The forecast for 2023 is in and it’s looking a little gloomy. The buzzword? Recession. With most economies in a steady decline and the cost of living soaring, it is very likely a recession will hit in 2023.
This is obviously less than ideal for any eCommerce merchants who rely on people having extra money to spend to be able to survive and grow. In addition to this, rising fuel and utility costs have probably made it more costly for you to run your business.
It doesn’t have to be all doom and gloom. There are a number of steps you can take to prepare for an economic downturn to recession-proof your eCommerce business and thrive during these tough times.
A plan should be in place for both brick-and-mortar and eCommerce businesses to deal with declining revenue and rising costs. But, for now, we're interested in what measures can be taken by eCommerce firms to prepare for the recession.
1. Stopping Advertising to Save Money is Like Stopping Your Watch to Save Time
When there is a recession, marketing often goes out the window. Marketers appear to be seen as a luxury rather than a necessity when consumers spend less.
However, this is not a smart move. Businesses need marketing more than ever when times are tough in order to increase visibility and stand out from their competitors.
While the cost of an in-house team may be out the window, you can look at outsourcing the areas of your marketing strategy that tend to bring the highest ROI.
Find what works best for your business and adapt your marketing strategy and budget accordingly. Work smart, not hard, and don’t focus on what might work, but on proven results.
For example, if your email marketing strategy and digital advertising bring in the most revenue, focus on these areas to allocate your budget where it has the greatest impact.
2. Keep Overheads Low
Your fixed overhead costs can be crippling when sales are down. For example, if you rent a warehouse, this can prove to be a drain on your cash flow if revenue has decreased.
During a recession, you need to work smart and try to keep your overheads low. This may mean moving to smaller premises, slimming down your team and relooking the technology or software you use to find the most affordable options.
Companies with enormous overheads are often the first to tank in a recession because they simply cannot afford to pay all their expenses. And we can see examples every day in the media.
3. Prioritise Products With The Highest ROI
It is not feasible to hold extensive inventories during a recession, especially when usually only a third of the products drive revenue. You instead want to focus on selling products that you know sell well and bring the highest returns.
Start by looking at your margins to find high-ROI products. What are you currently selling products for and what are your costs? Ideally, you want to choose products that have a higher margin so you can make more profit per sale.
Customers' lifetime value is another way to find high-ROI products. This is the total amount of money that a customer spends with your company over the course of their lifetime.
If you sell products with a higher customer lifetime value, then you’ll be able to make more money in the long run even if each individual sale has a lower margin.
You also need to consider the demand for the product. If there’s high demand for a product then chances are good that people will be willing to continue purchasing it, even during a financial crisis. For example, during the 2008 financial crisis (and the pandemic), tupperware sales soared because people were eating out less and cooking more, so needed food storage solutions. Pet care products are another category that continued to grow during the last recession, by a whopping 17%.
4. Embrace Retargeting Ads
It costs 5x more to win new customers than it does to keep your existing customer base engaged. So if you have an established customer base, don’t be afraid of utilising retargeting ads to keep them engaged with your brand.
To entice customers to come back to buy from you again ensure you provide excellent customer service, personalise your messaging and try out a loyalty programme to reward them for shopping with you.
5. Invest in SEO
When the economy is in a downturn, businesses need to be extra careful with their spending. One area that shouldn't be cut is your SEO budget. Investing in a solid SEO strategy can help keep your eCommerce business afloat during tough times.
SEO can help bring organic traffic to your website, which is often more valuable than paid traffic in the long run. It's also a long-term strategy that will continue to benefit your business even after the recession ends.
A good place to start is by focusing on keyword research and identifying the keywords that shoppers are using to search for products like yours. Then, create content around those keywords and optimise your website for them.
Build links to your site from high-quality websites, and monitor your SEO progress over time. By investing in SEO now, you can help ensure your eCommerce business comes out of the recession strong. There are a number of both free and paid SEO tools you can utilise to improve this area of your marketing strategy. Some of our favourite tools include:
SemRush - This well-known SEO tool enables you to run SEO audits, search for keyword suggestions in specific locations, analyse your competitor’s backlinks and keep track of your ranking in Search Engine Results Pages (SERPs). Price-wise, it is more on the expensive side but you’re getting a lot of features for what you’re paying.
