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7 eCommerce sales forecasting mistakes & how to avoid them

By Julian Bonte-Friedheim

Not ensuring that your sales forecasts are accurate can seriously impact sales. Learn to avoid the most common mistakes to ensure uninterrupted growth.

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A positive eCommerce cash flow ensures your business can seize opportunities, avoid running out of money, and thrive in the long run.
What it means to be a cash flow positive eCommerce business
By 8fig team

A positive eCommerce cash flow ensures your business can seize opportunities, avoid running out of money, and thrive in the long run.

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The complete guide to eCommerce cash flow forecasting
By 8fig team

Managing cash flow well is an essential part of eCommerce success. In this piece, we break down how to improve your forecasting.

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Maintaining healthy cash flow is one of the central pillars of running a successful eCommerce business.
The comprehensive guide to cash flow management for eCommerce sellers
By Julian Bonte-Friedheim

A detailed breakdown of the ins and outs of cash flow management. Three eCommerce veterans share their tips for optimizing your store.

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Understand eCommerce cash flow management better with these dos and don’ts. Automate payments, increase cash inflow, seek feedback, and more.
11 dos and don’ts for efficient eCommerce cash flow management
By 8fig team

Understand eCommerce cash flow management better with these dos and don’ts. Automate payments, increase cash inflow, seek feedback, and more.

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What to expect from eCommerce consumer behavior in 2024
By Julian Bonte-Friedheim

Drawing from 8fig internal data and external research, we offer our assessment of the direction eCommerce is going in 2024.The whole world was affected by financial volatility in 2023. As borrowing costs have risen, tech companies everywhere have had to tighten their belts and adapt to this new reality. At 8fig, we analyzed our data from the past two years and will share insights into how online sellers are currently faring. Our goal is to shed light on the industry’s current state while offering predictions about what awaits in 2024.

Table of contents
ECommerce keeps growing while competition increases
ECommerce sales growth in the US
Infographic
Sellers’ earnings drop on Amazon and Shopify
Explaining Shopify’s resilience
The impact of higher interest rates
Consumers are becoming thriftier
ECommerce evolves and keeps growing
Supply chains make or break a business
Leveraging AI
How sellers can adapt
Conclusion
ECommerce keeps growing while competition increases

This report by Statista reflects how impressively resilient the world of eCommerce has been during recent economic uncertainty. Thanks to its dynamism it remains in a position to maintain growth momentum. Online sales in the US are seeing consistent yearly growth. People everywhere continue to do more and more of their shopping online, whether for groceries, clothes, beauty products, or electronics. This means that even at a time when we fear reduced consumer spending, eCommerce sellers can rely on this growing pool of customers to keep buying more online.

After an immense growth bump of 42.7% from 2019 to 2020, in large part due to the COVID-19 pandemic, one can see that yearly growth in the eCommerce industry remains constant while reaching a slower pace. We find this to be an indication that this space is becoming more competitive.

ECommerce sales growth in the US

Sources: eMarketer, Census.gov.

However, the positive performance of online sellers isn’t uniform. ECommerce stores on some platforms have seen sharper growth than others. Looking at the data, we found several interesting patterns when it came to Shopify and Amazon. 8fig’s metrics indicate that the average Amazon seller brings in noticeably higher numbers. Between June 2021 and May 2023, their average monthly earnings were 40% higher than those of Shopify sellers.

There are many ways to interpret these numbers. At first glance, it may seem that Amazon sellers do better, but there are many factors that affect sellers’ average earnings. Central among them is the difference in platform. Amazon hosts hundreds of millions of users, while also having strong competition among sellers. It imposes an 8-15% referral fee, which, with other factors like high market saturation, means tighter profit margins.

Sellers’ earnings drop on Amazon and Shopify

According to our data, eCommerce sellers generally made less money in the first five months of 2023 than in 2022, on average. On Amazon, sellers’ earnings in this period dropped by 22%. Shopify stores saw their average revenue reduced by 7% during this timeframe. Sellers on both platforms were affected by similarly negative sales patterns. However, Shopify merchants were better able to increase their profits after the post-November-December spending drop.

Explaining Shopify’s resilience

While Amazon is the biggest eCommerce marketplace in the US with over 300 million users, Shopify is still in a more developmental, growing phase. It is growing at a faster pace than Amazon, which saw its annual revenue increase by 9.4% between 2021 and 2022, according to a Stock Analysis report. In contrast, Shopify’s annual revenue grew by 21% in the same time frame.

The impact of higher interest rates

Another factor that should be considered in this conversation is the US Federal Reserve’s interest rate hikes. These factors stand out:

Between February 2022 and May 2023, the Fed increased interest rates from 0.08% to 5.06%.
This rise has affected economies and markets across the planet.
ECommerce sellers are particularly vulnerable to higher interest rates since they often rely on external funding to finance their operations.
However, the impact of more expensive lending is likely to be felt further down the line.
Amazon sellers starting out are likely to require less external funding since Amazon’s platform helps them with matters like building an audience, storage, and shipping.

It will be crucial to closely monitor how Amazon and Shopify sellers navigate the change in funding opportunities. This is especially so as the impact of increased interest rates becomes more pronounced as time goes on.

