Everyone seems to be talking about a global recession.
So how likely is a financial downturn?
Well, research firm The Conference Board predicts a 96% likelihood of a US recession within the next 12 months.
It seems inevitable that the economy will soon be limping around like a three-legged donkey trying to win the Kentucky Derby. And that means people will have less money to spend, some will lose their jobs, and many businesses will struggle.
But it doesn’t have to include you.
If you take the right steps now, you can thrive during the recession and grow your eCommerce business faster than ever.
In this guide, we’re going to explore the impact on eCommerce during recession and how you can profit during an economic slump. You’ll learn 10 recession-proof growth strategies you can implement today.
Let’s dive in.
A recession is a period of economic decline where GDP falls in two consecutive financial quarters. A collection of events triggers a domino effect throughout the economy.
In the Great Recession that started in December 2007, the US subprime mortgage crisis caused the housing market’s collapse, leading to a global economic downturn.
In 2022, the stock market dropped, and the conflict in Ukraine caused rising gas prices. This caused the cost of everything else to increase, fuelling inflation.
Inflation hits consumers’ pockets, making them less likely to buy things.
Now, we’re on the cusp of another global recession.
But this isn’t the first time, and it certainly won’t be the last. The consensus of economists is that recessions are not a bug - they are a feature of our economic system.
So what does a recession mean for eCommerce?
While recessions can hit retail businesses hard, they don’t have the same effect on eCommerce stores.
First, it costs much less to run an online store than it does to run a brick-and-mortar shop. You don’t need to rent a storefront in a prime position, and you don’t have to pay expensive business rates. Staffing costs are also much cheaper.
Second, eCommerce sales are less affected than offline sales.
If we look at the last big recession, eCommerce sales plateaued and dropped slightly. But this was a minor blip compared to the impact on offline stores, where retail sales fell to their lowest level in 35 years.
An eCommerce store is not limited to a physical area. While brick-and-mortar stores can only sell to people in the surrounding area, you can sell to customers worldwide. Cross-border eCommerce is booming.
The short answer: Yes.
You can grow and thrive during a recession.
During the Great Recession, eCommerce brands were the most successful businesses. There are opportunities to capitalize on shifting consumer preferences and gaps in the market.
For example, the eyewear brand Warby Parker launched at the tail end of the recession in 2010. It provided shoppers with the option of ordering multiple pairs of eyeglasses to try at home before deciding which frame to buy. In just 48 hours, Warby Parker sold out and had a waiting list of 20,000 people.
Amazon also thrived during the last recession. While the average business on the stock market declined by 36%, Amazon recorded a 9% decline in stock value. And in 2009, the eCommerce giant bounced back with a 68% increase in profits.
In 1959, future US president John F. Kennedy explained in a campaign speech:
“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.”
Now, this isn’t entirely correct - the second Chinese character translates to something more like “change point.” But, there is a lesson to take away from Kennedy’s quote.
A recession can open up new opportunities for eCommerce stores.
When there is an economic downturn, there are generally fewer competitors. That makes it easier to win new customers. People are also more open to trying new things.
With less money, shoppers look for ways to reduce spending by switching brands and trying new products. This is especially true for younger consumers. According to Pinterest Business, Gen Z are 20% more likely than other generations to try a new product to see if they would like it more than their current brand.
And eCommerce sales are still growing. In 2022, global eCommerce sales are estimated to be worth $5.7 trillion. By 2026, they will generate over $8.1 trillion in sales.
Rather than a threat, a recession is an opportunity. You can come out the other end with a larger market share and a heap of cash.
This isn’t the first recession to hit the economy.
Looking back at examples and data from previous recessions, you can learn how to navigate an economic downturn.
With the right strategy, you can increase profits, attract more customers, and turn your eCommerce store into a lean money-making machine.
Here are 10 proven ways to thrive with eCommerce during recession.
