This global downturn will be unlike the 2008 recession, where the economy was active but the credit markets were frozen. It’s an onslaught of contributing factors, an economical blitzkrieg of war in Europe, fuel shortage, climate extremes and devastation, national economic collapse and even famine. Indeed it seems all that’s missing is pestilence and plague.
That means many of us are facing a scary and uncertain reality. Yet as with every other downturn going back to the great depression, it will end. And secondly, businesses now have a window of opportunity to reflect on how to adapt and survive in these times and beyond.
Let’s talk about these six ways your business can thrive in a recession:
- Keep your business active during a recession
- Invest in technology
- Review existing inventory management systems
- Evaluate alternative materials and resources
- Protect cashflow during a recession
- Keep communication flowing
1. Don’t put your business on hold
You don’t need to a bunker mentality to wait out the storm. Keep a lookout for new opportunities that arise. The key to successfully pursuing these opportunities is knowing your core business and strategy inside out; that will guide you in making the right strategic decisions. If that sounds like a case of easier said than done, consider this finding by Bain & Company, cited by the Harvard Business Review: “Twice as many companies made the leap from laggards to leaders during the last recession as during surrounding periods of economic calm.
Recessions are a wild card
Post-recession leaders aren’t always your usual suspects. 85% of companies that were growth leaders before a recession toppled during bad times, according to a 2010 study by Harvard Business Review.
Despite this, few of the leaders have a master plan when they enter a recession. Remaining agile while prioritising long-term growth will not only help businesses overcome a downturn, but also lay the foundation for continued success.
You can make gains early on
Recessions are a good time to capture market share when other businesses are distracted. For example, the last recession made it a tough time for toy companies — except for Lego. When their competitors were hibernating, they explored the global markets by expanding to Asia and increasing sales in Europe. At the end of the recession, Lego’s profits leapt by 63%.
Gains and losses are sustained
It’s a mistake to think that your business can accept poor results now in hopes that you’ll bounce back after the economy picks up. Fewer than 30% of businesses that lost market share in the downturn of 2001 were able to regain their positions, according to the Bain study.
In short, the time to act for future success is now.
2. Invest in technology
In the face of a recession the instinct may be to withdraw and tighten purse strings to stay protected. Yet one of the best ways to prepare for a recession is to continue to invest in technology and service offerings that are right for your business. This will give you a far better chance of coming out ahead of your competitors once the market bounces back.
The reality of the forthcoming meleé means that businesses need to turn to digital solutions to continue serving their customers.
So what does investing in technology look like for your business? It may involve adopting new email marketing personalisation software supporting your existing email marketing software with a higher ROI than you so far enjoy. It can also involve using business analytics to help you truly understand what’s driving your business. When a downturn happens, you’ll be in the best position to provide the best service for your customers.
We’ve written many articles on the benefits of cloud-based apps for your business and customers. For a more detailed guide on how to pick the best inventory management software for your business, check out the discerning choice in email software.
The short version, though, is that investing in technology makes your business more robust and therefore better able to handle uncertainty and rapid changes, especially those of your consumers.
3. Review existing inventory management systems
Use the downtime to reflect on your inventory management systems and practices. Your business might be getting by on spreadsheets and infrequent stocktakes, but once the economy picks up, will you be ready to grow with it?
4. Look at alternative materials and nurture relationships
Take this time to assess your raw materials and component parts. If you’re using high-end materials, it might be the right time to look for alternatives — they’re more likely to be budget-friendly and readily available. Customised or niche components are also harder for your suppliers to on-sell so consider using standard components that can be returned to the supplier easily.
Don’t overlook your suppliers either. Good suppliers play an essential role in your business — they should provide good quality products at a competitive price, maintain product quality, deliver products in full and on time, and correct problems.
If you’re able to weed out underperforming or unreliable suppliers before an economic downturn, you’ll be able to develop stronger relationships with great suppliers — ensuring both parties get through the worst of the downturn together.
5. Protect cashflow during a recession
Businesses with low cash reserves or unstable cash flows are particularly vulnerable in arecession. We’ve talked about some cashflow best practices before, so here are some ways your business can manage its cashflow in a crisis:
Consider alternative revenue streams
Consider how you can temporarily — or maybe even permanently — adopt different revenue streams. Diversifying your revenue streams can alleviate cost pressures, and introduce a more diversified revenue stream in the long term.
Focus on personalisation, if you want to keep you customers make it all about them
The last thing you want to do is indulge in self gratification during a recession, and glorify how wonderful and fantastic you are, while your customers suffer. You might as well say “who gives a toss about you darling, it’s all about me”.
The luxury of being an elite brand is it’s immediate association with all things beautiful and expensive. Often however, the real profits come from more mundane sources, thereby maintaining the value. If you can’t shift the bulk of your stock, it ridicules the single, one-off, exclusive lines. When you have the rug pulled from underneath you, be that suddenly finding all you lower ticket items stop selling, or no customer’s coming to you at all, it is good to take stock about their needs and wants to demonstrate your appreciation of them, rather than your own.
This may be a fundamental ethos change too far for some, if interpreted nonchalantly, but there are always ways and means to do this without denigrating brand value. Something as simple as adopting email software that personalises product selection, to each individual consumer, being just one. The added advantage of this is the lack of necessity for staff, as such systems run autonomously to perfect data accuracy, and therefore are exceptionally cost efficient. Larger organisations should be running this type of software already, unless they have been hoodwinked by ESPs into believing they have it in built already.
Reconsider variable costs during a recession
A quick way of reducing cash outflows is focusing on your variable costs. Many companies have already implemented variable cost-reduction measures such as banning travel and non-essential meetings, freezing hiring, and restricting spend on entertainment and training. Cutting back on variable costs, instead of fixed costs like salaries and insurance, is less financially and operationally harmful to your business.
Predictive email personalisation tools such as SwiftERM run totally autonomously, enabling any ecommerce retailer to accurately predict and monetise anticipated imminent ruches with the biggest overhead currently endured by a company, the cost of staff. How much do your staff really cost?
Think outside your box
All businesses exist in an ecosystem. You can’t focus solely on your own operations and inventory levels. Protect your supply chains and keep goods and services flowing, but don’t forget to consider the upstream and downstream impacts of your decisions.
Walmart is a great example of a well-developed and aligned supply chain. They worked with their suppliers to have vendor-managed inventory, built strategic partnerships with vendors to reduce prices, used technology to gain supply chain efficiencies and more. These efforts allowed them to be the leader in low-cost grocery retail and pass the savings on to their customers.
6. Keep communication open
More than ever, previous recessions have highlighted the importance of building ever closer relationships with your customers. It’s essential to identify and communicate regularly with them so that there’s understanding across your efforts.
Yes, it’s time-consuming to catch up with consumers frequently but accuracy of knowledge of immediate demand, needs, wants and desires prevents mistakes like ineffective marketing spend or missed purchase opportunities. The last thing you need is run a campaign that costs money, rather than realises and delivers on its potential.
Mitigate supply chain risks
Supply chains have dependencies that put your business at risk. Any recession exposes global supply chain weaknesses, so here are our supply chain strategy for ecommerce.
In a nutshell
Don’t let a recession stop you from improving your business. Companies that use these outlined tips to be prepared and proactive will be able to recover faster — and find themselves in a massively better position — once the economy picks up.