For e-commerce businesses, the pandemic was a time of exponential growth and opportunity. Many e-commerce sellers felt they emerged relatively unscathed and ready to continue riding the wave of growth.
And then came 2022.
As a future-thinking e-commerce business, it’s important you prepare for the current economic slowdown. Let’s discuss what is happening with today’s economic shift and how you can arm your business with the arsenal it needs to thrive through a recession.
How Will Today’s Market Impact Your eCommerce Business?
For the first time since 2018, interest rates in the U.S. were increased in March 2022 by 0.25% in order to combat rising inflation.
As a result, consumer prices are rising on food, gas, and basically everything. This will leave your customers with less discretionary income and they will start to ask themselves “What can I live without?”
According to recent reports, e-commerce sales decreased 1.8% as compared to 1 year ago (while in-store sales grew 10%). Shopify and Amazon both had their slowest revenue growth in Q1 2022, with Amazon’s growth at its slowest pace since 2001.
With the slowing economy and price increases, some of your vendors and suppliers will try to shift some costs to you. For example, Amazon is adding a fuel and inflation surcharge of about 5% to existing FBA fees.
But before you make the knee-jerk decision to pass those charges on to your products, consider it may not be the best way for you to keep your customers coming back during such an uncertain economic
How to Weather the Storm of an Economic Downturn
First, it’s important not to get too defensive too soon. No need to immediately swing into crisis mode by implementing policies that will reduce operating costs, lower headcount and preserve cash. Preventing your company from getting severely hurt or going under is an important goal but also make sure to look for new opportunities that arise. These opportunities could be a gateway to replace lost sales during this unprecedented time. The key to getting your e-commerce business to survive (dare we even say, thrive) through a recession is increasing your cash flow and your bottom line (i.e., your net profit) is possible to do with some careful planning and a certain path forward.
The true not-so-secret formula to increasing your bottom line and keeping you going through a recession? Remember this mantra:
Increase sales and/or decrease costs.
Seems like rather obvious advice on navigating the tumultuous waters of an uncertain economy, but how do you make it happen? Here are some additional tips to ensure that your eCommerce business can increase its recession-proof status.
1. Identify New Sales Channels
If you are purely an online business, look into expanding across more channels. If you primarily sell through your online store, look into marketplaces such as Amazon. eBay, or Rakuten to expand your product reach. If you are a retailer and predominantly offline, there is no better time to look into building and marketing your website than now!
2. Increase Market Share
Recessions are an excellent time for businesses to capture market share. Companies that are burning a large cash flow to operate will struggle to keep their employees and inventory levels–making this a prime time for smaller and more cash-efficient businesses to take over while others are distracted.
Many will slow spending or even hibernate through the recession. Take a look at Lego—they expanded into the global markets by reaching Asia and increasing sales during a 2009 downturn and by the end of the recession, their profits soared by 63%.
3. Invest in Technology
In the face of a recession, you may want to tighten your budget and stay put. However, one of the best ways to prepare for a downturn is to invest in technology and add your existing technology stack. It takes time to research and implement a new system; when the economy is right, you are too busy trying to grow and will not have the necessary time. Take advantage of this time!
So what does this look like for a product-selling business? During a recession, determining how you will maintain and invest in customer loyalty is more important than anything. It may involve working with your team to upgrade your solution. Group FiO’s Customer Loyalty Platform is the answer. A robust, data-driven platform that not only provides a central repository of truth about your clients likes, dislikes, preferred methods of communication, purchase history and behavioral patterns, it also gives you the robust tool you need to keep clients engaged and satisfied. This downturn will give you the time to implement and get familiar with new technology, and when the economy picks up, you will be able to scale much faster.
4. Keep Your Customers Loyal
If you’ve been in business for any length of time, you know that it costs five times as much to acquire new customers as it does to retain existing customers.
Great loyalty programs are not just about rewarding purchases. Think bigger and get creative to maximize customer engagement. For example, allow users to earn bonus points by writing reviews, or creating online challenges, prize wheels, games, etc. Remember that the more points or rewards they earn, the more likely they are to come back and redeem rewards with additional sales. People like the feeling of being rewarded for their actions, so if you build a loyalty program with engaging gamification features, you’re much more likely to participation.
Another way to retain customers is to offer a subscription model. Creating a subscription-based model gets your already happy customers into a recurring buying process so you can benefit from recurring revenue.
Systems like Group FiO’s Customer Loyalty Platform give you both the data and analytic power to establish a loyalty platform and program that will keep clients engaged and faithful during a recession and beyond.
5. Smart Inventory Management
Properly managing your inventory and accounting for your inventory costs is key to keeping your inventory costs down and making sure you don’t lose out on sales from improper inventory planning.
Let’s say you have a customer who reaches your Shopify store and is looking to splurge on a designer scarf from your site. Yes, your customer is aware it’s a recession, but she thinks YOLO, you do you, and all the other motivating words that get her to complete the purchase. Unfortunately, as a result of poor inventory management on your part, the product she wants is out of stock.
When consumers see that a product is out of stock, only 20% wait for that item to be in stock later. The rest are just going to your competitors to buy the product.
Don’t lose out on potential sales because of poor inventory management practices. To learn more about inventory management, schedule a demo of Group FiO’s Field Service Management Platform or our Customer Data Platform. Both of these data-rich, scalable systems can help you deal with inventory control issues and ensure you never have an inventory crisis you can’t manage or an order you can’t fill in a timely manner.
6. Market Your Business Like Your Life Depends On It
Focus on creating a strong brand built on a solid marketing strategy can help you build a connection with your customers. This can help you more easily bounce back from any economic impact on your business.
Creating good content can be an extremely cost-effective way to deliver comparable or even better results than paid advertising in terms of customer acquisition.
If you go with paid advertising, make sure to monitor the marketing spend very closely to ensure you don’t start bleeding out funds through a hole in your sales funnel.
If you’re not sure how to best allocate your marketing budget during an economic downturn, Group FiO’s Managed Marketing Services can help with that. We can help you create a marketing plan that will maximize your exposure to potential clients and help you move them through your sales funnel quickly.