You don’t have the sizable costs of a brick-and-mortar store. But eCommerce businesses still have overheads. From software and marketing to fulfillment and payroll, taking a close look at your business operations can help you identify areas to cut costs.
By reducing your overheads, you can increase profitability and free up cash to invest in areas that generate revenue for your store.
This can be challenging to get right. If you cut back and it compromises the buying experience for your customers, it can be a disaster.
The first area to look at is the software and tools you use to run your store. Are there any subscriptions that you’re not using to their full potential? Could you use a cheaper alternative?
Storing and shipping inventory is another significant overhead. One of the best ways to reduce this cost is to leverage a dropshipping model. You can find a dropshipping supplier and get them to handle the fulfillment process.
If you already have inventory for certain products, you can use dropshipping to test other products (without too much investment) to confirm if they can actually sell well.
While this can slightly lower your margins, it’s an excellent way to save money without reducing the variety of your product range. You can learn more about dropshipping and other eCommerce business models in our extensive guide.
A recession can hit your bottom line. And the higher your costs, the more products you need to sell to generate a profit. Cutting costs makes your business leaner and more profitable. It can also push you to test for new winning products. As a result, you can increase your margins or even cut your pricing to attract more customers.
Unless you’re completely new to eCommerce, you’ll already know that repeat customers are the most lucrative. And if you are a newbie, start with our beginner’s guide to selling online before you move on to the advanced stuff like customer retention strategies.
You can maximize profits by focusing on customer lifetime value and retention. According to a much-referenced research paper by Bain & Company, increasing customer retention by as little as 5% can increase profits by 25% to 95%.
If you don’t have a loyalty program, now is the time to start one. Loyalty programs are one of the most effective tools for customer retention.
You can reward repeat customers and encourage them to spend more with exclusive discounts, freebies, and bonuses. The biggest driver of participation in loyalty programs is saving money:
That doesn’t mean you have to offer a significant discount on every product. Instead, be creative about how you reward shoppers.
For example, you can offer discounts to shoppers that contribute product reviews or take part in quizzes that help you better understand their preferences. A loyalty program is a trade-off that should benefit both the customer and your store.
When shoppers have less money to spend, they get more selective over their purchases. That can result in conversions going down and advertising costs going up.
By focusing on customer retention, you can maximize the value of your existing customers. People who have already purchased from you are much more likely to buy from you again.
If you want to learn more about CLV and the other eCommerce metrics that can make or break your store, make sure you don’t miss our explainer guide.
Every eCommerce store has some slow-moving products in its range. If you have products that rarely sell, consider dropping them from your store.
This is easy to do if you’re dropshipping the product. But it can be more challenging if you have leftover inventory. You should consider a sale or bundle deal to shift your underperforming products and recoup your money.
Shift underperforming inventory with a flash sale. You can create a sense of urgency and drive more conversions with a stock counter next to the “Buy Now” button.
There are lots of Shopify Apps and WordPress plugins that you can use to add this functionality to your store.
If you still struggle to generate sales, product bundles are an excellent way to maintain profits while selling off discontinued lines. You can bundle the underperforming product with a top seller.
Slow-moving products tie up cash that you could spend on inventory that is more likely to sell. By releasing funds tied up in unsold stock, you’ll be able to adapt to consumer buying preferences. Cash flow is key to growth.
Relying on a few products to generate sales makes you more vulnerable to disruption during a recession. If your customers decide that your product isn’t a necessity or find a cheaper alternative, you could see sales drop off a cliff.
Expanding your range can minimize that risk. You can diversify your revenue streams and make your eCommerce store more resilient to changing spending habits.
As mentioned above, you can expand your range of products by dropshipping at first to test whether that product actually has demand or not.
Think about adding products that complement your existing range or would be appealing to your audience. For example, if you sell home office furniture, consider adding USB desk fans, office cleaning products, and other related items.
Before adding a product to your store, you need to make sure there is customer demand.
