With the looming economic shifts, uncertainties, ups, and downs worldwide, businesses need to be prepared for any surprises. eCommerce owners and small businesses are feeling the pinch of the current economic climate as sales decline.
Many businesses are struggling to maintain performance during this recession. However, there are several ways to protect your eCommerce business during a recession. In this guide, we’ll shed light on the facts about the recession and how it will likely impact the eCommerce industry.
What is a Recession?
A recession is a period of economic decline usually caused by the contraction of business activity, reduced consumer spending, and high unemployment rates. This can significantly affect the global economy. The recession often lasts at least six months or longer and can cause companies to go out of business, as well as reduce consumer demand.
An economic recession is recognized after a country’s domestic gross product declines for two consecutive financial quarters. This may trigger a significant decrease in domestic production, trade, and investment.
Tips for Surviving a Recession
Here are some tips to help eCommerce businesses prepare for the worst and protect their business during recession time:
Reduce Costs While Keeping the Essentials
If your eCommerce business has overhead costs, now is the time to evaluate them and see where you can make cuts. Ask yourself what essential costs will help you stay in business and which are expendable. Consider reducing your staff, cutting back on marketing expenses, or increasing automation for certain tasks.
By reducing your overhead costs, you can easily increase profitability and free up cash to help your business stay afloat during this difficult time. Start by looking at the software and tools you use to run your store. Opt for a cheaper alternative that can help you accomplish the same goals.
You can also reduce the cost of storing and shipping inventory by leveraging a dropshipping model. Find a dropshipping supplier and partner with them to remove the need for inventory storage and shipping. This will help reduce your costs significantly while still helping you meet customer demands.
Improve Your Website Conversion Rate
A great way to increase sales during this difficult time is by optimizing your website for conversions. Look at user experience, design and hosting, mobile optimization, and overall usability. Doing so can help you achieve higher conversion rates and boost your sales despite the current economic climate.
If your pages take a long time to load, consider switching to a better server hosting. Also, look for ways to make your website more user-friendly and attractive so shoppers are inspired to take action on your site. You can also use remarketing tactics to bring back lost customers and encourage them to buy from you again.
Lastly, make sure you optimize your website for mobile devices to ensure a smooth shopping experience on any device. If your eCommerce platform doesn’t offer the speed or flexibility needed for mobile optimization, consider switching to a better platform.
Put More Effort into Your Best Products and Channels
Analyze your sales data to identify which products and channels are doing well. Then, focus on those products and promotions that drive more sales. This will help you maximize profit with minimal effort.
Look for ways to reduce costs associated with promoting these high-performing products or channels. Take advantage of discounts, loyalty programs, and other promotional tactics. Low margin products that are occupying your warehouse space and tying up your capital can be reduced or eliminated.
Try to bundle your low selling products with some of your best selling items to help increase sales and get them off your shelves. You can also add complimentary items to your bundles to drive more sales. This will not only save on warehouse costs but will also free up warehouse space for high-margin products with higher turnover.
Proper Debt Management and New Financing
In tough economic times, paying off debts can be difficult, but it is necessary to help your business survive. When going into a recession, assess the interest rate you’re paying on your debt and consider focusing on the debt with higher interest first.
If you need access to cash for investments, look for new financing options such as short-term loans or asset-based lending. This will help free up your capital and increase liquidity during this difficult time. Having a good debt management plan in place will help your business survive the current market downturn.
Also, consider looking into alternative financing sources such as eCommerce business loans, Amazon lending alternatives, and Shopify; lending alternatives. These can provide the additional cash flow you need during this time of crisis. Just remember to shop around for the best terms and to read all of the fine print.
Strengthen Your Cash Reserves
In addition to taking eCommerce loans and other alternative loans, you should also look for ways to strengthen your cash reserves. This will help you cover expenses, pay employees, and make investments during the crisis.
Look for ways to reduce overhead costs, from reducing office space to eliminating unnecessary marketing expenses or subscriptions. Without sacrificing the quality of service or product offerings, consider cutting back on any non-essential services and reducing salaries where possible.
You can also look for ways to generate additional revenue, such as offering new products or services that cater to the current market needs and trends. Additionally, consider expanding into other channels, such as Amazon or eBay, which are growing in popularity during the crisis.
Expand Your Product Line
Expanding your product line is a great way to increase sales and revenue. Many people are looking for ways to stay entertained during the pandemic, so consider offering products that cater to this need.
This could include video games, electronics, DIY kits, subscription boxes, or anything else that will keep customers engaged. In addition to expanding your product line, create high-quality content for your website and social media channels. This will help you stand out in the crowded online market and draw in more customers.
Also, before adding a product to your store, ensure there’s customer demand for it. Research the market and look at what other similar businesses are doing to ensure you’re making a wise investment. Choose your niche and products carefully, and you’ll be able to maximize profits with minimal effort.
Offer Flexible Payment Solutions
During an economic downturn, it’s important to offer flexible payment options. Consider offering installment plans, subscription services, or loyalty programs. This will give customers more options, making them more likely to make a purchase.
