May 20, 2024

How to Know When to Expand Your Ecommerce Business

3 min read
Ecommerce Business

The old shark metaphor very much applies when it comes to ecommerce – you need to keep moving forward or die. For small ecommerce ventures, it makes a great deal of sense to proceed carefully at first and consolidate things like steady profits and a healthy cash flow before you start expanding.

However, one problem that many small businesses have is simply that they do not know when the time is right to start expanding, to start diversifying operations, and to put the measures in place to be able to accommodate more traffic and sales.

In fact, this is a fundamental problem for many small ecommerce companies. Expanding too early can certainly be disastrous. So too is not recognizing the point where you should expand, which causes stagnation and the interest in your company beginning to dwindle. It should certainly be noted that catastrophic failure is rarely the reason small ecommerce ventures go under – it is stagnation.

How to Expand

Before getting on to some of the tell-tale signs that it is time to expand your business, it might be worth looking into how you actually go about it. There are a number of options here, all geared towards increasing sales and the breadth of your operations. Here are a few:

Increase Inventory

And diversify it too. An increased inventory means putting more of your products on the market for an expanded customer base to buy. Expanding inventory though comes with challenges, and you need to have the resources for things like outsourced order fulfilment and higher monthly ordering costs in order to make this feasible.

Diversify Operations

This is another way you can expand. Plurawl, a company supplying T-shirts and hoodies for the Latino community in New York, say that expanding into also producing a Hispanic motivational podcast was the means they chose for diversification. There are other examples too – you can start specializing in completely different types of products, and you can even consider opening physical outlets.

Manufacturing Specialized Products

You can either do this in-house or through a deal with a manufacturing company. Starting to produce branded products that only you sell (and which are not simply existing products with your brand name stamped on) is a terrific way to show that your company is making it out of the minor leagues.

When to Expand

So, these are a few things to consider when thinking about how to expand. But how do you know you are ready? Here follows some more signs:

You Can no Longer Handle Fulfilment In-House

When you were a small ecommerce venture, it might have been more than possible to package all your products personally and drive them to the post office. When you find that you have too many orders for this method, it is definitely time to expand and begin to outsource fulfilment.

Your Cash Flow is Stable

Overall profits are one thing, but they can change like the wind. If your cash flow stabilizes though, and you consistently have enough money to meet your monthly financial obligations, then you are on solid ground and expansion could well be possible.

You Regularly Sell Out

If you need a bigger inventory on stand-by to meet demand, then it is clear that not only do you need to expand your inventory, but you are sure to have the profits and revenue to manage the task.

Business expansion is absolutely essential if it is to remain profitable. If you move along at a steady level of profitability, you cannot really do anything to safeguard that unless you start to offer more.

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