The COVID-19 pandemic brought eCommerce to the top but now a new recession tightens monetary policy and weakens global economic growth. With FAANG cutting their overhead expenses and staff, smaller businesses also follow the lead and even (in the worst-case scenario) forever close their doors.
There is no denying that digital brands have been already affected and would further suffer the consequences throughout 2023. Declining sales, struggle to maintain performance, and technological optimization is among the most expected but not the most drastic changes.
In this piece, we’ll dwell on some facts about the current recession in eCommerce and how it will impact the industry, as well as provide recession-proof tips to help you survive the economic decline.
What’s a recession’s impact on eCommerce?
For eCommerce business owners, the economy plays a major role in both consumer habits and operating costs. Could the whole situation be as bad as back in 2008? Probably. Consumer spending is likely to decrease as people have less disposable income and try to delay or, at least, limit excessive purchases.
According to the World Economic Forum, eCommerce started to shrink in 2022, with traffic down by 13% in Q2, as well as conversion rates and revenues. In 2023, this negative trend will prevail. As a result, when a recession is imminent, business owners should plan ahead.
Since most eCommerce businesses compete in the same industry and attempt to retain sales even when consumer spending declines, there would be a sharp increase in competition.
However, there are more positive statistics that eCommerce will continue to grow despite struggling with the recession. And to make your business resilient, you just need to follow a few simple tips.
How to Make Recession Work in Your Favor
When everyone around you is falling and shrinking down, it’s nevertheless a good chance to pull ahead of your competitors in business. The trick is to follow recession-proof tips and keep developing even in face of the harshest challenges.
1. Automate routine tasks and cut overhead costs
The critical analysis of your operational efficiency is the first thing you should do. Having a clear understanding of your overhead expenditures is part of this (essential processes vs. those that can be streamlined or even eliminated).
For example, automatic inventory and product information management makes it easier to work with a wide range of products across numerous channels and minimizes the probability of human errors from manual inputs.
In addition to streamlining customer support and post-sale customer follow-up, outsourcing certain tasks to external agencies or freelancers can also reduce your overhead. In general, automating and streamlining your business processes will help you to top eCommerce during the recession and keep evolving when times are good again.
2. Identify best-selling products and highest-value customers
eCommerce should save wherever possible and give priority to the highest ROIs. Automate product segmentation by using real-time data to see which products are doing best and which are failing. With proper data insights, your sales and advertising approaches can hit more targets when you halt the promotion of clear outsiders.
Recent surveys show that the bulk of revenue is generated by repeat customers. As a result, focus on the clients that are frequent visitors to your website rather than cast a wide net to draw in new ones. This approach will help you review product offerings and pricing models.
When demand is high, stockouts can be avoided by keeping extra inventory. During a recession, however, demand declines and it’s unwise to spend money on excess inventory. Determine the minimum stock level that is viable (with due regard to your recurring customers and their needs), and keep to it.
3. Optimize your technology stack
Another way to cut costs during a recession is to reassess your technology stack. While SaaS eCommerce solutions are great for start-ups, they can ‘choke’ established businesses, especially in times of trouble.
In addition to hassle-free hosting, maintenance, security, and technical support, SaaS also comes with recurring fees and charges a percent off the total revenue. For example, BigCommerce monthly prices can range from $400/mo for stores making under $400,000 to $20,000/mo for enterprise websites.
Shopify Plus is even more expensive, with $2000/mo for stores making between $0 and $800,000 per month. If your store transacts more than $800,000 per month, the platform will charge an additional 0.25%.
When it comes to SaaS eCommerce solutions, you pay for ease of use and rich functionality, but it doesn’t mean that you can’t get the same-level tools for a smaller price or even for free. According to proven cases, open-source solutions have as many powerful tools and features and are more recession resistant.
For example, the nopCommerce open-source eCommerce platform offers enterprise functions (multi-store, B2B pricing catalogs, customer roles, etc.) at no cost at all. The source code provides almost unlimited customization options and helps the platform adapt to new market challenges and technological trends.
What’s more, open source is likely to survive and even grow during economic downturns, thanks to community contributions and innovations that are conditionally free. It works so efficiently and smoothly because the developer community produces only valuable functions and products for end consumers.
4. Adjust pricing models and make better offers
Consumer spending tends to decrease during times of uncertainty. Online shops should come up with fresh ideas for giving customers more immediate value in order to combat the eCommerce recession. Effective pricing strategies can increase profitability and sales more quickly than other growth tactics.
During a low-revenue period, price optimization helps maintain positive margins even when your sales slow down. In addition, there’re common pricing models that still work and you should totally keep them in mind:
- Don’t price similar products exactly the same
- Set a price that ends in 9 (‘charm pricing’)
- Highlight price differences visually and graphically
- Use the buy-one-get-one deal to sell less popular inventory.
5. Invest in SEO and brand PR
Does SEO still work in a recession? In fact, it’s second to none (especially if compared to PPC campaigns). Using targeted marketing is less effective during tough economic times because many people who might want your goods won’t be able to purchase them right away.
On the other hand, SEO is much more cost-effective and will continue to drive new leads to your website, regardless of their immediate readiness to buy. But once purchasing power is back, your product will be way ahead of competitors in the head of potential customers. Thus, content is important as ever, so take the time to research and create high-quality web pages.
Growing the audience on social media is another terrific approach during a recession. Use this tactic to give customers accurate and current information on a range of products in their usual environment. That way, you can still expand your business and attract new clients without squandering money on ineffective customer acquisition strategies.
Make The Most of Hard Economic Times
It is unpredictable to run an online store. Profits are impacted by the ups and downs of the economy, delays and disturbances in the supply chain, and shifting customer purchasing trends. Therefore, it’s a wise idea to have a plan in place so you can keep succeeding even under tough circumstances.
Keeping in mind the eCommerce trends of previous years, being adaptable to changes and flexible with available funds, both small and established businesses can survive the time of trouble with minimum losses (or even valuable gains).