Since the financial crisis started, iMerge Advisors has provided business turnarounds consultant services to dozens of clients who survived 2009 and have since been squeaking along. In particular among all the verticals within the internet technology space, E-Commerce companies have found themselves under pressure facing many challenges. Many of these E-commerce businesses that started operations in the early 2000’s saw excellent growth leading up to the financial crisis. During that time based on those YOY growth rates, many online retailers added debt through lines of credit and/or long term loans to further expand growth. At that time the levels of debt to gross sales were at minuscule percentages. In 2010 however, even with the overall growth of online sales, many businesses saw top line revenues remain stagnant. As a result debt as a percentage of gross sales increased and owners were forced to cut expenses resulting in further challenges. In providing complimentary business turnaround services we see a common tactic that E-commerce business owners are attempting which was to further increase adspend above already higher percentages of gross sales from pre crisis levels. Chasing fewer orders at lower conversion rates lead to further squeezing net profit margins. To make matters worse, as consumers continue to be very price sensitive its not always possible to raise prices to try and help the squeeze in net profit margins.
Further challenges include competing with new players with no debt obligations penetrating into low entry barrier sectors in which distributors are willing to drop ship product. In addition, more of these distributors are now selling online direct to consumers.
If you find yourself in a distressed business situation please do not hesitate to contact us and learn more about how our turnaround strategies can help. Our business turnarounds do not involve any upfront fee so we encourage you to contact us early.