5 Ways to Minimize Risk in Your eCommerce Business

You can’t run a business entirely risk-free, but you can take steps to reduce your liabilities and grow with greater confidence. As an ecommerce seller, you might find risk is highest for things like product strategy, inventory management or cash flow — to name a few. Thankfully, there are ways to turn such areas from risk to asset and we’re here to show you how. Keep reading for 5 ways to minimize risk in your ecommerce business.

1. Invest in the right products…

… and be smart when you buy in bulk. At the end of the day, you want your products to sell, so make sure they’re in demand before you invest in them. To see what’s proven and what’s not worth it, look at a product’s selling history across marketplaces. You can get this information from your own sales data, Amazon’s scanner app or a third-party research tool. Getting this information will help you buy — and bulk up — with confidence.

Pro Tip: Once you do buy, place a smaller order than you normally would to test out the product. Once you see that it’s selling, then place a bigger order. 

2. Be smart with inventory 

Now that you have a proven product, you want to maximize your inventory management to avoid these common inventory-related risks: 

  • Ordering too much: If you buy more than is in demand, your cash flow will be tied up in inventory that’s not selling
  • Not ordering enough: If you don’t buy enough, you risk stocking out and losing your selling privileges

A proper inventory management system will help you avoid both of these scenarios so you always have the right amount of product at a given time — plus, you’ll know exactly when and how much to reorder. 

Pro Tip: As part of your inventory management strategy, consider investing in safety stock, which is your “rainy day fund” of inventory that you only use if demand suddenly spikes. It is your buffer against a stockout and will protect your business while you wait for a resupply order.

3. Befriend your suppliers

Building relationships with your suppliers is so important. Doing so will ensure that your inventory orders run smoothly — even those that are last-minute. What’s more, as you build a relationship with them, you increase your negotiating leverage and could get better deals on production costs, payment terms, shipping, etc. So keep an open line of communication with them and treat them like a partner. 

Pro Tip: You may even want to try paying your suppliers early in exchange for even deeper discounts. 

4. Automate and outsource as much as possible

As an ecommerce seller, there is so much to juggle, from order tracking to fulfillment to inventory management and so much more. When managed on your own, you risk making costly errors with your data entry or order fulfillment and ultimately reduce your efficiency by spending all your time stuck in the weeds. And if you sell across multiple marketplaces, you risk even more falling through the cracks. To keep things running smoothly, consider automating and/or outsourcing your everyday tasks with services like Amazon FBA, ChannelAdvisor or Freeeup.

5. Maximize cash flow

A surefire way to minimize risk is to maximize cash flow. When you have a reliable source of cash, you can better control or even prevent a risk as it arises. Demand suddenly spikes? Place a rush inventory order to avoid stocking out. Want to outsource your most time-consuming tasks? Invest in an online tool or virtual assistant to do the work for you. Need to consult a product research tool before buying in bulk? Pay for the service today. 

Our Instant Access product provides ecommerce businesses with daily payouts for marketplaces that pay on terms. Daily cash flow makes it easy to buy inventory when you need it, cover every day expenses and more. Instant Access also helps sellers take a high level of risk out of their businesses by allowing ecommerce sellers to finance their businesses with their own money rather than someone else’s. For example, if something were to go south with your supplier and you couldn’t sell your best-selling product anymore, you could walk away with money in the bank instead of owing money to the bank. 

The more reliable and risk-free your source of cash flow is, the faster you can grow your business free from added liabilities.

Victoria Sullivan
Victoria Sullivan is a Marketing Manager at Payability. She has over eight years of social media, copywriting and marketing experience. Prior to joining the Payability team, Victoria developed social media content and strategies for top technology brands such as Skype and Samsung. She holds a degree in Advertising from Syracuse University’s S.I. Newhouse School of Public Communications. She can often be found in a yoga class or working on her fashion blog.