Economists are hotly debating whether or not we’re in a recession, but we know one thing for certain: times are tough for online retailers regardless of the academic definition. According to Consensus Economics, the US economy is likely to grow by just 0.2% in the next year, the third lowest since 1989. Moreover, inflation hit 9% in June and only slightly fell to 7.7% in October, way above the Fed’s preferred rate of 2%.
Meanwhile, the consumer price index is very high, largely thanks to high fuel prices as part of the fallout of the Russian invasion of Ukraine; consumer sentiment has been falling all year; and NFIB’s small business optimism index has been below its 48-year average for ten months now.
All of this creates an especially difficult environment for ecommerce businesses. Ecommerce has always been highly competitive, but became even more so after the pandemic-driven booms, which prompted more businesses to move online and new home businesses to emerge. History shows that people spend less during periods of high inflation, compare prices on every item, and cut spending on “extras” when they feel the pinch. Additionally, a smaller pool of customers increases rivalry between sellers.
Yet, there are still ways for ecommerce businesses to succeed during an economic downturn. That said, here are five ways to better position your online store for growth during a recession.
Optimize Cash Flow Management
Cash is the lifeblood of commerce, and ecommerce is no exception. You need liquid funds to order products, finance marketing campaigns, remunerate your employees, pay shipping partners, etc. Even if business is generally good, a few months of poor cash flow could wipe out your company, and an economic downturn means that a few tough months are more likely to occur.
To stay on top of cash flow, track income and expenses with your bank’s tools, and/or your bookkeeping and accounting software. It’s best to automate cash flow calculations to remove the risks of manual error. Run cash flow forecasts more often than usual; for example, every month instead of every quarter or every year, because economic turbulence can change the picture quickly. 8fig, for example, makes it easy to track all your sources of income and expenses on a product-by-product basis, forecast cash flow in easy to understand visualizations, and tap into working capital when you need it, as you need it.
Right-price your products
Pricing is always challenging. If your competitors are selling the same products for significantly less than you are, you’ll lose customers. But if you lower the price too much, you’ll lose profits. You need to find that sweet spot where your prices are similar to or slightly lower than other sellers, without cutting your profit margin too fine.
This requires keeping an eye on your competitors’ pricing while also monitoring changing market conditions and customer demands. You could do this manually, but it’s a lot of work. Price monitoring tools like Prisync automatically track changes in prices and some of them also adjust your prices for you automatically according to preset rules and algorithms.
Enhance your product feed
Your product feed helps you manage multiple storefronts across the internet without dropping a ball or missing out on an opportunity. It helps you discover which channels are most effective for your business, so you can focus on the right ones.
It’s important to keep your product feed up to date and as detailed as possible to win at SEO. Include enriched product descriptions and clear images and videos, and remove items that are low in stock or non-compliant text that could trip up the feed.
Managing a product feed manually requires a lot of time and effort, and there’s still a risk that you’ll miss items that should be removed or that you’ll fall behind on optimizing SEO and metadata texts, which are critical in giving you an edge over your competition. Feed management tools like Feeditor automate this task so you can focus on business strategy.
Upgrade customer support
In a challenging economic climate, it’s vital to hold on to your existing customers. To do so, you’ll have to be quick to respond whenever and however they get in touch. Consumers know that online businesses collect their data, and they expect better service in exchange. They want your customer support agents to know their identity and purchase history, and expect information to be shared so that they don’t have to repeat themselves.
It’s vital to use customer success software that pushes insights about each customer to the agent, so they have the relevant data at their fingertips. Your goal is to enable customers to have one seamless conversation across channels and agents. Tools like HubSpot help share data, prevent duplicate replies from two agents working on the same ticket, and build a self-serve knowledge base. HubSpot includes a chatbot builder for faster response times.
Introduce (or improve) a loyalty program
Another way to keep customers shopping at your online store is to run a loyalty program. Customers love rewards programs, as long as the rules are transparent, and they don’t require them to complete a long and complex registration form.
Your loyalty program doesn’t have to involve big discounts; you could offer exclusive early access to hot items, faster shipping, free returns, and more. Choose which type of program you’ll run, like points-based or tiered; make it smooth for customers to join; and ensure your loyalty program integrates with checkout so they can spend their points or discounts easily. Tools like Smile.io assist you in setting up and managing all aspects of your loyalty program.
Keep profits up even when the economy is down
Your ecommerce business can survive, and even thrive, despite a turbulent economic climate. By finding your pricing sweet spot, keeping an eye on cash flow, and upgrading post-purchase support and rewards, you can attract new customers and retain existing ones, regardless of market conditions. That way, you can set your ecommerce business up for growth even in a recession.