Why small businesses must act now to prevent Black Friday disaster

As we all struggled to navigate the huge challenges of the COVID pandemic last year, some people were fighting uncertainty with entrepreneurship.

In response to the disruption caused by the global pandemic, the number of new small businesses registered in the United Kingdom in the third quarter of 2020 rose 30% compared with 2019 – the largest increase since 2012.

small businesses nowOn top of that, across Europe, eCommerce revenues jumped by 30% to a record $465bn in 2021, a number which is expected to reach almost $570bn by the end of 2025.

Right now, many of these newly-formed eCommerce businesses will be grappling with how best to tailor their activity to meet the demands of the period considered to be the most profitable for retailers and eCommerce businesses – The Golden Quarter. Preparations for this peak seasonal trading period from October to December will already be well underway and planning an effective strategy to maximise all opportunities it presents has become vital.

Christmas has always been an essential part of the retail calendar, but with Halloween, Bonfire Night, Black Friday, Cyber Monday, Singles Day, Christmas (and post-Christmas sales) and New Year’s Day all packed into a single quarter, it is imperative that eCommerce businesses plan ahead. It is particularly important that they secure their inventory to ensure they benefit from market dynamism and increased demand. With consumer confidence reportedly at its highest level since 2008, it feels like, after the huge challenges brought about by the pandemic, there is everything to play for this year.

I am, however, among some of the voices currently sounding a note of caution around hopes for this year’s Golden Quarter. Without wishing to spread panic, 2021’s peak shopping season may end in big disappointment for eCommerce businesses if they don’t secure inventory immediately. Worryingly, doing so, despite the fact it could make or break a business is going to be hugely challenging.

Global supply chains under threat

Many of us will have read alarming news reports detailing the human cost of recent floods in Europe and China. Weeks after the evacuation efforts got underway and governments attempted to mitigate the impact of these devastating extreme weather events, it is becoming clear that shockwaves from these floods will be felt for months, even years to come.

For businesses of all sizes, these sad events have also exacerbated already strained global supply chains and there is a very real risk that shipments will be delayed and inventory will not arrive in time for The Golden Quarter.

Cash flow challenges

Placing inventory orders for the whole of the Golden Quarter now will be a stretch for most new eCommerce businesses because paying for these orders during the traditionally quieter month of September could lead to significant cash flow problems. Borrowing now in order to secure the future success of their business makes sense, but the way legacy banks lend will simply not work for many digital entrepreneurs. Banks are inflexible about their requirements for equity checks and personal guarantees. They will also insist on running credit checks, all while insisting on compounding interest. This puts up a huge amount of barriers for digital-first entrepreneurs who need financing that works as flexibly as they do.

Legacy banking providers are simply not keeping up with current business realities. The pandemic has led to an eCommerce boom but this thriving sector needs more capital than either legacy banks or VCs can, or are willing to, provide.

The huge squeeze on global supply chains that we are seeing currently has exposed the multiple shortcomings of the way businesses – particularly eCommerce businesses are financed. The reality is that legacy banks don’t really understand the needs of digital entrepreneurs, and their dated infrastructure is not up to the standards required to help eCommerce businesses grow. It is no surprise that 82% of business owners say they are unhappy with their bank. Our economy is changing, with digital native businesses contributing an ever-increasing share to overall GDP.

The technology being deployed to power eCommerce businesses should also be used to provide fast and fair funding. We now have the infrastructure in place to make this happen and alternative lenders are already using real-time data provided by their clients across APIs to offer bespoke credit and other novel banking services.

Right now, nothing less than a complete reinvention of fundraising for business founders will do. As recent events have shown, small businesses need fast, agile, effective funding so they can focus on what they do best – growing their businesses. Change cannot come soon enough.

By Asher Ismail co-founder at Uncapped