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E-Commerce
How Ecommerce Companies Can Grow During a Recession

July 2020

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This column was originally published on Entrepreneur.com on June 19, 2020.

In recent days, economists determined that the United States has entered a recession that actually began in February. And while much of the focus over the past few months has been on businesses adapting to remote work environments, there is no denying that digital brands have also been affected.

Many ecommerce companies have experienced significant disruptions to their supply chain or faced declining sales in their product categories as cash-strapped consumers focus on necessities.

The impact of this downturn will likely be felt for a long time to come, and ecommerce companies will continue facing new changes that can either serve as opportunities for massive growth or become potential stumbling blocks. But by implementing these few key strategies, you can reduce your risk and continue to scale and succeed. 

1. Create a strong brand built on a solid marketing strategy

A strong brand is the foundation on which everything else is built. The companies that continue to perform well during a recession are those that have been able to effectively communicate what makes them better than their competitors. They have a strong, easily identifiable identity that helps form an emotional connection with customers.

While certain aspects of your messaging may change to reflect current events, the core identity of your ecommerce company should not deviate. You should still show how your products are better than your competitors — whether you’re differentiating on price, product quality or something else entirely.

As Wendy Culpepper writes for Customer Think, “During and after a recession-like event, your brand relevancy and purpose will tap into a consumer’s emotions and give you the opportunity to grab or retain the brand loyalty that consumers will still be providing to the lucky recipients out there. Ensure your messaging, value proposition, benefits and actions reflect your brand purpose to garner the full value of the consumer at a time when their emotions will be heightened and have a lasting impact on their behaviors and the brands they choose for the long-term.”

Bolster your branding efforts with SEO, content marketing and email marketing. These digital tools are highly effective at communicating your brand values and reaching your customers in places where they are more ready to buy.

2. Find new ways to provide value to your customers

Many customers are currently less willing to make purchases than they normally would. A global research study from McKinsey found that 70 percent of customers expected to adjust their financial habits for four months or more — and this was in June, several weeks after many areas began to lift stay-at-home restrictions.

While these specific changes are having a greater impact on brick-and-mortar retailers, overall consumer spending tends to decline during any period of uncertainty. To offset this, ecommerce retailers must find new ways to provide more immediate value to their customers.

During low-revenue periods, you may actually be well served by offering special sales or discounts on products. You might consider waiving shipping fees or tossing in a free bonus item with purchases. Focusing on the price point can help relieve customer anxiety at point of sale.

For the most effective results, ecommerce brands should target their already-existing customers. The oft-quoted Harvard Business Review study revealing that it costs five times as much to acquire new customers as it does to retain existing customers is especially crucial to keep in mind during economic hardships.

3. Reduce overhead and strengthen your margins

It can be tempting to pursue aggressive expansion when times are good, but ecommerce companies should always cast one eye on the future. Keeping your operations lean will leave your company better equipped to survive when prolonged financial setbacks occur.

Finding ways to reduce fixed costs and overhead is key to long-term survival. For example, many ecommerce brands use a drop-shipping model so they don’t have to spend money on warehouse storage.

Outsourcing certain tasks can also reduce your overhead. Marketing and finances are often outsourced to external agencies or freelancers. The monthly rate for an advertising agency’s services will likely be much less than the cost of hiring several full-time employees. For tasks that don’t require a full-time workload, a freelancer can offer services as needed, rather than being a constant fixed expense.

Effective reduction of your overhead means you won’t need to sell as many products to make a profit. Or you could lower prices to increase your competitive advantage. Even if sales slow down, you can maintain positive margins. With any such move, however, make sure that it doesn’t reduce your ability to provide quality products to your customers.

There is no telling what new challenges and opportunities the future might bring for ecommerce companies. While you may not be able to predict every change that comes along, you can reduce your risk of getting blindsided by taking these key steps in advance to streamline daily operations and strengthen your brand.

Copyright 2020 by Entrepreneur Media, Inc. All rights reserved.


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