Ecommerce During Recession: How to Operate in 2023

No matter how much we wish otherwise, an economic downturn is inevitable. 

As the world reels from the impact of a horrendous pandemic, it is also experiencing economic uncertainties, up and down from the stock market, and the repercussions of war.

In such a scenario, every business needs to prepare for the worst and eCommerce is no exception.

Research suggests that nearly 40% of eCommerce brands are concerned about the recession and how it will affect their revenue. 

The following article talks about eCommerce during the recession and tips to overcome some of the common mistakes eCommerce companies make during the same.

Let’s go.

Impact of Recession on Ecommerce

Recession affects every business differently. While some businesses may have lasting effects of the same, others may recover quickly after facing a minor setback. But the question is how do you know if you’re caught in the turmoil? 

1. Decline in Sales

In a recession, consumers become savers. They want to protect themselves from the downturn and hence, avoid spending too much. This has a direct impact on your sales. Your numbers will decline and so will your revenue. 

2. High Competition

Just like you, your competitors are also struggling to keep up with sales. They’d do everything to find more customers and increase their sales. As a result, your competition will increase as there are multiple companies striving to stay afloat.

3. Price Increase

To make up for the lost revenue, a lot of companies adjust their pricing. The result can be an increase in prices for the same product and inflation in the industry. 

9 Survival Tips for eCommerce During Recession

There are always ways to overcome a recession. Here are some tips you can use to lessen its impact or even avoid it altogether if you can see it coming beforehand. 

1. Prepare for Cash Reserves

One of the best ways to shield a business during sluggish sales periods is having cash reserves. The depleting revenue can help with compensating for the basic expenses so that you don’t have to take extreme steps to downsize. 

Having ready cash on hand provides the flexibility to fill gaps with low liquidity.

We know what you're thinking. It’s easier said than done.

While maintaining a consistent amount of cash reserves is difficult, you can always turn towards funding. You can also always choose to save when your business is doing good so that you’re not dependent on an external party for extra cash. 

2. Reduce overhead costs

Another practice you can embrace for eCommerce during a recession is to reduce the overhead cost. You need to check for processes or materials that you can do without, for the time being.

While an online store has low overhead costs as compared to a conventional retail store, it doesn’t mean you don’t have opportunities for cost-cutting. Assess the machinery and tools and keep only what you really need at the moment. There is a chance to buy them back in the future but the top priority, like we discussed above, should be having sufficient liquidity. You can check where you can automate some tasks and even opt for dropshipping for deliveries after calculating the shipping costs. 

For example, check if you need all your micro-fulfilment solutions to be operational or if you can do without some new customer service team that you recently onboarded. Since your only motive is survival in a recession, all the types of equipment and processes that help you scale become secondary.

3. Explore Ways to Provide Added Value

Your customer buying experience can never take a backseat, even when you’re not in the best of times. In fact, this is a time for retrospection of how you can build a brand that sustains through the economic downturn and how you can continue to make it an appealing place to shop from. 

The idea is to create value that is in line with the changing customer preferences. You already know that the customers are looking for cheaper alternatives. If you can provide that, they wouldn’t look for it at other places. 

Look for products that you can afford to offer at a discounted rate. Another strategy you can use is disruption so that customers can learn to have different preferences. Look for ways you can win consumer trust such as providing loyalty points, free shipping, and extended returns, etc. 

4. Optimise your supply chain

Another way of reducing your overhead cost is to look for cost-intensive supply chain processes. Strategising your supply chain efficiency can help you significantly in lowering costs while keeping the delivery experience intact. Some actions you can take are to improve the capacity of your existing warehouses, increase the number of orders you pick in a day, have an optimised level of inventory at all times through demand forecasting, etc. 

You can also consider partnering with other brands to improve the experience. If there are any overlapping efforts, an expert intervention from a logistics provider will help you streamline your efforts and save your costs.

5. Focus on Customer Lifetime Value

Repeat customers matter a lot for eCommerce. Especially for eCommerce during recession. They eliminate the customer acquisition cost and already have loyalty towards your brand. Research also suggests that repeat customers spend 67% more on your store than new customers.

Instead of actively targeting new customers,  focus on improving the customer lifetime value of your existing customers. To do so, find a customer segment that has been most profitable to you. Once you identify them, offer them reward programs or loyalty programs, ask for their feedback, and engage with them on social media. These activities can uplift their purchasing experience and increase their lifetime value.

6. Analyse product demand

You don’t want to have a product directory that no one wants to purchase. Remember this is when customers are not looking to try out new products or make purchases for products they don’t have use for yet. Before stocking up new units, analyse if there is a demand for them in the first place.

How can you do that? 

• Check your product reviews
• Identify bestsellers from the sales frequency of products
• Use Google Trends to see what your competitors are selling, at what price, and if you have an opportunity to offer your customers at a lower price
• Ask for product feedback after sales

Once you check the demand for your products, you can highlight the products that have the ability to sell faster and work on improving slow-selling products.

7. Encourage customer testimonials

As you look for customers to increasingly spend on your brand, you can adopt the age-old tactic of encouraging customer advocacy. Testimonials and advocacy are some of the most powerful types of marketing. Choose the most loyal customers and incentivise them to advocate your brand to interested potential customers.

As an eCommerce brand, you have the power to leverage social media platforms like Instagram and Pinterest to find influencers who can organically promote your brand. You can also run reward programs for customers that share your content and products on social media, review platforms, etc. Encourage your current customers to add a review on the product they purchased. Studies also show that 35% of the customers are less likely to buy if there are no customer reviews available.

While you cannot completely cut down your marketing budget, customer testimonials give you a much-needed push to your paid campaigns. Even on a limited ad budget, you can expect a good ROI if you simultaneously gather authentic reviews. 

8. Increase the Range of Your Products

Another tactic to apply in eCommerce during a recession is increasing your product range. You’re already analysing your demand. Do a competitor gap analysis and assess where to add new products to provide your customers with options. 

Relying on a limited range of products can be very risky considering your sales are declining. In a short span, you have to innovate with your offerings, offer cheaper alternatives, and build your online store to be resilient to changing customer preferences.

You can either try dropshipping or even think of offering complementary products along with your main offering. But before taking a decision, ensure that there is a demand for the new range of products you’re selling.

9. Find Different Suppliers

As you retweak your product offerings and your marketing strategies, you’d also have to look for new suppliers that align with your current strategy. For example, if you’re expanding your product range, chances are your current supplier may or may not have the product you wish to sell. Having new suppliers helps you bring innovation to your portfolio. 

Apart from that, consider the drawbacks of having a single supplier for eCommerce during the recession. With dwindling sales, you cannot have the risk of slow delivery times, high cost per unit, scarcity of products, etc. Your supply chain needs to be error-free and the way to achieve that is through having better-performing vendors and 3PLs that understand your mission and help you navigate through the recession. 

Overcome eCommerce Recession with Optimised Delivery Times

It is challenging to predict the fate of eCommerce during the recession. But the least you can do is build an agile supply chain, save costs, prepare for changing customer preferences, and have measures in place to ensure stable sales. 

Speaking of an agile supply chain, having a trusted partner that can fulfil the delivery expectations is the need of the hour to survive the competition. Contact us at PACK & SEND to know how we can help you revive your delivery flows and meet the exceedingly high delivery expectations of your customers even during an economic downturn.

Image source: CSP Global