Hike in Fuel Prices Present New Challenges for the E-Commerce Industry

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Businesses across the globe were already struggling to survive with the significant rise in the costs of operations and raw materials in the wake of COVID-19; the Ukraine-Russia war has presented another challenge for them, disruption of the fuel supply.

This disruption has caused a substantial rise in the fuel prices in the UK, Europe and the rest of the world. The UK, alone imported almost 10% of its fuel from Russia last year. With that supply gone, the price increase was imminent.

The Challenges Higher Fuel Prices Present

While the business world is trying to cope with the sky-rocketing prices, the e-commerce industry seems to be having a hard time surviving. Why?

1. The Rising Costs of Material

Fuel or crude oil is not only used as a source of energy to power transportation. It is also an integral ingredient for many consumer packaged goods or CPG. From clothing and cosmetics to edibles and cleaning products. Some pharmaceutical products also use certain petroleum extracts as ingredients.

With the fuel prices making a climb, it has become nearly impossible for the vendors to match product prices with their previous shipments. In an attempt to manage their pricing, e-commerce stores are lowering their margins, making it hard for them to sustain themselves in an already cut-throat market nearly impossible.

2. Increasing Shipping and Logistics

It’s not just the production costs that have increased. Thanks to the rising fuel costs, shipping costs have increased as well. However, the major concern of most e-commerce businesses is not the recent increase in the shipping and logistics costs, but whether these costs will remain unchanged for the unforeseeable future or not. 

And, their concern is understandable. While these costs are passed on to the customers, higher shipping costs are a turn-off for many online shoppers. With fuel prices changing as frequently as daily, quoting shipping costs on the website has become risky as well.

3. Sustaining Employment

This one is not specific to the e-commerce industry, it can, very well, start from it though. A majority of e-commerce businesses are small or medium-sized enterprises that employ a handful of people. Nonetheless, the sheer number of e-commerce businesses in the country contributes a significant share of employment opportunities.

As their profit margins go down, sustaining operations at their usual level becomes an obstacle that cannot be bested easily. Chances are when it comes down to keeping the business afloat lots of difficult decisions may be made, including letting go of people. The country could, as a result, witness a spike in its unemployment rate no less intense than what it saw during the peak of the pandemic.

The Solution

Though the situation has not gone bad to the point of no return, the impending doom is inevitable unless the fuel prices see a rapid decline and, once again, become affordable.

But, businesses can not wait that time out in the hopes of that happening anytime soon. What they can do is prepare for what is to come. Here are some simple initiatives that can be taken to make the blow a little softer:

1. Warn the Customers

Customers hate unannounced price increases for products and logistics. If you are planning to change prices because of high production and transportation costs, let your customers know about it and your reasons in advance. 

One way to go about it is to set up a popup on your website to share the information. Another way is to add a post on your social media as an announcement. Finally, you can also include a notice in all the upcoming orders that you dispatch.

2. Limit the Business Geographically

A great thing about e-commerce businesses is that they are not bound by borders. Unfortunately, to ensure their survival until the fuel prices deflate, they may have to. If you ship globally, limit yourself to nationally. If you are a national brand, limit yourself to one city or a few neighbouring ones only.

By limiting your area of service, you can save on shipping and warehousing. This step will help minimise your costs. However, if you feel that it will have a huge negative impact on the turnover, add a value restriction on shipping orders globally and to other cities.

3. Outsource Order Fulfilment

Despite the intensive fuel price hike, outsourcing order fulfilment services to a third party still remain the best option for e-commerce businesses. Yes, the fuel prices will, definitely, impact their pricing as well, but not to the extent that it impacts your business.

Order fulfilment companies get much lower prices for logistics than e-commerce businesses because of the volume they move daily. For that very reason, even if such order fulfilment companies are affected by the fuel prices and raise their service charges, the cost will still be lesser than what your e-commerce business will incur otherwise.

If you are looking for an order fulfilment company in the UK that can help your e-commerce business maintain the quality of its operations and services without breaking its bank, connect with Swift E-commerce.

We have been partnering with small businesses and E-retailers to help them stay connected with their customers 24/7 and with order fulfillment since 2008. 

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