How to Recession Proof Your Ecommerce Business?
2023 is likely to be a year of economic uncertainty, inflation, and recession. With the recent pandemic, online sales have grown exponentially, and so has competition in the ecommerce market.
Businesses in general and ecommerce businesses, in particular, must take steps to protect themselves from financial turbulence, including recession. So how can an ecommerce business recession proof itself?
Before we move to strategies to make your business recession-proof in these challenging times, let’s discuss what’s even more important.
What impact can an economic recession have on an ecommerce business?
A recession can impact an ecommerce business in multiple ways, including:
- Since consumers try to cut back their spending during recessions, ecommerce businesses may experience a decrease in sales and revenue.
- Businesses will likely face slower sales growth when there is a lower demand for goods and services. This can reduce profit margins, impacting the business’s overall profit.
- Retailers must spend more money on marketing and advertising during recessions to attract customers.
- Ecommerce businesses may be forced to reduce their operating costs, which can lead to layoffs and reduced employee morale.
- With decreased consumer spending, businesses may struggle to maintain their inventory levels. This can result in supply shortages and reduced customer satisfaction.
So, in these tough economic times, what strategies can an ecommerce business adopt to stay afloat and grow?
Let’s dive into proven strategies in more detail.
1. Diversify Your Revenue Streams:
In today’s economy, it is essential for businesses to have multiple revenue streams. This can help reduce risk and increase profits by providing more opportunities to generate income from different sources. To diversify your ecommerce business, you should add new products or services (such as subscription-based services or digital products), expand into new markets, and launch affiliate marketing programs.
You can also look into offering value-added services such as design consultation, installation, maintenance, and repair services to increase customer retention and attract new customers. Additionally, you should explore the possibility of adding omnichannel capabilities to your business so that customers can shop directly from your website, mobile apps, and physical stores.
The idea is to make sure that your business can remain competitive in the face of changing economic conditions. 2023 is going to be a year of disruption, and being prepared can help define your success.
2. Take Advantage of Automation:
Next, you want to look at ways to automate key processes in your business. Automation can help streamline operations and reduce costs while enabling you to focus on higher-value tasks. For example, you can use robotic process automation (RPA) to help with order fulfillment and customer service.
For instance, email automation can send personalized messages to customers, helping build stronger relationships with them. Tools like Mail250 can be used to create email sequences that are triggered by customer behavior. This way, you can ensure that customers receive the right message at the right time in the customer lifecycle.
Since Mail250 is ai-powered, it can also help you identify customers at risk of churning and provide them with personalized offers. Plus, it saves you time and money by eliminating the need for manual message creation and sending.
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What segments of your business can be automated?
When it comes to automation, you can start by looking at segments of your business that are labor-intensive or involve manual data entry. Consider automating processes like inventory management, payments, customer service, and order fulfillment.
For instance, Reply.io is a customer automation platform that can help you create automated email campaigns, follow up on leads and engage customers with personalized messages. It can also help you identify customers who are trending towards churn, helping you save time and money.
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The goal is to maximize efficiency while reducing costs. Automation can help you achieve this, freeing up time and resources to focus on more strategic initiatives that can help drive growth.
Integrately is another automation tool that can help you manage your customer data and create workflows based on client behavior. The following are the main features of Integrately:
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3. Maximize Customer Lifetime Value (LTV):
Repeat customers are essential for a successful ecommerce business, and when new customer acquisition is getting harder, maximizing customer lifetime value (LTV) becomes even more important.
Do you know what Amazon does?
Yes, Amazon does an excellent job of maximizing customer lifetime value. It offers a range of loyalty programs such as Prime and rewards customers with points and discounts. These loyalty programs create a sense of exclusivity and make customers feel valued, resulting in more repeat purchases and higher customer LTV.
If you just focus on sales, you might be missing out on bigger opportunities. To increase customer LTV, focus on building relationships with customers. It requires some investment, but it can be a game-changer for your business.
The very first step is to optimize your sales funnel. To do this, you can use tools like Autopilot that can help you segment your customers and create targeted campaigns. These campaigns will be more effective and help you engage customers more strategically.
Another way to maximize customer LTV is by providing personalized offers and discounts. Use data from past purchases and customer feedback to create personalized experiences. Running loyalty programs and offering incentives can also help you increase customer loyalty. This results in more repeat purchases and more revenue. 68% of millennials will not shop from a brand if they don’t offer loyalty programs.
