The current global climate is tough for retailers to say the least. And with economists all but guaranteeing that a recession is upon us, we know that retailers all over the world are worried.
No matter what situation you’re in right now — whether you’re still selling online, doing curbside pickup, or not selling at all — know that there are steps you can take to minimize the impact of a recession and/or protect your business from it.
Let’s look at 6 things you can do today and in the coming weeks to address the downturn.
1. Invest in digital transformation
There’s a post making rounds on social media about how the digital transformations of businesses were led, not by CEOs or CTOs, but by COVID-19. It was meant as a joke, but it resonated with the business community because there’s a lot of truth in it.
The fact is, when the coronavirus pandemic hit and stores were forced to close, retailers that had strong digital infrastructures were in a relatively better position to act. Meanwhile, companies that didn’t have their digital ducks in a row had to ramp up their efforts because it was the only way to survive.
If you’re part of the first group — good. Keep up with your efforts and find ways to improve. For instance, maybe you’re already selling online, but haven’t connected your ecommerce store to your POS system. If so, now is the perfect time to integrate all your systems.
Now, if you’re part of the second group and aren’t using digital solutions like a modern POS system or ecommerce site, then it’s important to invest in these things ASAP. Use this downtime to find systems that fit your needs and then set them up right away, so you can kick off strong when the retail industry springs back up.
Need help going digital? Vend helps you manage your online and in-store operations from one place while launching your brand into new markets. Open your store to the world by combining Vend’s easy-to-use POS and Inventory management with the best ecommerce platforms on the planet!
Want to see what a strong digital retail initiative looks like? Let’s take a closer look at Nike’s experience with COVID-19 when the virus was at its peak in China.
According to a report by Coresight Research, by late March 2020 (a time when China was starting to bounce back from the coronavirus) Nike reported a 7% increase in revenues. Not only that, but the company saw its digital commerce grow 30% in China, thanks to its activity apps.
Nike lays out its experience in four phases: Containment, Recovery, Normalization, and Return to Growth. At the time of writing this, Nike puts itself in Phase 3 in China, and Phase 1 in North America and Europe.
As stated in the table above, while its stores were closed during Phase 1, Nike focused on its digital efforts by launching the NIKE App in China, unveiling products digitally, and promoting ecommerce.
Of course, not everyone has Nike’s large presence and balance sheet, and not every retailer can launch an app. But there are some valuable takeaways from Nike’s strategy. In particular, doubling down on ecommerce and connecting with shoppers digitally are critical actions during this period.
So, make sure you have the tools and systems that allow you to do these things successfully.
2. Get all your channels working together
It’s not enough to have a presence on digital platforms like ecommerce, social media, and mobile. You also need to connect these channels together and keep all your data in sync.
Aside from saving you from having to reconcile your records and re-enter your data, having a tightly integrated system enables your sales channels to work together, so you can provide services like curbside pickup, local store fulfillment, and same-day delivery.
And these days, such services are in high demand.
Michael Decatur, CMO at Truxx, a platform that connects people with truck owners, says they’re seeing significant growth thanks to retailers “implementing buy online and pick-up in-store (BOPIS) and last-mile deliver solutions.”
“The goal for many of these retailers is not to be solely dependent on store traffic, but rather have multiple channels to sell,” he says.
“Initially, these initiatives were spurred by eCommerce competition, but increasingly they are being deployed to combat the massive down-turn in retail activity.”
Clearly, these services are essential now that more people are staying home, but bear in mind that they will remain in-demand long after this pandemic is over.
Social distancing and quarantine measures have prodded more consumers to adopt BOPIS, curbside pickup, and same-day delivery; and we can expect them to continue using these services even when stores open up again.
That’s why if your store isn’t set up to offer these services, it’s high time to establish them.
3. Run a leaner retail business
“Having a strong balance sheet will empower your business to operate no matter the circumstance,” says Forrest McCall, owner of the personal finance blog Don’t Work Another Day.
Forrests’s advice? Get lean.
“A business that has maximized efficiencies and runs on a lean concept will be capable of thriving in any environment. This means cutting any unnecessary spending and putting your efforts where they can be best maximized.”
Jody Grunden, CEO and co-founder at Summit CPA Group, echoes this and advises retailers to review their expenses and identify things to cut.
“Are there programs you’re paying for but no longer using? What are your highest line items that you might be able to reduce – i.e. if you have an expensive health insurance plan, could you cut back on that and save money?”
She adds that retailers should fill in their employees on what their plans are.
