The recent economic shifts, uncertainties, ups and downs in the stock market, and the war have shown clear signs of a looming recession in the next six months.
There is no denying that digital brands have been affected. eCommerce owners and small businesses are feeling the impact as they face declining sales and struggle to maintain performance during the economic slowdown.
What is the impact of recession on eCommerce businesses?
- As consumers try to save more to protect themselves from economic downturns, consumer spending will slow down.
- Increase in competition because of the sheer number of eCommerce companies operating in the same market trying to maintain sales even as consumer spending takes a steep drop.
- As retailers and suppliers adjust pricing to make up for decreased sales, the result could be inflation in prices.
- With decreased interest rates but high loan requirements, it’ll be a difficult time to borrow money for general spending.
Amid these uncertainties, the important question to answer is “What does it mean for your eCommerce store? How can you recession-proof your business and make it resilient when the market is constantly changing?”
While we don’t have a clear-cut answer, here are some strategies worth considering to make your eCommerce business recession-resistant.
1. Focus on customer’s lifetime value (LTV)
By now, you must be aware of how important repeat customers are to an eCommerce business. They increase profits from 25-95%.
With customer acquisition getting more expensive, focus on increasing the customer lifetime value in eCommerce. The reason is a downturn could even accelerate the entry of new competitors. Increased market competition will further fragment the market share. That’s why increasing the customer lifetime value is critical for a successful eCommerce brand.
Some underutilized tips to increase your customer lifetime value worth trying are:
Find the right customer segment (ideally 20% of your customers would drive 80% of revenue)
Figure out who your most valuable customers are using the RFM (Recency, Frequency, Monetary) model approach. Implement behavior-based upsell or high-value subscriptions targeted toward these customers.
Add a freebie to the customer’s shopping cart when they’re making a purchase
Surprisingly, free samples have proven to boost sales by as much as 2000%. Also called reciprocity, shoppers may feel obligated to give your brand something when they receive a free sample.
Ask for feedback without interrupting shoppers
Getting customer feedback helps you optimize the areas that need improvement and increase the lifetime value. But avoid intrusive feedback requests.
Consider timing in terms of when to reach out for feedback. This could be a pop-up when the customer visits your site after completing a purchase and receiving the product. Or a day after you helped them resolve a query.
Use smart bundles to increase the average order value
Upsell subscriptions in a subtle way by creating bundles and adding discounts to make the offer more appealing.
Meditation and sleep headband brand Muse offers a discount on annual subscriptions.
Get your customers to commit for at least a year, increasing their lifetime value instead of regular monthly subscriptions.
Build a customer-friendly loyalty program
68% of millennials are not likely to buy from brands that don’t have a good loyalty program. This shows the importance of a customer friendly-loyalty program in increasing the average customer lifetime value in eCommerce.
Focus on highlighting the benefits of the program. It should highlight every detail, must be easy to understand and users can join quickly. Be sure to communicate how customers can redeem their points, the way Sephora does.
2. Optimize pricing
Overall, consumer spending tends to decline during periods of uncertainty. To offset this, as an eCommerce retailer, you will have to find new ways to provide more immediate value to customers.
A Harvard Business Review experiment found that the right pricing strategies can improve profits and drive revenues faster than other growth levers. For every 1% improvement in the pricing, businesses can increase profits by 11.1%.
During a low revenue period, lean on price optimization so that even when your sales slow down, you can maintain positive margins.
Try out the following price anchoring strategies in eCommerce:
Don’t price similar products exactly the same
For example, clothing retailers price shirts differently based on whether the shirt has a solid color or is patterned. This eCommerce pricing strategy prevents customers from deliberating whether they like the solid or pattern version better. If the patterned shirt costs more, the buyer would like the design more than the solid version, making it worth the additional expense.
Choose a price point that ends in 9 (for example $1.99)
Also called charm pricing, a study found that “prices that end in 9” were even able to outsell lower prices for the exact same product. Customers tend to associate prices that end in 9 with bargains.
Use the buy one get one (BOGO) deal to move less popular inventory at a faster rate
People are more willing to purchase an item or even pay more than they normally would when they know they are getting something free in return.
However, not every BOGO deal involves getting something for free. You can use other discount offers like:
“Buy one, get one 50% off.”
“Buy one, get 40% off on your next purchase.”
Offering another product at a reduced price can still be an effective way to boost your eCommerce sales.