Ubersuggest - This SEO tool was created by the SEO guru himself, Neil Patel. It allows you to search for keywords linked to a domain or a niche in geographic locations for very specific keyword suggestions which include useful metrics like impressions and Cost Per Click (CPC). The tool offers a free 7-day trial with affordable plans that can be scaled depending on your needs.
Ahrefs - One of the industry’s gold standard tools and trusted by brands like Pinterest and Shopify, Ahrefs offers everything you need to nail SEO with a fully-loaded toolkit. It enables you to track competitor keywords, audit your existing SEO strategy, uncover top-performing content in your industry, discover exactly what search terms your customers are using and finally, track your SERP position. It is pricier than other tools on the market but well worth the investment.
Keywords Everywhere - This is a free Chrome extension that pulls up related keywords to your typed-in search term with metrics like CPC and search volume in addition to longtail keyword suggestions. For more in-depth data, you can pay for credits
Answer The Public - Also from Neil Patel, Answer The Public lets you type in a topic or brand to the search bar and provides hundreds of search terms people are actually using related to the topic. For example, if you want to know what questions people are asking about winter shoes in the UK, you can use commonly asked questions in your product descriptions or blog posts to attract more organic search traffic.
6. Have A Solid Email Marketing Strategy
You can reach customers regardless of where they are in your sales funnel with email marketing. For example, when you are trying to attract new customers and grow brand awareness, you can create a value-added offer such as sending a free recipe eBook when the customer signs up for your newsletter. A few days later you can send a follow-up email with a coupon code they can use in your store. Now, you have their contact information in your database to send them future offers and nurture the relationship with them to potentially turn them into repeat customers. In addition, the ROI is extremely high because it's one of the few marketing channels that is owned end-to-end.
Besides sending newsletters, you have to make sure your automatic email flows are flawless:
Newsletter Subscriber Flow - should be catchy
Site Abandonment - convince them to return
Browse Abandonment - help gain the visitor's confidence
Cart Abandonment - incentivise them to return to their carts and complete the checkout process
Checkout Abandonment - convince them to follow through with paying for an order
New Customer Flow - teach them about your brand
Repeat Customer - thank them for being part of the crew
Subscribers need to be enticed by more than a catchy subject line so offer value in the form of discount codes and other special offers to get them to click through to your website. Make sure you deliver the right message to the right users at the right time by automating your campaigns and segmenting your lists as granularly as possible.
7. Offer Value
Companies and marketers alike are interested in customer lifetime value (CLV). This is the estimated amount of money you will make over the course of time from a customer. Based on this data, you can calculate how much to spend on customer acquisition (i.e. how much money you should spend on getting someone to buy from you).
Understand your customers' churn points, and then provide incentives for them to keep buying. Your marketing strategies should focus on weak spots in your funnel to withstand a recession-related drop-off in customers. During a recession, people will expect your business to understand their pain points (i.e. rise in costs of living) and help them solve their problems.
Keep in mind that it’s cheaper to retain a customer than to find a new one, so you can leverage this by adding a loyalty program to your website. This is a good right time to start cross-selling products to entice your customers to return or even adding low-priced products to increase the average order value (AOV) and upsell.
For example, you could give away a free sample or gift with purchases or a discount code for their next purchase.
The Key to Success Is Being Prepared!
In order to recession-proof your eCommerce business, the key is to be prepared. This means having a clear understanding of your financial situation and making smart decisions about how to allocate your resources.
It can be helpful to think of your business as a house during a hurricane: you want to make sure that you have the supplies and resources necessary to weather the storm and come out unscathed on the other side.
By taking the necessary steps now, you can ensure that your eCommerce business is prepared for whatever economic conditions may come our way in the years to come.
Whether you need a new Shopify store developed, would like to migrate from another platform to Shopify or need to improve your store’s conversion rates, Vevol Media is here and ready to assist you in recession-proofing your business. Pop an email to firstname.lastname@example.org and let’s get the ball rolling.