Recession. The new buzzword among e-commerce business owners. There was a 50% chance that it could have happened in 2019, based on KPMG principal and chief economist Constance Hunter. This will be the longest economic expansion in U.S. history if it continues beyond June.
In spite of this, all good things have to end. It is important for all of us to begin to prepare for an inevitable shift in the economy, whether we know it will occur or not.
A plan should be in place for both brick-and-mortar and e-commerce businesses to deal with declining revenue and rising costs. For now, we’re interested in what measures can be taken by e-commerce firms to prepare for the recession.
1. Keeping lean requires outsourcing
When there is a recession, marketing often goes out the window. This is understandable. Marketers appear to be seen as a luxury rather than a necessity when consumers are spending.
Creating demand, even when the average consumer is less likely to spend, is also part of great marketing.
However, you shouldn’t give up your marketing budget simply because the economy is down. Keeping margins high requires outsourcing marketing (and things like inventory management and software development) if you want to stay lean.
2. Make sure you’re tracking your overhead and unit economics
There is a temptation to make major hires and capital-intensive investments during economic expansion (for instance, building or purchasing a warehouse).
Regardless of whether you sell goods, your overhead will remain constant. In these difficult economic times, these fixed costs can be crippling.
There will still be a CFO to pay, and the warehouse bills will remain. The first to go under during a recession are companies with bloated overhead.
Strong margins go well with low overhead.
Discover the most economical method of producing, distributing, and marketing your products to maximize your profits.
Selling more products is necessary to stay afloat with thin margins. In an environment of stingy consumers, that’s a tall order.
3. Your brand stands out from the rest if you focus on what makes it unique
Focus on your brand’s most relevant differences and USPs (unique selling points). How do you differentiate yourself from the competition? Is your customer aware of these differences?
Generally, big companies slow down first during recessions. You can gain new customers from those who are migrating away from big brands by communicating how your products outperform those of the big names.
You can maintain your existing customers by doing this as well.
4. Give hesitant consumers value upfront
One thing is true about recessions regardless of the root cause; consumer spending slows down. In spite of the fact that discounting or offering promotional offers during the low-revenue period may seem counterintuitive, free trials and other freemium programs soothe consumers’ concerns and might lead to them opening their wallets.
5. Make sure your SEO and content strategy is solid
Have you ever thought about how we said we create demand? That is exactly what good content does.
You can establish trust within your target demographic by educating and entertaining your audience.
This will allow you to lead as a thought leader in your industry and create moments between normal purchase cycles where your audience is more likely to buy.
Customers can consume your content for free, which leads to organic traffic that is often of high quality.
However, you will need to devote time and effort to creating quality content, so schedule it carefully.
When business is booming, fine-tune your content strategy. In the face of a recession, proving you are a thought leader will be even more challenging, requiring more time and resources.
6. Have a solid email marketing strategy
You can reach customers regardless of where they are in your sales funnel with email marketing. The ROI is extremely high because it’s one of the few marketing channels that is owned end-to-end.
Subscribers must be enticed by more than a catchy subject line.
Make sure you’re delivering the right message to the right users at the right time by automating your campaigns and segmenting your lists as granularly as possible.
When planning your email marketing strategy, it’s best to do so when the seas are calm.
7. You can increase the lifetime value of your customers
Companies and marketers alike are interested in customer lifetime value (CLV). This is the estimated amount of money you will make over the course of time from a customer.
Based on this data, you can calculate how much to spend on customer acquisition (i.e., how much money you should spend on getting someone to buy from you).
Understand your customers’ churn points, and then provide incentives for them to keep buying. Your marketing strategies should focus on weak spots in your funnel to withstand a recession-related drop-offs in customers.
The Key to Success Is Being Prepared
You ought to prepare your company for potential recessions just as you would for an outage like that of Facebook (Meta).
If you implement the steps outlined above before a recession strikes, it can add to your business’ success and resilience far into the future, whether it happens this year, next year or beyond.