Recession and Adaptable Commerce: How Can Investment in Digital Save Your Business?
Investment in adaptable digital commerce can help businesses emerge from the recession unscathed. Here’s why and how.
According to The Doomsday Clock, it’s 100 seconds to midnight, the closest we’ve ever been to Armageddon. Indeed, every single warning light is glowing red. The military campaign in Europe, stalling recovery from the pandemic, and protracted droughts across the continent have contributed to an energy crisis, rising inflation, supply chain disruptions, and a great deal of economic uncertainty.
Despite the ECB trying to bolster its inflation-fighting credentials with a record margin increase in interest rates across the eurozone, a recession seems imminent. According to Bloomberg, the odds of a recession in the UK in the next 12 to 24 months are estimated at 75%, 60% in the eurozone, and 100% in the US.
Despite the gloomy outlook, many experts agree that adequate planning and strategic measures can prepare a business for the current economic slowdown. Digital, in particular, can help businesses, if not thrive, at least survive the recession.
In this article, we’ll look at how ecommerce and adaptable commerce tools can help a business weather the economic storm and keep it going through the winter.
You Don’t Have eCommerce Yet: How Investment in Digital Can Help Your Business Save Costs
In times of recession, any financial investment seems contrary to reason. However, investment in technology can help a business save costs and grow in the long term. Gartner agrees, saying that neither geographical disruptions nor rising rates of inflation can slow investment in technology, which is on track to reach $4.4T by the end of this year. Similar studies reveal that companies that do, in fact, minimize their technology expenditure during a recession lose key customers when the market finally bounces back.
So, how does investment in ecommerce help reduce costs in the long term?
Reducing labor costs and increasing efficiency of salespeople
While setting up an ecommerce store might be costly, it requires fewer resources than traditional businesses.
One of the most tangible positives of ecommerce in terms of cost reduction, which universally works in any market climate, is the lowered cost of labor and increased efficiency of salespeople.
A digital channel greatly increases the overall efficiency of an entire company. Some experience as much as 80% savings on order processing time, freeing labor resources for more pressing tasks. Without an online channel, your reps may serve up to 20 retail outlets in a week; with a digital channel, they might serve up to 60.
By promoting self-service options, salespeople can spend less time on routine activities and more time building better relationships with existing clients or prospecting for new business. Instead of acting as disruptors, salespeople can become enablers of ecommerce in an organization by gathering customer feedback and acting as customer advocates.
Moreover, recent advancements in technology, such as personalization and recommendation engines, can help solidify and strengthen your customer relationships. By automating upsell and cross-sell options, you provide customers with a much wider and better choice of available options and help them find supplementary or substitute products without the help of a salesperson.
Reducing order processing and centralizing order management
The interconnectivity of different systems will keep all your data in sync and up to date, providing faster and more efficient processing. This, in turn, will support your salespeople and customer service reps as they will be able to retrieve the necessary information easily and take care of customers more quickly.
At first, this upturn in productivity might be hard to quantify, but in the aggregate and longer term, business efficiency translates into tangible cost savings that can be turned into revenue-generating initiatives when the market eventually bounces. Consider how much money and time you can waste chasing a possibly unreliable paper trail or inconsistent communication on different channels. With ecommerce, you have a digital footprint of every transaction in the cloud that you can retrieve at any moment without affecting your day-to-day business operations.
Getting access to valuable data and using it to improve your business
eCommerce helps you accumulate vast amounts of data from all the areas that have an impact on your store. This data is incredibly valuable because it offers unique insight into your business performance, sales effectiveness, inventory, customer buying habits, and wider market trends. You can use this knowledge to forecast your future demand/supply and discover areas that need improvement.We have a specific business use case that illustrates the power of ecommerce to leverage data. Click on the link below to learn how Virto Commerce helped Bosch Thermotechnology build a loyalty portal that gave the company access to valuable customer information unavailable through traditional channels.
Reducing costs in a dwindling market segment
When markets brace for an upcoming recession, few think of increasing sales or expanding to new regions. In a shrinking economy, even supporting the same channels can become very expensive.
