The IMF has said a third of the world is in recession, and yet a number of eCom businesses continue to grow. James Hyde looks at what we can do to not just survive, but to thrive.
More and more businesses are struggling with increasing costs and labour shortages whilst still getting to grips with Brexit. Consumers are battling the cost of living as inflation rockets grocery prices and energy becomes unaffordable. With recession now declared in a number of key economies, it’s inevitable that retailers are expecting tough times ahead.
In a review of how publicly listed companies coped in previous recessions, 17% went bankrupt, were acquired or went private, and of those that survived 80% hadn’t reached their pre-recession growth rates three years later. However, they also found that 9% of companies actually flourished.
So what can you do now, to be in that 9%?
During Covid, online retailers were able to take advantage of increasing internet adoption, greater surplus income, high demand and shortages of supply. This drove higher margins and increased marketing budgets. With rising costs, staff shortages, falling disposable incomes, and increasing returns all eating into margins and available marketing spend, we are now in a very different economy.
When the external markets are against us, we cannot hope to change them, but we can change our strategy from making the most of an external growth environment, to optimising our internal business environment instead.
Here aresevenareas we should all be reviewing right now:
People and culture
Unless you’ve managed to build a one man empire, it’s likely that people are one of your biggest costs and they are certainly one of the biggest variables in the success of your business. You might not be able to give everyone a massive pay rise, but you can make your company a great place to work. Creating an awesome culture takes time, but there is no better time to perfect it than now and that includes making sure you have the right people too.
Motivated people, and the right people, are the first key to success in any business.
Hammering suppliers for discounts is never a good long term strategy so with costs increasing largely outside of our control, we have to look instead at how we can be more efficient. Much of this isn’t exciting, and it can feel like small improvements won’t make a difference, but remember a 1% improvement each day results in a 37 fold improvement over a year! Document your processes, separate core business activities from those which are peripheral and consider outsourcing them. Invest in training and ensure your team are working in their zone of genius – doing high value activities, not pushing paper for the sake of it. You may not see all of the benefits immediately, but when sales start to pick again you’ll soon be ahead of the game.
While we all claim to review our marketing spend regularly, the reality is almost every company has a couple of skeletons in the closest when it comes to digital marketing – activities that you keep doing because you always have, or simply because you forget to turn that campaign off. Now is the time to apply some zero budgeting. Start with a blank piece of paper and ensure that each activity justifies its budget and build back up what’s really working.
When your top products are bringing in the cash, it’s easy to ignore the long tail of other products. You would be amazed the true cost of keeping end of line items (that often never get sold), storing high numbers of SKUs that rarely sell, or even keeping inventory that’s out of date or out of fashion. While it might cause some emotional hurt, and a little knock to the ego, to clear out those products which aren’t performing, you’ll likely sell more and free up some cash (and with far less inventory costs and write downs) if you can focus on a smaller set of top performers.
Many are questioning whether we’re seeing the end of free returns, as rising costs mean customers are being more choosy about what they keep, but regardless of your view there are a number of actions you can take to reduce the cost of returns to your business.
Shipping the right product, on time, to the right address is a good start, but setting a clear returns policy and giving regular updates to the customer on shipping are all good steps to take. Collecting data on the returns you receive, the reason items are returned and how often is probably the biggest step you can take, however, allowing you to systematically remove listing and product issues which cause unnecessary returns and replacements.
The right platforms make running your business easier, but the wrong platforms can do the opposite. Often businesses will have subscriptions to services they no longer even use. Take the time to review all of the platforms you use and make sure that they are still the right fit, and more importantly that you’re using them effectively. Investing in the right technology has been shown to produce the biggest impact in post recession success.
So while the press is full of doom and gloom right now, there’s a lot to be getting on with. I’ve purposely not spoken about sales, because if you have the right product and the market is there, sales will come, and when they do, hopefully you’ll be able to make the most of them with a leaner, more efficient business that’s ready to scale.