That’s where a tool like SaleHoo Market Research Labs can help. You can find top-selling product ideas without having to trawl through pages and pages of product listings.
Choose your niche, and set the filters to narrow in on low-competition products selling well on Amazon, eBay, and AliExpress. Once you find a winning product, you can quickly get in touch with a pre-vetted supplier using the built-in chat feature or via their contact information.
Don’t put all of your eggs in one basket. Shopping habits can change quickly during an economic downturn. Having multiple revenue streams to fall back on can protect your business and help you offer more value to your customers.
Just make sure there is customer demand before investing in inventory or adding new products to your store.
Need some inspiration?
Check out our list of the top 50 eCommerce and dropshipping products for 2022 to get some ideas for your niche.
ROAS reveals how much revenue you generate for every dollar you spend on advertising. The higher your ROAS, the better. Let’s take a look at how it works.
And don’t worry if math was your least favorite subject at school. The formula is really simple.
ROAS equals your total conversion value divided by your advertising costs. Conversion value is the amount of revenue you earn from a conversion.
So if you earn $60 every time you sell a product, and it costs you $15 in advertising per conversion, your ROAS is 4.
Conversion value = $60
Ad spend per conversion = $15
60 ÷ 15 = 4
ROAS = 4
You can expect to earn $4 for every dollar you spend on advertising. By improving ROAS, you can make your eCommerce store more profitable.
The best way to improve ROAS is to narrow your ad targeting so that your ads are only displayed to the people most likely to buy from you. If you’re using Facebook Ads, there are a bunch of targeting options to help you reach the right audience.
You can target users according to their interests, past actions, location, demographics, devices, and more. Spend time auditing your ad campaigns to ensure you’re not wasting your budget on irrelevant clicks.
Most eCommerce stores need to make their ad budgets work harder during a recession. Focusing on ROAS can help determine if your campaigns generate enough revenue.
If you’re generating a good ROAS, you can increase your ad spend. You can capitalize on the lower competition and cement your store as a leader in your niche.
Customer advocacy is one of the most powerful types of marketing. It happens when your customers are so happy with your brand that they proactively recommend your store and products to other potential customers.
There are lots of different ways you can encourage customer advocacy. For example, if you run a loyalty program, you can reward your best customers for sharing your content and products on social media, writing reviews, and referring new customers.
Customer service is also key. You'll struggle to keep your customers happy if you don’t respond to queries and complaints with prompt responses and solutions.
Check out our eCommerce customer service guide to discover 15 strategies you can use to enhance the customer experience at your store.
If you sell great products and provide an excellent service, you should have many happy customers to lean on for customer advocacy. So how do you get them to share their experiences in a way that will help your business?
The answer is user-generated content (UGC). You can encourage happy customers to submit and share images and videos of themselves using your products.
This is an authentic marketing tactic that can be super effective. Around 85% of consumers find UGC more influential than brand photos or videos.
To encourage customers to participate, consider running competitions on social media, offering rewards, and running branded hashtag ad campaigns.
When you get customer advocacy right, shoppers spend more, buy more often, and recommend your brand to their friends. You can generate more customers organically and make your paid campaigns more impactful with UGC. During a recession, when ad budgets can become stretched, customer advocacy can help to keep costs down.
In times of economic uncertainty, the first reaction is often to cut back on spending, starting with your marketing budget. But this is a mistake.
Henry Ford once wrote, “A man who stops advertising to save money is like a man who stops a clock to save time.”
If your competitors are slashing their budgets, it opens up an opportunity for you to capitalize on lower advertising fees. You can strengthen your position in the market and grow your customer base by pushing forward.
Instead of cutting your budget, look at how you can adapt your marketing strategy to changing consumer preferences. For example, people are more budget conscious and focus on value for money during a recession. As a result, they take longer to research products and make purchasing decisions.
