Wall Street’s been telling us that there’s a recession on the way – but we’re already seeing the impact of customers tightening their belts.
Consumer spending slowed earlier this year as inflation rose, with Americans spending $44 billion less on goods than the previous month in May.
When a grocery load that used to cost $60 has gone up to $80, customers are going to be more conservative with their spending on non-essentials.
That means that many of the self-care luxe treats they might have budgeted for – a monthly massage or manicure – are going out the window.
It also means they’re going to be more price-sensitive when it comes to all of their purchases, and may start to pull back on their online shopping habits.
So how can you make sure that your business is set up to weather the storm?
Try these tips:
- Use third-party solutions rather than staffing up
When you hire staff, you’re anticipating a certain level of income to justify their wages – but if sales start to fall, that can mean you need to consider layoffs, which is painful for everyone involved. Instead, consider keeping your team lean and using outsourced third-party solutions for the bulk of your business operations.
For example, you can use chatbots to support many of your customer support requests, reducing your need for live support. For warehousing and fulfillment services, a 3PL can help you effortlessly scale up or down depending on how things go. The Shopify app store offers over 7500 apps to help you build your business – from design to marketing to management, you’ll find no shortage of options that can help you grow without adding headcount.
- Keep capital on hand
If you’re seeing sales slow down, it’s a good time to make sure that you have plenty of cash on hand to ride out the downturn. Consider waiting on any non-essential big purchases, and avoid taking on loans with high interest rates. In general, businesses should aim to keep enough funds to cover three to six months of operating expenses, so that you’ll be able to make smart decisions rather than panicking if your profit margins start to fall.
- Add budget-friendly products
Take a look at your inventory and consider introducing new product lines at lower price points. When customers have limited budgets, they’re likely to be very cost-conscious, so making sure that you have some lower priced items can be the difference between making a sale or not.
- Include free shipping
Customers are also likely to balk at paying a shipping fee, so you’ll win over more shoppers by adding free shipping and free return shipping on every order, no matter how small. Free shipping is becoming par for the course, as far as most shoppers are concerned: 66% of customers expect free shipping on every purchase.
- Deliver an amazing customer experience
Customers want to keep shopping with brands that make them feel good. Focus on building relationships with your customers, by providing personalized recommendations and messaging based on their behavior and purchase history, and ensure that you’re giving them the support they need to learn about your products and troubleshoot any issues.
Frequent communication is key, even after a purchase: Make sure that you provide customers with an instant order confirmation and transparent order tracking, so that they know when to anticipate their delivery.
- Build a customer loyalty program
While acquiring new customers is important too, prioritizing your existing customers will help you ensure that your sales strategy is sustainable. Set up a digital customer loyalty program where your customers will receive points for every purchase, as well as completing actions like sharing your posts on social media or referring a friend. By gamifying the shopping experience, you’ll be able to encourage customers to buy more frequently and stay loyal to your brand.
- Simplify the returns process
When customers are pulling back on their spending, they’re likely to be more concerned about return policies – they don’t want to risk not being able to return a product that doesn’t work for them. Make sure that you alleviate their concerns by incorporating a clear and simple returns policy with a generous window of time for accepting returns for any reason.
If a customer does want to make a return, that process should be just as straightforward: By using a returns management solution like Loop, customers will be able to initiate their own returns through a self-service portal, and get a return mailing label or scannable QR code to bring to a drop-off location. Improving your returns policy can help you win over cautious first-time customers, and help you build brand loyalty among existing customers: 96% of customers say they’d buy again from a brand that offers an easy return policy.
When consumer spending patterns change, it can be a concern for your business – but it also represents a time to innovate and make changes to your brand that reflect what your customers want today. By paying close attention to customer behavior and shaping your business strategy around putting their needs first, you’ll be able to ride out any recession and come out stronger than ever before.
Want to learn how Loop can help you recession-proof your business? Get a demo today.