SMBs are struggling to understand how much product to make and where to store it. Credit: Boumen Japet via Shutterstock.

A new report by software solutions provider Katana Cloud Inventory analyses the current e-commerce performance of Shopify merchants and the challenges they face.

Shopify is a proprietary e-commerce platform for online stores and retail point-of-sale systems.

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The survey of more than 100 small and medium-sized businesses (SMBs) in the US and Canada revealed that 98% of respondents have difficulty aligning inventory and production with changing consumer demand.

Additionally, to offset a significant rise in material costs, 80% of SMBs have had to increase prices and 53% have looked for lower cost materials. In fact, the report revealed that 26% of Shopify merchants were forced to reduce their staff in a last-ditch effort to counteract inflation.

To overcome current challenges, 73% of SMBs are leveraging technology to mitigate cost pressures and increase efficiency.

While 77% of SMBs expect their e-commerce sales to increase by the end of this year, respondents are struggling to understand how much product to make and where to store it.

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According to the report, 66% of SMBs stated that producing and storing inventory is their largest expense. Additionally, 83% of merchants reported significant operational challenges and difficulties keeping inventory, manufacturing, and accounting data synchronised.

Managing outdated business systems (64%) and aligning inventory with demand (60%) were also stated as major challenges. This is alongside the issue of inventory shrink through theft.

When asked about focus areas for 2024, the most common responses were e-commerce transformation (32%) and inventory management (32%), followed closely by technology adoption (30%).

A staggering 94% of SMBs intend to increase their spend on SaaS technology and 97% plan to incorporate AI into their business operations this year.