Could e-commerce give small businesses protection against inflation?

Small businesses should consider e-commerce as a buffer against inflation to diversify their offering of goods and services and find new income streams. South Africa’s annual inflation rate is now 6.8%, driven largely by fuel, electricity and food price inflation.

The South African Reserve Bank (Sarb) increasing interest rates to 11.75% on Thursday and predictions that this is not the last repo rate hike, means small businesses will bear the brunt. As inflation increases, so does the cost of doing business and it is therefore crucial to adapt business operations to cushion the blow and remain competitive, says Laurian Venter, sales director at OneDayOnly.co.za.

“In addition, the Sarb predicts that headline inflation will only revert to the mid-point of the 3% to 6% target range by the fourth quarter of 2024. This means that small business should look at where they can save money and spend it more wisely to bring down business costs.”

She says investing in e-commerce could therefore offer them a buffer against inflation and while this does come at a cost, it is minimal, especially when compared to the capital outlay needed to run brick and mortar shops.

“For starters, providing an e-commerce offering to complement their physical stores can help small businesses to diversify their revenue stream. Many businesses did this during the pandemic to remove the risks of being dependent on a single income source and lessen the impact of changes in market conditions.”

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Not only more customers, more revenue too

Venter says this is just as necessary now in the face of inflationary pressures and with e-commerce enabling businesses to sell 24 hours a day, seven days a week, this could help to increase revenue too.

“An online offering can also assist companies in reaching and engaging more customers, particularly with 50% of South African consumers currently shopping online. This figure is predicted to grow to 60% by 2027. To further widen the pool of potential customers, a number of small businesses are partnering with established e-tailers to tap into their databases and social media followers.”

This strategy can also help small businesses to reduce their operational costs since the partner company not only hosts the products on their site but also typically handles the marketing and distribution, she says.

“With inflation affecting consumers and their buying power, perhaps one of the most useful benefits of e-commerce is the ability to keep a constant eye on customers’ buying habits and interests. This includes which products are the most popular, the times when people buy the most and what kinds of discounts and deals motivate their purchases.”

Small businesses can use these insights to tailor their offerings to match customer requirements and ensure that they are providing items customers want at prices they can afford.

“Although this is not the ultimate solution for the problem, e-commerce offers small businesses a way to sustainable growth in a dynamic market landscape,” Venter says.