Consumers are becoming thriftier

Currently, online shoppers are drawn by low-priced products, which are often imported from countries where production is cheaper. As a result, online marketplaces targeting these kinds of consumers with affordable prices have experienced noticeable growth. For example, Temu, an eCommerce site that sells discounted products from China, saw its app downloaded over 12 million times within five months of its US launch in September 2022.

The economic situation has pushed consumers to be more thrifty, seeking out better deals, first and foremost. A growing number of people are willing to tolerate long shipping times from abroad, due to the significantly reduced cost. This shift in mentality has been a major factor in Temu’s growth.

Going forward, these developments will provide a clearer picture:

How Amazon responds to this growing trend of thriftier shopping. It boasts fast shipping times and excellent customer service, but noticeably higher prices than China-based online retailers.
Temu is likely to continue growing while taking up more and more of Amazon’s market share. This trend correlates with our data indicating that the average Amazon seller income was relatively low in the first five months of 2023, compared to 2022.
ECommerce evolves and keeps growing

From 2022 to 2027, US eCommerce is set to see average yearly growth of 14.70%, according to this industry forecasting report by Mordor Intelligence. Expanding internet penetration, the growing use of smartphones, and the gravitation of consumers toward online shopping have fuelled this rise. ECommerce sales are set to increase from $470 billion in 2021 to over $560 billion in 2025 in the US.

Many businesses, from large corporations to small and medium-sized enterprises are expanding into eCommerce as it offers noticeably higher profit margins than traditional retail structures. This is because of significantly reduced communication and infrastructure costs. Being able to easily market to large audiences through ads on Google or Facebook makes establishing an eCommerce business very straightforward. The process of scaling an online store is also easier compared to traditional retail. Once an entrepreneur wants to sell their business, doing so is also simpler in eCommerce.

Given this situation in the market, we conclude that:

The current situation keeps us confident in the short- and long-term growth of the online retail space.
Hiccups are bound to happen in this market, but it quickly adapts and keeps returning to consistent growth.
This economic resilience may be partially due to the uniquely dynamic nature of eCommerce. Store owners have to navigate countless factors such as delayed shipments or production shortages, while keeping their supply chains running smoothly.
The COVID-19 pandemic, Russian invasion of Ukraine, and global supply chain delays and shortages in the past few years have bred a generation of sharp and flexible business owners that will continue to innovate and overcome obstacles.
Supply chains make or break a business

An eCommerce supply chain is a complex structure of interconnected stages, including shipping, logistics, storage, marketing, and payment processing. Each part has to be paid for, often significantly before revenue from product sales comes in. Inventory shipments can take months to arrive, so sellers need serious cash reserves to order the inventory needed to avoid stockouts. Without the right financial backing, they can face what is called a ‘cash flow crunch’, being unable to cover the cost of operations. That is prone to happening when sellers need to pay their operating expenses before revenue comes in. This study conducted by CB Insights found that 38% of business startups that fail do so because they ran out of money.

The best response here is to map out one’s supply chain in great detail. It is important to closely monitor the flow of capital and goods, in order to discover inefficiencies and potential risk areas. Identifying patterns in sales performance can be crucial here: Understanding that demand for a particular product spikes in August means that orders need to be sent out by the end of May. Accurately predicting how much capital is needed and at what time can make any business more efficient.

Leveraging AI

New AI tools that can help sellers improve their business emerge every day. Small and medium-sized enterprises, in particular, can benefit from AI services to oversee their operations and optimize their supply chain. AI-generated language and image tools, such as ChatGPT and Midjourney also open the door to a lot of possibilities. Sellers that leverage and master these technologies early on are likely to gain a major advantage to maximize their sales.

How sellers can adapt

Given these uncertain times, eCommerce businesses can take several steps to adapt and protect their sales in 2024:

Focus investment on best-selling products, rather than trying to branch out and take too many chances.
Maximizing the revenue that is already coming in through bigger marketing campaigns.
Staying flexible to be able to quickly react to unforeseen hiccups, like a delayed shipment of inventory.
Holding on to cash reserves at all times.
Order new shipments of inventory via air freight once a disruption does occur. This will ensure minimal disruption to sales even if it reduces profit margins in the short term.
Conclusion

Consumers’ habits have changed in 2023 and sellers need to take note or risk being left behind. The growing inclination towards more affordable options, as evidenced by the rise of Chinese marketplaces like Temu, signals an important turning point for eCommerce businesses. This trend underscores the importance of adaptability and strategic pricing in maintaining market relevance. Shoppers growingly prioritize affordability over fast shipping and customer service, a shift that sellers need to keep in mind.

To stay competitive in 2024, eCommerce businesses should embrace a dual approach: optimizing their operational efficiency and aligning their offerings with consumer expectations. This includes a focus on cost-effective sourcing and efficient supply chain management. Additionally, leveraging emerging technologies, particularly AI, can provide an edge in understanding market trends and consumer preferences. Sellers who adopt this approach can not only survive the current market dynamics but also position themselves for sustained growth in the long term.

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Why fast, free shipping is important for eCommerce businesses
By 8fig team

Offering fast, free shipping can be a game changer for your eCommerce business. Here’s why it matters and how to use it to grow your brand.

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