Highlight the price differences visually
When you run a sale, place the sale price next to the original price. Going a step further, use a different size and color to show the sale price. When you differentiate the sale price from the original price using a different color and smaller font, the consumer perceives the difference between the two prices to be even greater, resulting in more purchases.
Overall, consumer spending tends to decline during periods of uncertainty. To offset this, as an eCommerce retailer, you will have to find new ways to provide more immediate value to customers.
3. Make shoppers’ lives easy (eliminate friction)
For a flawless purchase experience, work on the customer friction points. Friction happens when the customer’s flow is disrupted and they are distracted or discouraged from making a purchase, thereby improving checkout conversions.
Ways to eliminate friction in your eCommerce store are:
Introduce progress bars for mobile checkout
Right below the header, allow customers to backtrack, offer visual confirmation of progress, and maintain visual continuity.
Personalize checkout with pre-filled forms
When customers are excited to purchase, they don’t want to waste time filling out lengthy checkout forms. Auto filling of forms prevents formatting errors like writing the phone number in a different format.
Offer last-minute promo codes on the checkout page for better checkout completion rates
If customers are hesitant of purchasing a product, offering a discount at the checkout may help seal the deal. Ensure that the promo codes are easily visible and can be applied quickly.
Introduce urgency on the checkout page to prompt them to buy the product now
Urgency helps overcome overthinking and drives quick action. In ecommerce, show your customers limited product availability or a lack of time to complete purchases faster.
Rebellious has an “Order before midnight” tab that adds an extra layer of urgency, with the reward being an early delivery.
That said, analyze the daily buys and views over some time to manage sales and track trends.
4. De-risk purchases
75% of online shoppers want to know the return policy before they purchase a product. And 15% of shoppers abandon the cart when the return policy is unclear. At a time when your customers are getting all the more hesitant about purchasing non-essential products, de-risk purchases are an underrated conversion rate optimization idea for eCommerce. It will be one of the key decision points on their path to purchase.
Lay out the return and exchange policies in an easy-to-find way either in the FAQs or as a separate page to overcome customer objections.
De-risk purchase tips for eCommerce brands:
Offer a free sample with every order
Let customers choose the sample rather than forcing unnecessary products.
Or offer complementary products. Suppose your brand sells skincare products. If the customer has purchased lipstick, you could add a cleanser oil sample.
Provide Free trial
If you sell products less prone to damage, try what Warby Parker does. They allow customers to try-on products at home for a limited period of 5 days. This way, your customers can use a product and make an informed decision.
Include free returns
Offer free returns, eliminate restocking fees and be upfront about shipping charges on the return. For example, Austin Bazaar mentions that returns are completely free for customers. Suppose there was an accident or mistake with the order, they would even pay for the shipping costs.
5. Decrease cognitive load/Improve website UX
Did you know that 82% of top-grossing US and European eCommerce websites have poor UX performance?
Stand out from the competition by optimizing your website and product page design.
Here’s how to reduce the cognitive effort for your customers and boost conversions for your eCommerce store with improved website UX.
Reduce the number of options to fight analysis paralysis
Either reduce the number of options or present them well. Consider grouping multiple options in umbrella categories so that the customer doesn't get overwhelmed by seeing them all together.
Strive for a minimum number of clicks on the way of choosing and buying wherever possible.
Improve the mobile experience by making it seamless for users to search for the right product
When users are searching for something in your eCommerce store, you don’t want to show them “Couldn’t find what you were looking for.”
Instead, you can add - typo-tolerant search, auto-complete suggestions, synonym search terms, related product searches and personalize search suggestions based on previous purchase history. This eCommerce strategy increases your mobile conversion rates.
Avoid decision delays with quicker load times
57% of shoppers will abandon a site if the page doesn’t load within 3 seconds. And what’s worse, 80% of those people will never come back.
So, as a part of your eCommerce website user experience, faster pages lead to a better user experience and people are more likely to purchase from you.
Tips to load your eCommerce site faster:
- Reduce image sizes
- Remove redundant code
- Avoid sliders on the homepage and opt for banners
- Keep pop-ups to a minimum
- Remove broken links
Partner with other brands to improve the experience
When it comes to vendors, most probably, they’re struggling as well during times of economic stress. If there are overlapping supply chains and inventory management efforts, consider partnering with them as a cost-saving option.
Think of the strategic and financial gains along with improved experience by leveraging the expertise of complementary brands.
