Flashback to the financial crisis of 2008 that hit the business world like a tsunami, many businesses were left struggling to stay afloat in the troubled waters. Among the notable companies that seem to have weathered the storm is Amazon.
As most merchants were counting losses and closing shops, Amazon reported profits and was even able to scale up its operations and with this increased market share and sales revenue. One may ponder, how did they pull it off? As the record has it, they leveraged a data-driven approach and the latest technology to stay ahead of the crisis.
Now fast forward to 2023, and the global financial and business world is once again teeter-tottering in the murky waters of recession. The COVID-19 monster that had most businesses closed for the better part of 2020 did upend markets and led to massive disruption.
For e-commerce companies, especially if you do not have enough capital and assets like Amazon; the main concern is how to prepare for the unknown like a recession while ensuring survival in uncertain times. This article looks at how startups and e-commerce businesses can weather an economic downturn in their business and grow
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1. Leverage technology
In the stone age, people used stone age tools but today we are in a digital age and as such artificial intelligence AI, big data and machine learning, need not be alien to modern businesses. New technologies are revolutionizing the way businesses operate, and e-commerce is no exception.
Tapping into technology can help businesses synthesize large amounts of data in the blink of an eye and use it to make informed and timely decisions. In addition, leveraging technology can help startups and other businesses gain valuable insight into consumer behaviour patterns, make data-driven decisions and optimize their operations by analyzing consumer data.
New technology can be useful for e-commerce businesses to counter recession by using data to personalize the customer experience, increase customer retention rates and loyalty, and predict and prevent fraud. In turn, as businesses leverage technology, they will be able to have a competitive edge and ultimately drive sales and scale down on the cost of production.
2. Make solid plans
The key to weathering a recession is to make solid plans. This may include and is not limited to prioritizing which areas are key to the running of the business and which ones are not. Making projections of how much to spend versus revenue earned and putting in place a budget and so forth.
3. Cutting down on costs
Preparing for a recession can be painful as it involves prioritizing and cutting down on costs where possible. E-commerce businesses can slash expenses that are deemed unnecessary for the time being such as travelling for meetings and advertising in certain channels. Also finding ways and solutions to make operations more streamlined and efficient.
4. Make customer retention your focus
In case of recession, companies can be tempted to make so many changes in a bid to save on costs, which is a logical move. However, it is as important to prioritize keeping existing and particularly loyal customers happy and satisfied.
As it goes it is easier to sell to existing customers and acquiring new customers takes time, energy and resources and might be difficult in times of a recession. So, prioritizing and focusing on retaining customers helps to keep the revenue flowing and reduces the need to acquire new customers.
5. Make diversified revenue streams
When businesses diversify their revenue streams it is a way of shielding their business from collapsing in case of an economic downturn when sales plummet in one area. An e-commerce business can diversify, for instance through starting a new sales channel or creating new product lines.
6. Build emergency funds
Coming up with an emergency fund can assist start-ups and e-commerce businesses to overcome an economic storm if there is a recession. This becomes a cover allowing businesses to operate until the economy recovers.
In conclusion
Events that lead to a recession may impact e-commerce companies’ performance differently. E-commerce businesses can cushion themselves by being strategic and putting in place a solid plan if they are to grow.
Also, businesses can embrace innovation and stay agile to help weather economic downturns. Therefore, with better contingent plans, startups and other businesses will be able to come out of their predicament stronger and more resilient.
However, in leveraging technology, being aware of the technological challenges and limitations in preparing for the unknown is equally of great importance.
New technologies are beneficial, but drawbacks exist such as the accuracy and fairness of machine learning algorithms have been questioned. For instance, when it comes to job hiring and scoring credit. Startups and businesses therefore will need to work with experts to avoid violation of the privacy of customers or bias.
