An overwhelming majority of online or D2C (Direct-to-consumer) sellers worldwide have been forced to increase their prices. The reason attributed to this is higher procurement cost, caused in turn by the pandemic and Russia-Ukraine war, as per the latest survey by BuyHive, a global B2B sourcing platform.
While 82 per cent of sellers surveyed confirmed that their costs have increased due to higher prices from suppliers, over 72 per cent said they have already increased their prices, or are planning to. Despite the increase in prices, 64 per cent of surveyed sellers also agreed that profit margins have reduced as a result of higher costs. Furthermore, the respondents also noted that their sales have reduced because of the increase in prices.
Over 140 online or D2C sellers from the US, UK, and India participated in this survey. These sellers either retail their products via major e-commerce platforms like Amazon, eBay, Etsy, or Flipkart or run their e-commerce stores through platforms like Shopify.
‘The online and D2C sellers have been badly hit by the increase in procurement costs and are finding it hard to grow their topline or retain their profitability margins. The BuyHive survey also reveals the link between global supply chain disruptions and business risks for D2C brands or online sellers. While many sellers are choosing to change their suppliers because of the ongoing disruptions; it might directly affect their product quality and impact their business in the long run,’ said Minesh Pore, CEO, BuyHive.
Nearly 73 per cent of the surveyed sellers said that they have started looking for other or cheaper suppliers to keep their procurement costs in control. When asked about the reasons for an increase in their procurement prices, 68 pe cent of the sellers blamed Covid-19 related manufacturing disruptions, while 70 per cent reasoned that international freight prices are responsible.
Finding alternative suppliers, however, is proving to be a challenge for most online sellers. Nearly 50 per cent of those surveyed agreed that they are not able to find trustworthy suppliers, while almost 60 per cent lamented that they are not able to find cheaper suppliers. Just over 50 per cent of the sellers agreed that they had concerns or doubts about the quality control at new or alternative suppliers.
‘The disruptions in international travel along with the continuing surge in travel costs have created new problems for small or mid-sized retailers worldwide in finding new or alternate suppliers efficiently. Online platforms like BuyHive are filling in the gap by offering ‘sourcing as a service’ on demand,’ Pore added.
When asked how they found their current suppliers, nearly 70 per cent of surveyed online sellers said they used Google or Bing search engines to find them, while around 49 per cent said they had used B2B e-commerce platforms like Alibaba. Almost 55 per cent of sellers were introduced to their current suppliers through a friend or business associate.
The survey also revealed the significant opportunity for new suppliers to bridge the gap in buyers’ trust and pricing. A little over 47 per cent of sellers said they find their current suppliers trustworthy and reliable, while only half of them agreed they had no problems returning defective goods or units. However, less than 44 per cent of sellers agreed that they found the prices from their current suppliers attractive.
On the impact of the Russia-Ukraine conflict on their business, 55 per cent of sellers said it has increased their costs and reduced margins; while over 49 per cent said it has led to reduced sales. Over 53 per cent of the sellers also agreed that the conflict has caused more difficulty in sourcing goods.