With the world yet to recover from the previous economic recession caused by the pandemic and the possibility of another downturn looming large, many store owners are on the hunt for ways to stay afloat and move in the right direction.
In our recent thought leadership webinar, we brought together experts from across the industry to discuss the different ways to safely navigate through such crises. Ashna Sikri, Growth Product Manager at Mason; Niwin Santhosh, Co-founder and COO of Vajro; and Harshul Jain, Founder, and CEO of Glood.ai, participated in the webinar.
This blog is a summary of all the key strategies discussed by them to manage any downturn in the near future.
What is the likely impact of an economic downturn on customer behavior?
Customer behavior is mainly dependent on liquidity, or the amount of cash one has for shopping. The more money one has, the more likely one will spend. During an economic downturn, there is a liquidity crunch. This will trickle down and impact the customer’s purchasing power.
However, in most recessions, people only change the products they purchase. They do not stop purchasing completely. There is a redistribution of spend from luxury purchases to commodities. For instance, during the pandemic, many businesses selling non-essential items had to shut down. However, the grocery business, particularly e-commerce ones, did exceedingly well.
During these times, people will also look for bargains and better deals. And that explains why many shifted completely from offline purchases to online purchases even after the pandemic subsided, as the latter offered plenty of deals.
Let us now look at the different strategies store owners have to employ to manage a recession.
#1 Re-evaluate everything
Most store owners build strategies and set targets but seldom update them. This can become an issue during a downturn because the external factors around your business completely change during this period. Your old strategies and targets will no longer be sustainable or achievable.
You have to re-evaluate everything about their business during a downturn. Right from how much cost increases to how much decline in AOV is expected, you need to find answers and change the direction of their business accordingly.
But always remember that your new strategy should revolve around reducing losses (or expenditure) and not around reducing revenues. This thumb rule is particularly applicable if your business was not making profits before the downturn. On the other hand, if you are a profit-making business, focus solely on increasing the revenues through various ways, such as finding more channels to sell.
#2 Innovate. Innovate. Innovate!
Recession or no recession, R&D should always go on because that’s the only way for your business to offer more value to your customers. It’s a key factor that determines whether you stay afloat during an economic crisis or not. Innovation could be around your product or around a particular process, like marketing.
As a business owner, you need to continuously invest in R&D because it not only helps you improve your product or process but also supplements your business strategy. All successful businesses in the past have focused on R&D to experience marked growth in productivity.
#3 Focus on loyalty programs
You need to focus on improving your brand loyalty and attracting customers to stay with you for a longer time. The best way to do this is through loyalty programs.
If you haven’t created a loyalty program yet, set up one during a downturn and aggressively market it. By doing so, people will remember you over your competitors even after the recovery and continue to purchase from you.
Try gamifying your loyalty programs if possible. It’s a great way to engage with your customers and encourage them to make repeat purchases.
#4 Build stronger customer experiences
Most businesses focus on the operational side of their business during an economic downturn. Their attention is usually on decreasing spending, improving efficiency, postponing new investments, etc. In this process, they end up sidelining customer experiences. A BIG mistake!
Building a good customer experience is even more important during a recession because that’s the best way to retain customers and ensure continuous circulation of inventory and cash in your business.
And to build solid customer experiences, you need to pay attention to the ‘whys’. Find out answers to:
- Why would a customer need your product?
- Why do they love you as a brand?
By finding these answers, you can create memorable experiences for your users. Remember - Good customer experiences always follow good customer understanding.
#5 Automate your store
Productivity is another key factor that can help you cross the downturn without any major impact. And the best way to improve your organization's productivity is by automating most of the processes in your store.
There are hundreds of automation tools out there that can simplify your life. Once these tools are in place, your teams can focus on strategic and mission-critical activities instead of their regular chores. For instance, they can focus on brainstorming ideas and ways to add more value to the customers instead of manually uploading the products to the catalog.
In summary, never shy away from investing in tools that will make your life better, especially during such times. But make sure to validate that the technology you are investing in offers a positive ROI.
#6 Track everything
The importance of tracking everyday processes multiplies during the recession. Why? Because a wrong move can impact you much more during a downturn than it would during other times.
Keep checking your visitor data and find out whether your current channels are showing the same number of visitors as before. If you see a downward trendline, change the channel.
Keep a close watch on your inventory. You do not want to be left with a lot of unsold inventory. It’s critical to keep it right-sized during recessions.
You should also track your promotions and campaigns. For instance, you should know where customers got a particular discount code from, which channel they bought from, what their AOV was, etc. This way, you will get a fair idea of where to really focus and where not to burn cash.
#7 Network like there's no tomorrow
During a downturn, it's not only important to build relationships with your customers but also with store owners. There is nothing called bad networking today. So do not be scared of important ideas or strategies getting leaked to other business owners. As long as you have a band of loyal customers, you will do good.
Through networking, you get ideas from people who are sailing the same boat as you. It will even help you avoid issues that they are currently facing if you can come up with solutions beforehand.
Here is the complete webinar, in case you missed it live.