“Not only is it helpful for them to understand why you’re doing what you’re doing, but they may also be able to provide helpful insight on things that could be cut that will help the company budget moving forward,” she explains.
4. Strengthen your customer relationships
“I would say my number one tip for anyone trying to recession-proof their business is the same tip I’d give to someone trying to ensure they’re not going to be let go when a company downsizes: Make yourself invaluable and irreplaceable,” says Dan Bailey, president, at WikiLawn.
According to Dan, retailers can do this by building deep connections with their customers.
“There are a lot of small, local restaurants, for example, that are seeing a surge in takeout orders right now simply because locals want to support them. They’ve built up a relationship and are recognizable enough to not just be replaced by any other restaurant, whether that’s because of the food, people, atmosphere, or all three,” he says.
“Loyalty is a powerful thing, and it will help keep your doors open,” Dan continues. “If you’re afraid your business isn’t unique enough to garner that kind of loyalty, you need to get a little creative. Hire the kinds of people who will greet customers by name and ask them about their kids. Support locals and celebrate local events. Underpromise on what you’re offering so you can then overdeliver, and you’ll give customers the impression of generosity even amidst trying times.”
Another way to build and maintain strong relationships is to regularly touch base with your customers.
As Ryan Daniel Moran, founder of Capitalism.com puts it, “the trick to a recession-proof business is to stay top of mind in the customer; use your customer emails, texts, and physical addresses to keep in front of them, even if that is to simply support them through a transition like right now. The companies that stay top of mind through this time will come out the other side victorious.”
One tool that can help you stay top of mind is Marsello. It does customer retention and customer marketing via email, SMS and loyalty like no other and plugs into Vend perfectly. You can get going really simply and start engaging with your customers. Use Marsello to stay in touch with your customers with one connection and up to 3,000 contacts free for three months.
5. Be creative with how you position your business
Getting people to spend during a recession is much harder, but it’s doable if you position your business the right way.
“To survive economic downturns and recession-proof their companies, retailers need to position their brands and products differently to remain relevant. Customers don’t want to feel like they’re spending frivolously; they want to feel smart and sensible. They want to get the biggest bang for their buck during a recession,” comments Jonathan Ochart, founder and CEO of The Postcard Agency.
Jonathan explains that “with the right messaging” retailers can stay relevant and continue driving sales.
“For example, brands may consider marketing their products as investments with a variety of uses, instead of indulgent treats, to remain relevant and sensitive to customers’ new financial situations. A luxury retailer may position watches or designer goods as heirlooms to be passed on from generation to generation, while a consumer technology brand may emphasize a product’s ability to enhance work-from-home experiences.”
“These approaches demonstrate a retailer’s understanding of the new economic landscape and the adjustments customers are making in order to stay afloat themselves, thus strengthening relationships between a retailer and its customers, he continues.
We can see this in action in the supplements company Athletic Greens. In the ad below, you’ll see that AG positions its product as something that can help “insure” people’s health.
If it makes sense for your business, make it a part of your game plan to re-position your products or services to be more relevant during a downturn. How can you shift your messaging so that it resonates with customers wh are keeping a closer eye on their budget? Can you start marketing to people who are more likely to spend?
The answers to these questions should help guide your marketing efforts going forward.
6. When revenue picks up, stockpile cash
Cash is king, especially during a downturn, so see to it that you have enough liquid funds in your account at all times.
How much, exactly?
“We typically recommend for any business, no matter what size, that you maintain at least 10% of your annualized revenue in the bank at all times,” says Jody.
“For example, a $3M company should have about $300K in the bank account at any given time. This practice is extremely important for businesses as it prevents small issues from becoming big issues and it reduces big issues completely.”
And it doesn’t hurt to have even more cash, particularly if you’re preparing for a downturn.
According to Jody, “as you’re preparing your business for the recession, you may want to increase that amount to at 15-20%. If you don’t have that 20% in the bank, make that a goal for your company. Keep in mind that in addition to that 20% you’re going to want to set aside your tax reserve. For simplicity’s sake, we recommend setting aside 40% of the net income on a regular basis.”
Recession-proofing your retail business requires balance: you need to invest in the right things (like digital) but cut back on unnecessary spending, so you can have enough money in the bank. You may need to rethink your marketing strategy and come up with messaging that resonates with the right people at the right time.
Prepping for a downtime also requires urgency. So, take action. Do what you can today and work on building a stronger retail biz for tomorrow.
About Francesca Nicasio
Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.