You can capitalize on this trend by creating more educational content targeting your customers’ pain points. Here’s an example from the beauty brand Glossier’s blog, Into The Gloss:
Use content marketing to help shoppers find the best options for their needs. For example, you can create educational guides, comparison articles, and other content assets aimed at every stage of the buyer’s journey.
This is one of the biggest lessons to take away from previous recessions. In the 1981 recession, brands that increased or maintained their marketing spend grew 275% more than those that cut budgets. It’s the same story during the 2001 and 2007 economic downturns.
You can gain an advantage and increase your market share while your competitors cut back.
Conversion rate optimization (CRO) can be a cost-effective way to increase sales and get more out of your marketing budget. Instead of spending more to attract potential customers, you can generate more sales from your existing web traffic. Increasing your eCommerce conversion rates from 1% to just 2% can double your sales revenue.
There are lots of tactics you can implement to increase conversions without breaking the bank.
Heat map visualization tools can provide valuable insights into the performance of your product pages and checkout process. You can see what’s working and identify potential problems that derail conversions.
A/B testing can also help you optimize your store. Sometimes even a small change to a CTA button or tagline can significantly impact conversions.
According to a recent study, an optimized checkout design can improve an eCommerce site’s conversion rate by 35.26%. Discover more eCommerce statistics that matter to your store in our extensive blog post.
With consumers spending less, you want to capitalize on as many conversion opportunities as possible. CRO can help you increase revenue without having to splash more money on advertising campaigns. You can increase ROI and justify your marketing costs by prioritizing CRO.
Your suppliers play a vital role in your online business. If you have to deal with returns, slow shipping, or a high cost per unit, it can hinder your growth at the best of times. During a recession, it can be fatal for eCommerce companies.
Dropping unreliable or expensive suppliers for better-performing vendors can help you navigate an economic recession. You’ll have a trusted partner that can help you grow.
A supplier evaluation is the best way to measure the performance of your vendors. You can weed out underperforming suppliers by regularly reviewing product quality, pricing, shipping, and customer service.
If you’re looking for high-quality products and reliable suppliers, check out the SaleHoo Directory. You’ll find 2.5 million products from over 8,000 pre-vetted suppliers.
It’s easy to filter results, search by category, and find popular products from trusted suppliers.
A simple way to improve cash flow during an economic recession is to reduce wastage. The biggest outgoing for almost all eCommerce businesses is inventory, so that’s the best place to start.
You may find that you can buy at a lower price from another supplier. It’s also important to account for the time and money you spend dealing with returns and poor customer feedback. Sometimes spending a little more with a better supplier is worth the investment.
We’ve already mentioned the importance of customer lifetime value during a recession. And email marketing is the best way to inspire customer loyalty and keep shoppers coming back for more.
You can use email to keep in touch with your customers and stay top of mind. It’s the perfect channel to share educational content, make shoppers aware of your latest products, and increase brand loyalty.
There are a bunch of free and paid tools you can use to create automated email campaigns. You can set up welcome email sequences, post-purchase thank-you emails, and customer engagement sequences.
One of the biggest benefits of email marketing is the ability to personalize your messaging. By segmenting your customer list, you can share product recommendations and content tailored to each customer.
Email marketing offers the highest return on investment (ROI) of any marketing channel. According to Litmus, eCommerce companies earn $36 for every dollar they spend on email marketing.
In an economic recession where ad budgets can become stretched, email marketing provides a cost-effective way to drive sales. You can boost customer loyalty and strengthen your relationship with existing customers.
Read our guide to learn the best eCommerce marketing strategies for a recession.
Economic changes are normal. It’s how you adapt to change that sets your business apart. A recession is an opportunity for eCommerce brands that get the big decisions right.
You can grow and thrive using the above tactics while your competitors cut back and focus on survival.
If you have questions about selling online during a recession or want to hear more about our eCommerce solutions, get in touch with our 24/7 chat support team.