Also, keep an eye on your competitors and see what payment solutions they’re offering. You may find some interesting ideas that you can use for your eCommerce business. Don’t charge your customers extra money on the payment solutions, as this can be off-putting and make them less likely to shop with you.
Concentrate on Customer’s Lifetime Value
Focus on your customer’s lifetime value, not just the immediate sale. This means you want to build relationships with customers and retain them for as long as possible. Offer incentives such as discounts or loyalty programs to keep customers coming back.
By concentrating on customer retention, you’ll create a strong base of repeat customers who will continue buying from you through the crisis and beyond. Some of the tips to increase your customer lifetime value include:
- Finding the right customer segment: By finding the right customer segment and targeting them with your products or services, you’ll be able to increase customer lifetime value.
- Delivering quality products and services: Providing a quality product and service is essential for retaining customers. If you offer something of value, your customers will keep coming back.
- Adding a freebie to the customer’s shopping Cart: Try adding a freebie or discount coupon to the customer’s shopping cart when they’re making a purchase. This will make them feel valued and appreciated and keeps them coming back for more.
- Ask for feedback without interrupting shoppers: When customers are checking out, consider asking for feedback without interrupting their shopping experience. This will give you an opportunity to learn more about your customers and find ways to improve the customer experience.
- Build a customer-friendly loyalty program: A customer-friendly loyalty program will help you reward your customers for their loyalty and encourage them to shop with you in the future. Make sure you focus on highlighting the benefits of the program and make it easy for users to understand and use.
Optimize Your Pricing Strategies
When the economy is in a downturn, it can be tempting to lower your prices to attract more customers. However, this is not always the best strategy and could even end up costing you more in the long run.
Instead of reducing prices, focus on optimizing your pricing strategies. This could involve offering different tiers or packages of products or services. You’ll be able to attract different types of customers, increase customer lifetime value, and maximize profits without sacrificing the quality of your product or service.
Other pricing strategies you need to consider include the following:
- Avoid pricing similar products exactly the same: Do not price similar products exactly the same, as this could lead to customers choosing the cheaper option. Try adjusting prices on certain items to make them more attractive to customers.
- Opt for a price point that ends in 9: Opting for a price point that ends in 9, such as $9.99 or $19.99, is usually seen as more attractive to customers than an even number like $10.00 or $20.00. The psychology behind this is known as the left digit bias, where the customer is more likely to choose the lower price point.
- Offer volume discounts: Offering volume discounts can be a great way to boost sales and attract customers who are looking for value. You can offer discounts on certain items if they’re purchased in bulk or even offer a discount when multiple products are bought together.
- Highlight the price differences virtually: Highlighting the price differences between your products virtually is a great way to encourage customers to make a purchase. This could involve using an interactive pricing tool or displaying featured products in different colors, sizes, and shapes.
By optimizing your pricing strategies, you’ll be able to attract more customers and increase customer lifetime value. You’ll also be able to maximize your profits without sacrificing quality.
Encourage Customer Advocacy
Encouraging customers to become advocates for your business is a great way to increase customer lifetime value. Ask satisfied customers to leave reviews and share their positive experiences with others. You can also offer referral rewards or discounts for customers who refer friends or family members.
Customer service also plays an important role, as you’ll struggle to keep your customers happy if you don’t have a good customer service team. Make sure you invest in training your staff and providing them with the necessary tools to help customers quickly and efficiently.
By investing in customer advocacy and customer service, you’ll be able to increase customer lifetime value, boost sales, and improve your overall reputation as a business. This way, you’ll have more happy customers leaning on you for customer advocacy. Let customers share their experiences through user-generated content by submitting and sharing images and videos of themselves using your products.
Look for Better Suppliers
Your suppliers play a big role in helping you deliver quality products to your customers. That’s why it’s important to find reliable and cost-effective suppliers who can help you keep customer lifetime value high. If you’re dealing with returns, slow shipping, and high cost per unit, your growth will suffer significantly.
When looking for new suppliers, ensure they have a good shipping policy, competitive pricing, and excellent customer service. You should also look into their production capabilities and make sure they can produce enough to meet customer demand.
Dumping that unreliable or expensive supplier for a better performing vendor can significantly maximize your profits to help you navigate an economic recession. You’ll have a trusted partner that will help you keep customer lifetime value high and provide your customers with the best possible experience.
Make sure you measure the performance of your supplier by evaluating factors like delivery times, prices, customer service, and quality. This way, you’ll be able to identify which suppliers are worth investing in and which ones should be avoided.
Conclusion
Economic changes are normal. However, they can bring numerous challenges to businesses of all sizes. It’s how you adapt to these changes that will determine your success or failure. By utilizing the right strategies, you can protect customer lifetime value and take advantage of economic opportunities to grow your business during an economic recession.
Make sure you focus on pricing strategies, volume discounts, customer advocacy, and better suppliers to keep customer lifetime value high and maximize profits. This way, you’ll be able to navigate an economic recession and come out stronger on the other side.
