Navigating the Retail Media Revolution: Strategies for Success in 2024
5 Ways for Retail ecommerce Brands to Prepare for Recession
With the US economy running the risk of falling into a protracted recession, the need for prompt action has never been greater. Brands must prepare their business to weather any decline in revenue that shoppers, supply chain issues, or macroeconomic factors can throw at them.
Here are 5 strategies to ensure resilience during a recession:
1. Focus on the Core
When faced with the prospect of a recession, it is only natural to rein in spending. This might entail postponing projects that are too costly, especially those that require iterative testing, or abandoning those that don’t produce acceptable returns within a reasonable timeframe.
However, it is crucial to maintain brand consistency even during economic downturns. Brands with cash reserves should consider maintaining lower prices for their core products to keep customer routines intact. While it may temporarily come at a cost, this decision can strengthen brand loyalty as customers appreciate brands that maintain their core value proposition. It will also make shoppers less likely to consider competing brands.
This strategy will especially pay off in the period immediately after recession, which is full of growth opportunities.
2. Realign with Shoppers
Flexibility is important during a downturn and the key to flexibility is data. Brands need to know if they are losing core shoppers to lower-priced alternatives or if they are gaining new ones from other brands and categories. Brand disloyalty will only become worse during a recession, so brands need to keep their customers through a consistent rewards strategy. While data is important, brands must ensure it is properly interpreted to determine the root cause behind changing consumer behaviors. The root cause must be addressed when possible.
Affordable luxury is another strong theme among shoppers during a recession. Brands should consider aligning with this trend by offering indulgences that are within shoppers’ budgets. At the same time, brands may also want to revisit their core messaging and shift customers’ perception of their products from a want to a need. If they believe that a product can enhance their well-being, for instance, then engagement can be maintained even during tough times.
Brands also need to pay close attention to how popular search terms change in advance of a recession. Because shoppers tend to spend more time shopping across brands to find the best deal, some keywords gain traction while others lose importance. It is crucial to understand these shifts in order to adjust retail media spend accordingly and increase brand engagement. Optimizing share of voice will help brands drive growth even through a recession.
3. Realign the Offer
As shoppers change their spending patterns, brands need to realign their offers to match. Rationalizing the offer can make sense to cut down on costs, but it also needs to be data-driven so that brands can bolster their focus on the most relevant and profitable items with surgical precision. This will help brands make informed and consistent decisions while adjusting their product lineup on a SKU-by-SKU basis.
Brands may also consider entering into new categories to diversify their revenue sources, but keep in mind that the pandemic has had an impact on product and category growth trends. Pay close attention to which shopping behaviors are going to stick and which will have a rebound effect, such as the shift from the home decor trend during the pandemic to shopping for experiences in the aftermath.
Finally, although there may be pressures to boost margin, brands would be wise to protect their opening price points during a recession. It is important to protect pricing integrity for shoppers with a tighter budget.
4. Automate Everything
We’ve said follow the data, but how can brands make the most of it? Here’s where automation is useful. While it requires upfront investment in technology, the resulting improvement in performance saves brands money in the long run.
Whether it’s adding robotics to warehouse management or synchronizing retail media spend with inventory to avoid wasteful ad spend, automating routine tasks can help save time and increase employee efficiency.
To optimize data tracking, brands must ensure that the systems they’re using are interconnected in a way that allows real-time responses with little to no manual intervention.
5. Act Fast and First
Historically, the fastest acting companies outperform purely reactionary decision makers.
The faster a brand acts, the greater the cash reserves on hand to navigate challenging financials, and the more it can strengthen its core value proposition. Fast-acting companies have first rights to new growth opportunities as they arise post-recession, especially if the downturn is short-lived.
However, accuracy is just as crucial as speed. Brands must avoid constantly undoing their decisions due to the occasional outlying piece of data. There is value in being flexible and agile, but being inconsistent can also hurt a brand’s image and chance of success. Brands should use data that’s available now, be proactive, and then course-correct only if truly warranted.
Recession threatens the economy. By addressing these five areas, brands can give themselves the leverage they need to increase their chances of thriving in tomorrow’s retail market.