The Honest Company partnered with suppliers and vendors to initially launch a set of 17 products as opposed to a single offering to establish its brand and market fit. The thought beyond the multi-product launch was that parents looking for chemical and irritant-free diapers would also be interested in chemical-free shampoos and so on.
6. Revisit the checkout experience
Research shows that nearly 81% of website users abandon their purchases in retail, fashion, travel, and utilities. The high cart abandonment in eCommerce costs brands $260 billion in loss due to checkout flaws.
Here’s how you can improve the eCommerce checkout experience to maximize the ROI:
Partner with multiple payment apps
As per Baymard, the lack of payment options is one of the main reasons why buyers abandon their shopping carts. As more consumers purchase online now than ever, payment channels have turned into conversion funnels themselves.
Start by researching the most popular payment method in the country you are targeting. For example, in Asia, consumers prefer purchasing with mobile phones rather than desktops. In Germany, consumers prefer paying by invoice rather than credit card whereas in the UK debit and credit cards are most popular.
Also, consider the age and gender you are targeting: younger generations might prefer the Buy Now and Pay Later or Apple Pay option while older generations might prefer a bank transfer or credit card.
Offering more payment methods will only help increase your eCommerce conversion rates.
Highlight checkout errors with relevant messages
There could be many technical bugs preventing bugs from checking out. For example, the form field requires MM/YY for credit card expiration while the customer is entering YY/MM. As an eCommerce seller, notify people when they make a mistake in the checkout form.
If visitors can't figure out what to do next, they will leave. Sure, mistakes are bound to happen and you need to ensure each field has an appropriate error message.
This involves three things:
Let users know when they make a mistake
Zappos does so, along with asking for additional information (like the area code) that people may forget to add.
Make errors prominent
In the above example, Zappos highlights the error using red color, for customers to easily spot the exact field where they’ve entered the wrong information.
Ensure your error messages are easy to understand and helpful
Petco tells users exactly what went wrong as seen in the Address bar. Especially useful when the visitor is not aware of what exactly is wrong with their input.
Automate discounts and coupon codes to apply at checkout easily
Customers who checked out on Shopify sites with a discount coupon automatically applied were 1.8 times more likely to place an order than without a discount. In addition, they checked out 25 seconds faster with an automatic discount compared to manually having to enter or search for a discount code.
Plus, there’s already a discount applied to their cart. This means the customer does not leave the checkout to hunt for a discount code. Nor does she have to email that they couldn’t find the code you sent. The smoother experience could potentially lead to higher conversion rates.
Let’s take the example of Bath and Body Works. During a Buy 2 Get 1 Free sale, in the checkout form, the price of the second item was crossed out and the word “Free” appeared. The same reflects in the total price column.
Design for auto-sync across devices
Mobile checkout optimization is extremely important when it comes to increasing conversions to your eCommerce store.
Research shows that although 50% of users browse on mobile but orders are 24% higher on desktop. This means you need to optimize for auto-sync across devices. Allow your users to save items to cart across devices.
The prerequisite for this is signing up. Convey the benefits of why they should sign in. Customers can checkout easily without having to find their favorite products in your store again.
Here’s how FLOS communicates this on its wishlist page, encouraging users to sign in so that their saved items can be synced.
Alternatively, customers can transfer from one device to another using a shared link. Make link sharing easier - it could be a tap to copy on the URL bar or a share icon placed at the top of the page.
Try adding UTM parameters or unique IDs to your links. Each link is unique to the customer and you can customize recommendations to suit their behavior on your site regardless of whether they shop on desktop or mobile.
As a part of your product page UX design, improving the checkout experience optimizes for both new and repeat conversions.
7. Work on moving underperforming products
If you’ve got products sitting on the shelves that aren’t moving, clear them out. It’s okay if you only recoup the wholesale cost spent on the product. Cash in the bank is any day better than dust on the shelves.
eCommerce product analytics gives you actionable insights on how to let go of slow-selling products quickly.
Here’s how you can do so:
- While social proof messages can be added to fast-selling products, “nearly gone or only two left” can be used to drive shoppers to make quick decisions for slow-selling products.
- Suppose sustainable mattresses have a higher click rate than feathered mattresses. Make a subcategory “sustainable bedroom products” making it easier for customers to find attributes they like.
- If your product sales are spiking based on a particular season, promote them accordingly on those days or add a discount to stand out from competitors.
- If you’ve figured that customers in Germany respond to “waterproof” messaging, serve them product recommendations that highlight your waterproof range.
