Approximately half of the nation’s business economists believe
the U.S. economy will go into recession by the end of 2020
. According to
KPMG principal and chief economist Constance Hunter
, there’s a 50% chance it will happen in 2019. If the current U.S. economic expansion lasts beyond June, it will be the longest on record.
But as the saying goes, all good things must come to an end. So whether you believe the economy will power on or take a turn for the worse, we should all begin to prepare for that inevitable shift. Both brick-and-mortar and e-commerce businesses need to have a plan in place for dipping revenue and rising costs. For now, we’ll focus on what measures e-commerce companies can take to recession-proof their businesses.
1. Outsource to stay lean.
Marketing is often the first thing to go when a recession hits. It makes sense. At first blush, marketing seems more like a luxury for growth when consumers are spending than a fundamental necessity. But great marketing doesn’t just address demand, it creates it — even when consumers are less likely to spend in general.
That doesn’t mean you shouldn’t be frugal about your marketing budget during an economic downturn. In order to stay lean, you can outsource marketing (and other things, like inventory management and software development) in order to focus on retaining margin.
2. Keep tabs on your overhead and unit economics.
During periods of economic expansion, it can be tempting to make major hires and capital-intensive investments (like building or buying a warehouse, for example). But your overhead will remain the same whether your products are selling or not. These recurring fixed expenses can be a killer in slow economic times. You’ll still have to pay that expensive CFO, and the bills to keep that warehouse running won’t go away. Companies with bloated overhead are the first to drown during a recession.
The best companion for low overhead is strong margins. Find the most efficient way to produce, distribute and market your products to maximize your profit on every sale. With thin margins, you’ll need to sell more product in order to stay alive. And when consumers are being stingy, that’s a tall order.
3. Find and focus on what makes your brand stand out from the crowd.
Laser in on your brand’s key differentiators and unique selling propositions (USPs). How and why are you different from your competitors? Do your customers understand this?
Big companies are typically the first to slow down when a recession hits. By communicating how your products are better than those of the household names, you’ll stand to earn new customers from those who’ve migrated away from big brands. Meanwhile, this can also help in retaining your existing customers.
4. Provide upfront value to hesitant consumers.
While the root cause of every recession is different, one thing is always true: consumers slow down their spending. While it may seem counterintuitive to offer discounts or promotions during low-revenue periods, free trials and other freemium offers ease consumers’ price concerns and may end up being the reason they come back with their wallets open.
5. Create a solid SEO and content strategy.
Remember what we said about creating demand? Good content does exactly that. By educating and entertaining your audience, you can position your brand as a thought leader in your industry, establishing trust within your target demographic and creating moments of need between normal purchase cycles.
Content is free for your customers to consume, which often leads to high quality, organic traffic. But creating good content takes time and dedication, so plan your calendar carefully.
Dial in your content strategy while business is booming. Trying to prove yourself as a thought leader after a recession hits will be even more challenging and requires time and resources you may not have to spare.
6. Have a solid email marketing strategy.
Email marketing is incredibly effective and can target customers anywhere within your sales funnel. It’s one of the few marketing channels you own end-to-end, meaning, if you’re smart, the return on investment (ROI) can be extremely high. But it takes more than a catchy subject line to get subscribers to purchase. It’s about timing and personalization, so automate your campaigns and segment your list as granularly as possible to deliver the right message to the right users at the right time. As with content, it’s best to plan your email strategy while seas are calm.
7. Increase your customers’ lifetime value.
Customer lifetime value (CLV) is an important metric for companies and marketers alike. Simply put, it represents how much money you’ll make off of a customer over time. Among other things, it informs how much you should be spending on customer acquisition (i.e., how many marketing dollars it’s worth putting toward getting someone to purchase — and repurchase — from you).
You can increase your CLV by understanding customer churn points and providing incentives for customers to continue to purchase. Invest your marketing resources into the weakest parts of your funnel in order to withstand the customer dropoff caused by a recession.
Preparedness Is Key
Just as you should take measures to prepare for something like the longest Facebook outage in history, you should also prepare your company for a potential recession. Whether it hits this year, next year or beyond, instituting the measures outlined above before a recession hits can cement your company’s success and resilience in the future.