The UK is in recession, and it’s expected to remain in one throughout the whole of 2023. This can have severe consequences for ecommerce businesses.
Especially ones which don’t take necessary precautions and actions to ensure they maintain their current successes and growth.
But it’s not all doom and gloom. There’s decisions and tactics ecommerce brands can take during a recession to survive, and potentially even thrive.
So how might a recession affect you, and what can you do to succeed?
How might the recession impact your business?
A recession is when a country’s GDP falls for two quarters consecutively.
This often results in less jobs, lower wages, and more expensive products.
For ecommerce businesses, this can cause some major negative impacts. During economic downturns, consumer spending reduces and there’s a lower demand for products - particularly non-essential and luxury goods.
This can sometimes lead to even more competition amongst businesses, too, as brands attempt to cut prices to appeal to customers - reducing profit margins for all involved.
But recessions don’t just impact consumer attitudes. Investors and money lenders become more risk averse, and so if you’re looking for additional funding and investment, it may become more difficult.
To survive, or even thrive, during a recession, ecommerce companies need to develop intelligent strategies. Whether that’s through cutting costs, diversifying product ranges, or thinking up new ways of doing things altogether.
What can ecommerce brands do?
It’s not something any ecommerce business wants to do. Cutting costs sometimes means reducing your operational capabilities, which can lead to reduced revenue. But during an economic downturn you may need to consider what sacrifices you can make.
However, there’s also a misconception that cutting back on costs always leads to reduced output and productivity. But that’s not true. In fact, sometimes cutting back can help you focus and improve the services you offer.
For example, let’s say you have a costly supply chain and fulfilment operation. One way of reducing expenses is by optimising that area of your business, so that it runs the same or better at a reduced cost. Perhaps you could get rid of your warehouse altogether and move to a 3PL company which handles everything. Or maybe you could reduce the size of your warehouse, but optimise how you store, pick, and pack products to not need the extra space.
This applies to other areas, too. You could cut take a look at your marketing strategy and decide you’re spending too much on ads which don’t actually result in many conversions.
A full analysis of your business will allow you to identify areas which can be cut back and made more efficient.
Diversify and switch up your stock
People’s spending tends to reduce across all areas during a recession. However, some types of products remain more popular than others.
That’s particularly true for non-essential shopping, as consumers cut back on buying luxury goods or items they would normally ‘treat’ themselves to.
However, 55% of consumers say they spend most of their income during a recession on groceries or food. And almost 40% say they spend the most on essential personal care and hygiene products.
That shows that some ecommerce industries still see plenty of business during economic downturns. And even if your brand isn’t in those industries, you can still capitalise on trends and necessities in your own way.
Diversifying your stock is one of the best ways to do this. Increase the visibility and diversity of your ranges which people need regardless of the state of the economy. For example, fashion brands could look to introduce cheaper, more plain clothing like socks, underwear, and t-shirts. This could encourage people to buy from you when they’re not looking for more expensive designer clothes.
Think about what your brand stands for and sells, and work around that to diversify your stock.
Focus on customer loyalty
When a recession hits, people like to stick with what they know and are comfortable with. They don’t like taking risks. And that’s as true for their ecommerce shopping habits as it is for other areas of their lives.
Shoppers are less likely to take a risk on your brand if you have a competitor who does the same thing, but they’re more familiar with. Which is why focusing on your current customers to build and retain loyalty could be a profitable tactic.
Letting them know how much you value their business is a great way to build your relationship with them, whether that’s through regular emails, special deals, or a dedicated loyalty program.
If you have a loyal customers, you’ll dampen the effects of a recession as they’ll always think of you first. Plus, 77% of customers will recommend a brand they like and have had a good experience with to a friend - so it’s a marketing tactic which attracts as well as retains.
Offer more to your customers
During a recession, people have less money to spend. Which means they appreciate ecommerce businesses who are understanding of that, but retain their generosity.
For example, by still sending out great offers and discounts. During economic downturns, 70% of customers say they shop around more for deals and promotions.
That’s a huge portion of shoppers who could end up flocking to you, if you advertise a sale.
But it doesn’t just have to be discounts and deals. You could take a completely different approach to offering more and run a campaign drawing attention to a social issue, or make a commitment of a certain amount of profits from every order going towards a cause.
Whilst this might not raise any direct revenue, it’s a great way of creating buzz around your brand’s name. Particularly in a recession, which will make your brand stand out as generous and considerate.
Think about things differently
We’ve only just scratched the surface of things your ecommerce business could do to continue to succeed during a recession.
In fact, you might want to try something completely different, and think up a brand new strategy no one’s ever done before.
Whether you want to think outside the box, or implement some of the solutions we’ve talked about, ecommerce brands are always more successful when they have a dedicated agency partner by their side.
At Juno, we provide a system of support, strategy, and insights to help your business grow.
For more information, get in touch for a free consultation and for more advice on how we can help you overturn an economic downturn.