If you’re hoping to break into e-commerce, there’s plenty of opportunity to make your mark. Retail ecommerce sales are expected to hit $7.4 trillion worldwide by 2025, up from $5.5 trillion this year, according to eMarketer. B2B ecommerce is also a hot area. In the U.S. alone, B2B ecommerce sales are on track to hit $2.4 trillion by 2025, up from $1.6 trillion in 2021, eMarketer found.
Gary Huang, founder of the 7 Figure Seller Summit, says that rising advertising costs are … [+]
I had a chance this week to catch up with veteran e-commerce seller Gary Huang, organizer of the 7 Figure Seller Summit, a free event for the e-commerce community, about the latest trends in e-commerce. “Overall, this year we foresee tremendous opportunity,” says Huang.
Here is an edited version of our conversation.
Elaine Pofeldt: What are the biggest trends in ecommerce this year?
Gary Huang: I feel e-commerce this year is the Wild West. There is a lot of ongoing opportunity with selling on Amazon, given the pandemic. There are new opportunities as well. Amazon is really integrating its offline to their online retail.
Beyond that, we’re seeing a continued surge in selling Amazon businesses. The major players include Thrasio. They have bought over 200 brands. We talk about [businesses selling for] multiples based on EBITDA. Two years ago, a multiple of 2x-3x was considered good. Now we’re seeing multiples between 5x-7x for businesses that were well-positioned to exit this year.
Elaine Pofeldt: How is the supply chain crisis affecting small e-commerce businesses?
Gary Huang: In terms of supply chain, I don’t think there is a silver bullet. Container prices continue to be high. There are ongoing delays at the port. China had a zero-Covid tolerance policy. Any time there are couple of cases, they will shut down an entire port. This is affecting small businesses in ecommerce. It’s very expensive to ship your inventory from overseas. Inventory management and staying in stock is another big issue.
Elaine Pofeldt: What creative solutions are you seeing to the supply chain issues taking place?
Gary Huang: One of the seven figure sellers I’ve spoken with originally sourced from China. They are currently self-manufacturing in the U.S. The bought their neighbor’s barn and tooling equipment and hired a couple of people locally. They took their manufacturing back to the U.S.
Obviously, this doesn’t work for all products but by doing that they’re able to save on all of those shipping costs. They took the delivery time from four months shipping a product from China to only four days. We’re also seeing a lot of interest in nearshoring from places like Mexico. You can circumvent all of the China/US tariffs.
Elaine Pofeldt: The pressures of the covid crisis have been declining in many parts of the world. What are the implications for e-commerce?
Gary Huang: During the pandemic a lot of people bought stuff online for the first time, including many Baby Boomers who previously were afraid to put their credit card into a strange online store. These habits are here to stay.
The Covid crisis has been declining in many parts of the world. We may be shifting back to some kind of normal, but I’m not so sure. Business owners that are serious about their supply chain normally would visit their factories, but it’s not really feasible at this time, so that remains to be seen.
Elaine Pofeldt: With many consumers and businesses using e-commerce more, many people are interested in starting an ecommerce store. What advice would you give them?
Gary Huang: There’s a rise in the cost of advertising, especially in Amazon. Recent reports show that they’re the third largest online advertising company, just behind Google and Facebook. Because of the Amazon terms of service changes recently, Amazon is cracking down hard on sellers who were previously using rebates, almost in ranking manipulation tactics. Amazon is issuing warnings and suspensions to sellers who are using these types of tactics.
We’re seeing a lot of shifts to pay-per-click. Pay-per-click for Amazon is booming. I feel right now it’s become more of a pay to play type industry selling on Amazon. Some advertising agencies I’ve interviewed have shared that ad spend have risen about 23% for Amazon. E-commerce entrepreneurs need to be prepared to budget for advertising expenses.
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