- Use social proof (best seller product badge, two brought in five minutes notification, and welcome to the family exit-intent popup) to drive more purchases.
- Place the slow-selling inventory on the homepage with product badges to bring extra attention to these products.
8. Find new ways to attract customers
Downturns will lead to competitors operating in the same market targeting a similar segment of customers while consumer spending drops. In-store pickup is an underutilized way to attract new customers.
Your customers want flexibility in how they want their orders fulfilled. “Buy online and pick up in-store/curbside” enables customers to conveniently select the items they want to purchase immediately and the ones that are worth waiting for.
Store pickup has benefits including free shipping, quicker pickup service, visual order confirmation, and increased online sales.
If you’re looking to implement store pickup, here’s how some eCommerce companies are nailing it - and you can replicate it as well.
Furniture store Haverty’s has a free pickup option that pops up during checkout. Clicking on free pickup takes you to another page that has all details like FAQs, tips, and more.
Make the free pickup process clear for shoppers by answering their queries.
GAP offers two ways to shop: “Buy online and pickup curbside” and “Buy online and pickup in-store.”
They have a “we think you’ll like these” section at the bottom of the page to encourage customers to buy more products.
The pet store chain Petco has a filter on their online store (buy online, pick up in-store). This way, if it's urgent for the user - she only needs to scroll through that section to choose the right products.
9. Assure customers (build more trust)
Chances are, customers buying from you for the first time may be worried about the product quality. Customer reviews are a form of social proof that makes people confident about their purchasing decisions.
The two ways to assure customers of the product quality are:
Show real-life purchases and satisfaction with the product
REI, a brand selling outdoor wear, has customer reviews below each product. Notice how they go a step ahead and add the badge “Verified Purchaser” for added credibility.
Also, include a scale for ratings. Ratings enable potential customers to quickly analyze the quality.
Provide size charts and measurements of each product
Similar to REI, if you’re selling products wherein sizing could be an issue, a size chart assists the online shopper.
To help buyers choose the right size, REI has a shoe size chart that the buyer can refer to.
10. Promote cross-sell specific reviews
A study by Trustpilot found that nine out of ten customers read reviews before buying a product. Adding reviews and star ratings from customers who have bought the cross-sell items can convince shoppers to add them to the cart.
Some ways to cross-sell specific reviews in your eCommerce store are:
- Add ratings and reviews from products customers have bought together. Recommend products with at least 4 stars if you are looking to cross-sell on product pages.
- Target has a section of “frequently bought together items” and “complete the set option that shows other pieces of furniture similar to the ones the customer has in the shopping cart.
- Wayfair’s cross-selling involves the phrase “You may also need” under each product on their website. What’s important to know here is that these products have almost 21 times greater reviews.
- Ensure that your copy is clear and compelling with bold colors and clear sales categories.
- If you have products in your inventory that are not being sold, offer discounted rewards in the form of coupon codes.
Lastly, remember to not go overboard with the pricing. Recommend products that are within the buyer’s budget. Pitch products in the range of 10-50% cost of the products they select. Anything beyond would either overwhelm them or drive their attention away.
11. Gauge demand (and scope out competition)
The road to bankruptcy is paved when you have great products that no one is purchasing. As an eCommerce seller, before launching new products or stocking more, gauge the demand.
One way to do so is by getting good product reviews. This includes filtering through reviews posted on your website, social media (Google, Facebook, Instagram, or Pinterest), and third-party listings. Give these highly recommended products more screen time.
When shoppers visit your page and find highly rated products at the top of the page, it builds trust and they’re more likely to purchase from your business.
In addition, an email marketing strategy to collect customer feedback on products can give deeper insights into what your customers think of your product.
Ways to gather customer feedback using email marketing:
- Ask for product feedback immediately after the customer has bought your product.
- Offer an incentive (like a discount on their next purchase) in exchange for detailed feedback.
- Interview customers via phone or with exit surveys.
Another way to gauge what’s popular: analyze Google Trends:
See who is selling the same product, at what price, and the offers they are running and make your offer better than theirs.
Preparedness is critical for your eCommerce business
While there is no telling what challenges and opportunities the future might bring, you should be prepared for a potential recession. Whether it hits in the next six months or this year, implementing the measures outlined before a recession can drive your eCommerce business’s success and resilience for the future. Streamline your daily operations and strengthen your brand, to reduce the risk of getting blindsided.