What has contributed to the success of Starbucks?
Starbucks is a great example of maximizing customer lifetime value. It offers loyalty programs such as “My Starbucks Rewards,” giving customers points for every purchase. This encourages customers to return and increases the likelihood of them purchasing more. Starbucks offers personalized discounts and rewards based on past purchases and customer feedback. This helps create a sense of exclusivity that makes customers feel valued, resulting in more repeat purchases and higher customer LTV.
4. Reduce Overhead Costs:
Businesses that are able to reduce their overhead costs are more likely to survive a recession. This means that you need to find ways to cut unnecessary expenses and optimize your processes.
One of the major costs for an ecommerce business is shipping. Consider using a fulfillment service such as ShipBob to reduce your shipping costs. This can help you save time and money as they can handle your entire fulfillment process.
Next, think about the staff you have. You need to identify where you can reduce the number of employees without compromising performance. Automation tools such as Zapier and Integrately can help you reduce the time and effort required to invest in routine tasks. This gives your employees more time to focus on core activities and helps you become more efficient.
Next, consider the technology you’re using. Take a look at the features and pricing of your tools, and see if there are any alternatives that are more cost-effective. You also need to ensure you’re getting the most out of the tools you use. Instead of investing in more tools to get analytics, financial data, and customer data, look for tools that offer these features in one platform. Triple Whale is an excellent example. Triple Whale’s All-in-One ecommerce platform allows you to manage customer data, analytics, and financial data in one place. It saves you time and money, plus you can get insights that can help you optimize your business.
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Hard times typically require extra capital and access to funding. When a recession hits, businesses should have access to working capital. This means having extra cash on hand in case of unexpected interruptions or fluctuations in business income.
No need to worry, as many platforms like Kabbage and Fundera provide access to working capital. They help small business owners get access to the funds they need quickly and easily. Revenue-based funding (RBF) is an excellent option for ecommerce businesses. RBF allows you to access funds based on your revenue and growth potential. When you’re just starting out, you might not have access to traditional loans. RBF gives you the opportunity to get funding without any collateral or a long list of requirements.
Since repayment is based on your revenue, it’s easier to pay back during recessionary times. This means you can focus on running your business and not worry about payments or high-interest rates.
6. Work on Products That are Not Seasonal:
During a recession, businesses are more likely to experience low sales in certain parts of the year. To combat this, you should focus on creating products that don’t have seasonal fluctuations. This way, you can ensure there is a steady stream of income throughout the year.
What it takes to create such products is unique and creative ideas. You need to come up with something that customers will love and want throughout the year. Consider creating a subscription model or offering add-on products that customers can purchase in addition to the main product.
You also need to create products that are trend-proof. Products that will remain relevant in the long run and not be affected by changing trends. This way, you can ensure the longevity of your business even during the toughest times.
For instance, consider creating a product that can be used for multiple purposes or sell a product that consumers can use in many different ways. This way, you can stay ahead of the competition and provide customers with value all year round.
7. Work on Products That are not Performing
Not every product is going to be a hit. Most businesses just focus on the best-selling products and ignore the rest. However, during a recession, you need to focus on all your products if you want to keep your business afloat.
Look at the products that are not performing well and figure out the WHY. See if you can make modifications to improve the performance. This could be anything from changing your pricing structure or improving the product’s quality and packaging.
Following are some of the things you can do to improve the performance of underperforming products:
Create urgency: Urgency is a lifetime motivator and can help you boost sales. Use scarcity, limited-time offers, and discounts to motivate people to purchase now. Since this is a low-performing product, it will only boost once you do something to make it popular.
Utilize copywriting: You can also use powerful words to increase the sales of your product. The trick is to understand what language motivates people to purchase. Using persuasive copywriting can make a big difference.
Leverage the local context: Local context helps people relate to your product and understand how it can help them solve their problems. Leverage the local context, industry trends, and customer stories to make your product more relevant to the market.
Utilize social proof: Social proof is a powerful tool to convince people they should buy your product. When visitors land on site and they see a notification, “This person bought this product, ” it can significantly affect their purchasing decision.
When people see others watching or using your product, they feel more comfortable buying. They don’t feel like they are taking a risk because it must be safe if someone else has done it. You can use tools like FOMO, which allows you to show social proof in a pop-up.
