For the past 11 years, the US economy has been in an expansion period. This is the longest period of experiencing no recession in the history of the nation. As the saying goes, all good things will eventually come to an end. With the uncertainty brought to the US workforce by the COVID-19 pandemic, a potential recession may be looming. It is important that consumers, ecommerce business, dropshipping business, and other brick-and-mortar establishments across the nation take caution.
Furthermore, the novel coronavirus pandemic has affected a lot of jobs, thus, leaving millions of Americans unemployed. The current economic situation has also taken a huge toll on the stock market. Updates from Bloomberg Economics have indicated that there is a 100% chance for a recession to occur anytime from now or within the next 12 months. In this article, we will be providing you with a couple of tips to help owners of ecommerce and dropshipping businesses prepare for a potential recession.
What are the Possible Impacts of a Recession on Your Ecommerce or Dropshipping Business?
When recession strikes, ecommerce and dropshipping businesses are highly vulnerable to economic difficulties. In fact, these business models are often in a more difficult position to get through an economic downturn. Based on occurrences from past recessions, your ecommerce business may be affected in the following ways:
Reduction in Sales: As a result of personal financial hardship, consumers are likely to spend less money than usual.
Stern Competition: Ecommerce and dropshipping businesses within the same niche or market will need to compete harder to maintain sales.
Inflation: Inflation will occur as suppliers and retailers adjust pricing to make up for decreased sales from anxious consumers.
Decreased Interest Rates: Also, interest rates will decrease, thus, making it a difficult time to borrow money for general shopping or spending.
Tips to Prepare Your Ecommerce or Dropshipping Business for a Recession
Below are some insightful tips to help you strategize and cushion the effect of the recession on your business:
Focus on Your Best Selling Products
In a booming economy, ecommerce and dropshipping businesses tend to spread their advertising budget across various products. However, with a looming recession, it is advisable that you change this and concentrate more on your best-sellers. The idea is to conserve and get the best out of the little that you have during trying times. Focus on the products that are often in high demand by your customers. Consider halting other product marketing. By concentrating your marketing efforts on your best selling products, you can derive the best return for your efforts.
Improve Customer Value
As mentioned earlier, consumers are likely to spend less money than usual due to personal financial difficulty. How do you convince them to keep patronizing? – By offering value. Customers always want to get the best value for their bucks. A recession may be a great time to take a comprehensive look at your current customers and increase the value of products or services you offer to them.
Evaluate your current customer base, and think about ways you can encourage them to keep coming back, especially during difficult times. A great idea is to offer possible incentives like free shipping, extra fast delivery, discounts, commissions, points programs, and more. Doing these may help you earn more revenue without having to source for new customers.
Monitor Your Spending
What’s more, recession is brutal and very unforgiving! When it occurs, it may not be the best time to take financial risks. This is the time to monitor your spending. No need for any bold financial move or major business purchase. The financial stress that comes with recession is enough. It is important that you keep your spending in check. With this, you can prevent engaging in outrageous spending, which may likely affect you and your ecommerce or dropshipping business in the long run.
Optimize Your Costs
Another way to prepare for a possible recession is to optimize your cost. When the economy is booming, ecommerce and dropshipping businesses enjoy increased sales. Often times, this may lead to reckless spending or low operating margins. During the rapid business growth, inefficiencies like using larger boxes for packaging are often overlooked. This results in higher dimensional weights.
If there is a recession, issues like this should be spotted with and replaced with cost-effective practice solutions. Also, you can optimize your cost by keeping your ecommerce, and dropshipping order fulfillment costs relatively low.
Content is King – Create Informative and Engaging Contents
Also, having a well-thought-out content marketing strategy is crucial during a recession period. Creating engaging and informative content will position your brand as an industry leader. You can also establish authority in your niche and attract more customers to your business with proper content marketing.
Contents such as blog posts, videos, and newsletters can help drive organic traffic to your store and generate leads for your ecommerce business. Also, you can leverage SEO through content marketing. This will increase your store’s rankings in search engine results, which in turn drives more traffic to your store.
Keep Your Business in the Spotlight
Finally, you can keep your business in the spotlight by increasing your brand awareness endeavors. Brand awareness, during a recession period, may be a great way to combat the problem of dwindling sales. Remember that customers are hesitant to spend during this period. Increasing brand awareness will put your business at the forefront of both current and potential customers. This is the ideal way to secure a purchase.
There you have it! Above are some tips to prepare your ecommerce or dropshipping business for a potential recession. Just as you should take adequate measures to prepare for an adventure, you should also prepare your ecommerce business for a possible recession. Whether the recession hits within the next couple of months, next year, or whenever, applying the insightful tips provided above before it hits can help lessen the impact on your business.
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