which could be an annual trend. This can be difficult to manage for any business, but an SME operating with tight margins and low cashflow going through these times can be particularly difficult.

Any regular, annual event or trend which impacts income should be factored into your seasonality planning. Of particular note in the UK for B2C eCommerce retailers are big holidays such as Christmas and Easter, but also events such as the New Year health kick and Spring Bank Holiday for DIY. In B2B, the end of the tax year each April is a time when many companies have the last of their annual budgets to spend before new ones are set. Here’s a list of annual events that might impact your business:

  • New Year’s Eve
  • Chinese New Year
  • Valentine’s Day
  • Mother’s Day
  • New Tax Year
  • Easter
  • Spring Bank Holiday
  • Father’s Day
  • August Bank Holiday
  • Halloween
  • Bonfire Night
  • Black Friday and Cyber Monday
  • Christmas

Identifying the trends in your sector, either by examining your own cashflow history or analysing competitor behaviour is crucial when it comes to planning for busier, or even quieter months.

The impact of Christmas on eCommerce revenue

The so called ‘Golden Quarter’ between October and December includes the busy Christmas period and is typically a time of year when many retailers make the biggest proportion of their annual revenue. It’s one of the most important seasons for B2C eCommerce retailers, with the average UK household spending 29% more money in the run up to the big day than in a typical month.

Black Friday and Cyber Monday driving huge sales in lots of industries, and the trend towards online shopping continues to rise, which is good news for eCommerce retailers. But making sure you have everything in place to capitalise on these big annual events is what matters most.

How can eCommerce companies plan for seasonality?

Ahead of peak periods the most important thing is planning to handle the demand. This involves a close examination of your business as it stands today, and how it might need to adapt.

There are lots of things that owners and managers of eCommerce companies can do to plan effectively for the year. They include:

  • Having the right staff levels and team resource levels in place
  • Planning inventory, stock levels and evaluating supply chains
  • Assessing your company’s financial situation
  • Being prepared to diversify your business offering during slow periods

Understanding seasonal staff needs in eCommerce

Seasonal staff can be a necessity during big holiday events like Christmas. In 2021, Royal Mail planned to hire 20,000 temporary workers, with Amazon also looking for 20,000, Sainsburys recruiting for 22,000 and John Lewis and Sainsburys also hiring several thousand.

As a small business, your numbers are likely to be much smaller, but hiring a handful of seasonal staff to ensure a smooth Golden Quarter will help meet customer expectations and avoid potential issues.

However, with so many retail and eCommerce industries looking for workers at the same time, it can be tough to attract the people you really need. In 2021, lots of recruiters have highlighted issues in the labour market that could impact staffing levels with a lack of candidates. Many companies have been forced to offer more to attract job seekers, with sign-on bonuses, increased hourly wages and benefits packages just a few of the things companies are doing to entice workers.

It’s vital that you factor these increased costs into your seasonality planning to make sure you have the right staff levels and team resources when you need them.

Planning stock levels, inventory and assessing the supply chain

Retailers and wholesalers should work together to determine stock demands throughout the year, arranging for increased levels during a previously identified peak and either dropping deliveries or adapting stocked items to meet different market demands in other seasons.

Another crucial part is understanding what current stock you might have. Are there seasonal products that you have put away that you might be able to promote through your eCommerce site again now? This can be a really effective way of maximising sales but also ensuring that you don’t over commit to new products ahead of anticipated demand.

You will also have to trace your supply chain to its source to truly ensure your demands can be met. For example, if your materials are sourced from overseas, a peak period for you may be a time of severe weather there, impacting logistics and turnaround times. Communicating with suppliers and ensuring you have a range of options at your disposal is always good practice.

Checking your cash flow and exploring finance options

When the rush of a busy period subsides, it can leave eCommerce business owners suddenly facing a substantial financial hole. One of the most important aspects of your planning is to be financially secure for the slower periods. Where possible, building cash reserves to battle through a low patch is advisable, alongside understanding how low demand has been during previous years to give you the reassurance that this isn’t just a one-off blip.

However, for lots of eCommerce retailers, cash flow can be very tight and managing through a quieter period of seasonality can often force some companies to close completely. Making sure you take the time to explore your options to avoid that happening is a key part of running a successful company and borrowing finance to help manage those quieter times can help make sure you’re able to really maximise sales when it’s busy.

For eCommerce retailers, traditional sources of finance are not always the best option, which is why opening the door to alternative financing solutions is a popular route for many. We explored all of this in a recent blog about alternative finance for eCommerce retailers with five key questions you should ask yourself:

  1. Do I need multiple funding solutions to meet the current (and future) needs of my business?
  2. Which funding options offer me flexible repayment options?
  3. What’s the credit impact of applying for this type of loan?
  4. Are there any prepayment penalties associated with this type of funding?
  5. How quickly do I need the funds?

At Capify, the most popular form of alternative finance we offer are Small Business Loans, which are designed to work with the needs of each business. Our Small Business Loan Calculator is a great way to look at your options before you consider making an application.

Diversifying your products and services to limit the impact of seasonality

If you’ve followed the tips in this article, you will have considered your stock and staffing levels, and had a look at your cash flow to see if you may need to lean on some form of finance or business loan to help your business.

Another important aspect of seasonality planning is exploring avenues that could diversify your income sources when you hit the slow sale periods. Some businesses may seek new markets for existing products or look to expand their offering for new customers altogether. Having a niche is always good but being brave and looking at new opportunities to make your online store appeal to more people at different times of the year can boost sales and revenue.

Also consider looking at the channels you sell through. Could you open-up new ones to appeal to a different demographic? Or perhaps create a strategic partnership with another company to cross promote products? Taking the time to consider your options and lessen the impact of dips in sales could make all the difference for your business.

Alternative finance with Capify for eCommerce retailers

If you need assistance managing cash flow, or you’re looking to fund growth, Capify is proud to offer a range of alternative finance options.

You can check your eligibility for a small business loan in as little as 60 seconds with our online loan calculator. All you need is at least 12 months’ trading records; to be processing more than £10,000 a month through your business account and to be based in the UK as a limited company.

There’s lots of great information in our newsroom for eCommerce business owners too, including our guide to 7 free tools that every eCommerce business owner should be using, so make sure you take a look for more information and support to help your business grow.