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8. Optimize Pricing:
This is the most important step in recession-proofing your ecommerce business. You need to analyze the market, understand what people are willing to spend, and then create pricing models that are attractive to customers.
According to Harvard Business Review, pricing strategies play a very important role during a recession. It can improve profitability and encourage customers to buy more.
Following are some of the pricing strategies you can implement to increase your profits:
- Choose a price that ends with .99: This is one of the most common pricing strategies used by retailers. It is known to be effective in driving up sales. You can use this technique to your advantage.
- Offer bundles: Offering product bundles is a great way to increase profits and incentivize customers to buy more. You can create packages of multiple products that offer great value and attract customers.
- BOGO: Buy one get one (BOGO) offers are very popular and can help you boost sales. This pricing strategy encourages customers to buy more without feeling like they are overspending. Some other offers include: Buy one 50% off, Buy 3 get 1 free, and so on.
- Group discounts: Group discounts can also help you increase sales and conversions. By offering a discount to customers who purchase in bulk, you can generate more revenue.
- Promo codes: Promo codes are a great way to boost sales. They can help you draw more customers and incentivize them to spend more. You can offer discounts, free shipping, and loyalty rewards to customers who use your promo codes.
9. Improve the Conversion Design of the Website:
When business is slowing down, it is the right time to review and improve your website’s design. Your goal should be to increase the conversion rate by making it easier for customers to find what they are looking for.
The following are the Conversion design elements that must be adjusted on above the fold section of the website:
AIDA principles: AIDA stands for Attention, Interest, Desire, and Action. You need to make sure your website follows the AIDA principles. Your web pages should capture users’ attention, provide them with the information they need, create a desire to purchase the product, and motivate them to take action.
Social proof: As mentioned earlier, social proof is a powerful tool to increase sales. Make sure you have testimonials, reviews, and customer stories visible on your website to encourage people to make a purchase.
CTA Buttons: Call-to-action (CTA) buttons are essential for successful conversion. Your CTA buttons should be visible and based on colors that stand out. They should be easy to click and lead customers to the checkout page.
Hero images: Hero images on a website are the first thing visitors see when they land on your page. It is essential to have an eye-catching hero image that conveys the message of your product. You must take advantage of this step in order to increase conversions.
Trust icons: Customers need to feel secure before making a purchase, so it is essential to have trust icons on your website. You can have logos of payment gateways, secure checkout signs, and more. This will help build trust with customers and encourage them to buy from you.
Check this screenshot to understand how to improve your conversion design:
Check how strategically ConversionWise uses all the important elements of conversion design on their home page and maximizes their conversions.
So, this is really important to implement all these conversion design elements and principles when recession-proofing your website.
10. De-risk purchase journeys:
De-risking purchase journeys is another effective technique to keep customers engaged and decrease the risks associated with buying from your ecommerce store. According to the stats, 75% of customers see return shipping as a major threat when buying online.
Therefore, you must make sure that you maintain a strong return policy. You can offer free returns and flexible return policies and give customers an easy return process to make them feel more confident when buying from you.
The idea is to make refunds as effortless and hassle-free as possible. You can also provide customers with a tracking number so that they can track the status of their returns. This way, you can reduce the risk of buying and maintain a good relationship with your customers.
You can also offer a free sample of the product to customers so that they can try it out and see if it is worth buying. This will help them make an informed decision and reduce the risk of buying.
In addition, you should also have an easy checkout process that does not require too much information from customers. This will help to make their purchase journey smoother and reduce any risks associated with online shopping.
Recession-proofing your ecommerce business includes making sure that customers have a seamless checkout process. This is because a long checkout process can be a deterrent and lead customers to abandon the purchase.
2023 is going to be a challenging year for many ecommerce businesses. Recession-proofing your business is essential in uncertain times, and you need to ensure that you are taking the right steps to stay ahead of the competition.
In this article, we discussed some effective techniques and measures that you can take to recession-proof your ecommerce business. These include optimizing product pages, building a loyalty program, offering discounts and deals, running promotions, and more.
You should also focus on improving the customer experience with your website by adding testimonials, and reviews, showcasing customer stories, and de-risking purchase journeys.
Remember, an opportunity missed is an opportunity lost. So take advantage of every opportunity that comes your way and recession-proof your ecommerce business today! Good luck!