Soaring fuel prices predicted to negatively impact online businesses

The talk of the town is the skyrocketing price of fuel. Every day people and businesses alike are both feeling the pinch. Online businesses, are being hit hard, because their business model is based on deliveries and with fuel prices going up and affecting all aspects of their supply chain, online businesses have to strategise to navigate their way through this challenge.

We were already seeing escalating fuel prices brought on by many pandemic-related issues. This was exacerbated by the Russia-Ukraine war crisis and as a result, fuel prices spiked even higher; and unfortunately, analysts are saying that we are unlikely to get any relief soon.

How does fuel affect online businesses?

Fuel prices trickle down to every part of the consumer space and if you are an online retailer, this is going to be a great challenge for your business model going forward.

Regular retailers might push click and collect to their customers, but with online businesses, this is not often possible. Fuel prices are beyond your control and with profit margins already being squeezed, it’s more than likely that you’ll have to pass on the costs to your customers.

Since the start of COVID, the logistics industry has been hit by a flurry of challenges which have resulted in delivery delays. There have been major supply chain issues and staffing shortages. The cost of operation is creeping upwards, amidst other ongoing issues.

If there is a short and sudden spike in fuel prices, it’s usually not a problem, and businesses can absorb these added costs, but we are looking at an extended period of elevated fuel costs, with some experts saying that it will be difficult to revert to former prices.

What can businesses do to curb supply bottlenecks?

Businesses will then be under pressure to pass the costs on to the customers. Here are a few tips for eRetailers on how to manage the rising costs of fuel and keep afloat;

Explore different solutions

There are potentially a few different ways that online businesses can look to cut their fuel costs, but it’s a fine balance between meeting the rising costs and the risk of losing revenue. The most important step is to do something. Doing nothing is harmful for the business.

Seek out third-party logistics providers

For businesses currently managing the pick, pack and ship process themselves, it might be time to outsource this work. While everyone is impacted by the rising cost of fuel, large logistics firms have the capacity through volume to absorb rising costs better than most.

There are efficiencies that can be achieved through sheer volume and scale. Take advantage of logistics providers in the Australia and New Zealand market. You will probably find that once you have outsourced this work, you will never go back to doing it yourself.

Review your geographic market

Online retailers need to think strategically about their market base and how far they are prepared to service certain areas. Remote areas cost more to reach. Review your market to determine whether you need to reduce the physical range of areas you ship to. If you continue to do service these areas, you may need to add extra cost to deliveries.

Consider the frequency of deliveries

Same day or next day delivery is a brilliant service for businesses that have the capacity to undertake this type of service. For businesses that don’t perhaps, a revised frequency and cost structure could be put in place to enable the business to absorb rising shipping costs. Give customers the option to pay more for fast shipping or less for regular shipping.

Green delivery technology

If your customers are located in areas that are in close proximity to the business and they are easy to access via car or ebike, draw on green technology to reduce your business’ reliance on fuel. Pizzas are being delivered on ebikes, why not other types of orders.

Ebikes just need to charged – no fuel required.

Tracking and visibility

Everyone knows that due to the increase in online shopping, deliveries are taking longer, and they understand why, but they just want to know where their package is currently and when they can expect it to arrive. If your chosen delivery provider offers a parcel tracking service, this can go a long way towards alleviating some of the frustration that clients experience.

Fluctuating fuel prices is something that all businesses have to deal with constantly. It’s part of the norm of running a business. As a business owner, you have to be savvy about working the fluctuations into your costs. At the end of the day, it’s about resilience and I’m confident that many businesses have the grit in them to get through these current challenges.

 

 

Jam Pathirana is the CEO and founder of B dynamic, an industry-leading enabler of eRetail and provision of third-party logistics services.