By the end of 2023, ecommerce will have accounted for 20.8% of the global retail sales market. If the industry keeps to this pace, that will mark a 100% increase over a span of six years, with that number steadily increasing each year.
While these figures indicate that ecommerce is thriving, things have certainly settled down following the pandemic-induced boom. The days of easy expansion and growth have sailed, and rumors of a recession amidst mass tech layoffs are creating a growing uneasiness among business owners. In a welcome back to reality, ecommerce competition is as stiff as ever, and sellers looking to gain an edge will need to be open to trying new things, and perhaps stepping a bit out of their comfort zones.
Roei Yellin is Chief Revenue Officer at 8fig and an ecommerce and supply chain risk expert. With years of industry experience, Yellin sees this time as crucial for ecommerce owners to take measures that will catapult them to new heights. One surefire way of doing this is by forming strategic partnerships.
Yellin’s company 8fig provides ecommerce businesses with supply chain-optimized funding and a range of tools for long-term cash flow management and planning. As its name implies, 8fig’s goal is to help scale ecommerce businesses to eight-figure revenues.
Yellin, through his extensive experience working with hundreds of ecommerce businesses, has seen owners all too often make the same mistake of trying to do it all on their own. “An ecommerce business operating solo is putting itself at risk by not allowing itself to scale as quickly as possible,” he remarks.
The importance of partnerships in ecommerce
Before understanding why partnerships are important, we must first ask – what exactly are partnerships in ecommerce?
“In the ecommerce world, a partner is often a trusted service provider, such as a marketing agency, a freight forwarder, or a capital provider,” Yellin explained in a recent email interview. “Ecommerce businesses are often run by solopreneurs or consist of one or two owner-operators.”
When it comes to operating solo, there are numerous risks, even if it might seem like a crafty way to cut costs and avoid unnecessary bloat. Even the mightiest of solopreneurs could use a little help. Owners will invariably run into areas where they’re out of their element, including scaling up, a goal easier imagined than achieved. Sales do not necessarily translate to profits, and profits do not necessarily translate to a healthy cash flow – one of the most important factors needed to scale any business.
According to Yellin, it’s preferable to seek out specialized assistance from partners, as they can help businesses in areas they might not have been able to achieve on their own. For example,“By working with partners such as third-party providers or growth partners, sellers can get access to better terms on services which would have been much harder to secure if operating alone, such as with freight and shipping”, explains Yellin.
Eventually, the expenses of operating alone will outweigh the costs of collaborating with partners. While self-reliance is a respected attribute, a good business owner cannot afford to make the mistake of sacrificing significant potential revenue by valuing present autonomy over future success.
“An ecommerce business should always utilize partnerships, especially if they are small and running on an owner-operator business model, because even if they are already very successful and have lots of sales, they’ll need to work with partners to accelerate their growth and maintain healthy margins,” advises Yellin. “This requires being lean in their expenses. Since hiring in-house teams is expensive, a smarter and more viable option is to incorporate partners into your strategy.”
Learn from experience
History has shown that partnerships have proven helpful for ecommerce businesses.
Say you are an ecommerce retailer that specializes in outdoor gear. You have seen steady growth, but you notice that timely deliveries are an area that’s holding things back.
To address this concern, you partner with a logistics provider that already has a reputation for excellent delivery services. With this partnership, you can now take advantage of their established network of warehouses, distribution centers, and any useful business relationships they have. You might also gain the ability to share detailed tracking details with your client, a service otherwise expensive if done in-house.
In one of 8fig’s own examples, a husband and wife’s ecommerce business grew their store from $96,000 in revenue to $709,000 in one year after partnering with 8fig. The key to their success was a growth plan that ensured they’d have enough capital to stay in stock and maintain operations, aligned with their supply chain’s needs. The steady maintenance of cash flow enabled them to keep up with inventory all year round, to order well enough in advance without capital issues, which ultimately laid the groundwork for scaling.
Short of somehow finding a constant source of cash by themselves, partnering up was the missing piece holding back their business from flourishing.
In which areas should ecommerce businesses look to form partnerships?
There are several areas in which ecommerce businesses should consider seeking out partnerships. According to Yellin, “marketing agencies, freight and shipping service providers, logistics and fulfillment providers, and growth partners that support cash flow and working capital” are the partners most crucial to seek out.
Let’s dissect this:
Marketing and advertising: There’s only so much marketing a new ecommerce business can do by itself until it gets overwhelming and costly. This is especially applicable for new players who lack the necessary experience and know-how to scale up effective digital marketing strategies.
For example, young ecommerce businesses often overlook the importance of optimizing marketing campaigns for different devices and audiences, lack understanding of how to effectively use paid advertising, have weak product descriptions, and fail to analyze traffic and conversion data as much as they should. For these reasons, investing time and money in an in-house marketing campaign is a risk that often breeds inconsistent returns.
Finding a trusted marketing partner with years of proven experience can drastically boost growth for struggling and thriving businesses alike.
Shipping and logistics: Businesses rely on reputation amongst their customers, and one of the best ways to do this is by ensuring a quality and timely shipping experience. To make this happen, it’s recommended to work with an experienced third-party logistics provider (3PL) to help keep orders and fulfillment on time and to mitigate inventory management issues.
Suppliers and manufacturers: No ecommerce business is complete without a modern supply chain. The COVID-19 pandemic highlighted the significance of stable supply chains. Partnering with suppliers and manufacturers that are experienced in navigating this ever-changing field is crucial to address the dynamic day-to-day reality of ecommerce.
Investment and funding: Finding investment partners is one of the most important steps in the journey of any business. In ecommerce, funding is crucial to ensure that your business has enough capital and cash flow to expand and survive against unexpected challenges and situations. Cash flow is not the same as profit and loss. Rather, it’s the money that moves in and out of your business. While profit is an important end goal for any business, it is cash flow that allows businesses to pay their bills and ultimately scale.
How to identify and select strategic partners
When deciding how to go about your ecommerce business collaborations, you’ll want to assess your potential partners’ previous achievements, examine case studies, and evaluate their contributions to the growth of their existing and past partnerships.
When choosing a partner, “sellers should keep in mind reliability, scalability, and ingenuity. They should always be exploring new options, especially when it comes to marketing”, suggests Yellin.
The process of identifying and selecting strategic partners should happen earlier rather than later.
“An ecommerce business should seek out strategic partnerships from the very beginning, as early as possible. They have so much to do, so the more they can offload to others and create turnkey solutions for, the more they can focus on other areas that need solving.”
While many ecommerce entrepreneurs might prefer a sense of agency and independence in leading their ecommerce businesses, that shouldn’t negate partnering with relevant parties that can boost their growth. The right partnerships have the potential to not only help sustain and scale operations, but to unlock opportunities that might have gone otherwise undetected if flying solo.