Take fragmented retail, for example. In developed countries, chain retail has been expanding for years, slowly but steadily absorbing independent retail outlets.
If you happen to operate in fragmented retail (or have any other dwindling sales channel, for that matter), you’d see digitization primarily in the light of saving costs rather than exploring new revenue opportunities. These might be expenses on representatives, call centers, and customer service, to name a few.
In decreasing markets with a continuously shrinking landscape, ecommerce can help to support the transformation of an entire business and allow it to continue operating profitably by eliminating inefficiencies and automating resource-consuming manual processes.
The Importance of Adaptable Commerce
Evolving buyer expectations are driving significant changes across the industry, demanding new, adaptable solutions that can change in line with market requirements. Unfortunately, static platforms are not up to the task – they cannot efficiently scale, easily incorporate new features, or smoothly integrate with other applications. Adaptable solutions, on the contrary, are designed for continuous change, which allows small teams of developers to add new features or functions every one to two sprints for at least five years, keeping the cost and speed of development at the relatively same level.
To learn more about the difference between static and adaptable platforms, click on the banner below.
To illustrate the difference in efficiency between static and adaptable platforms, consider scaling. In times of relative economic stability, clients often ask if an ecommerce platform can scale up. Say, “If orders surge from 10,000 a week to 40,000, will an ecommerce platform be able to handle it, and how much more will it cost to maintain?”
During a recession, however, the situation dramatically alters, and the question becomes, “Can your platform effectively scale down?” Now, instead of 10,000 orders a week, a business ends up processing 3,000 at best. But what about ecommerce costs? Will they proportionately go down or stay at the same level?
The problem is that if a digital solution is static, ecommerce costs will remain stable, despite the dip in orders and traffic, rendering the whole digital enterprise commercially unsustainable.
Adaptable solutions, on the contrary, allow you to change your resource plan and reduce your costs in accordance with the current pressure on ecommerce.
Adding and disabling new features, testing new products and services, and customizing shopping experiences in adaptable platforms are equally straightforward.
Because the cost of innovation is fairly predictable, your overall expenditure on ecommerce remains stable, which is a significant benefit in times of economic slowdown.
You Have eCommerce: How Can You Prepare Your eCommerce Businesses for Recession?
It seems more than likely that the recession is not going to bypass ecommerce. As 2022 is coming to a close, ecommerce sales are slowing down. Although ecommerce is still growing, it’s doing so at a much dimmer growth rate, meaning that the market is going to be affected, and some players will shift to the periphery.
With the current price increases, some vendors will try to transfer some costs to buyers and partners. Amazon has already added a fuel and inflation surcharge of about 5% to existing FBA fees. Increasing prices in return, however, might not be the most sensible strategy. To keep your business afloat during a recession and stay above the break-even level, you’ll need to find ways to either increase your bottom line or decrease costs. Below are a few suggestions of how you can achieve that.
Minimize overhead costs
Improve digital CX
It costs more to acquire new customers than to keep existing clients (in fact, anywhere from 5 to 25 times more). Considering the cost and effort involved in customer acquisition, it makes sense to try to retain existing customers first.Research indicates that in the last few years, B2B companies have been competing largely through the quality of customer experience. As many as 87% of buyers report they would switch suppliers that they find difficult to do business with. So, if you invest in a good quality digital customer experience, the chances are you’ll keep your customers happy, and they won’t need to shop around.
So, what is a good CX, and how can you improve digital experiences?
- Accurate information: Nearly half of B2B buyers admit they often have trouble finding basic but critical information from suppliers. An online portal is a fantastic opportunity to provide such critical information. Coupled with attractive images and videos, your online catalog can be as convenient as a printed brochure.
- Analytics tools: By enriching CX with analytics tools that solve potential problems or showcase differences in equipment performance, you’ll help buyers find more value in your offerings.
- Self-service options: 99% of B2B buyers report they will purchase through a completely self-serve portal. Although business buyers still consider human interaction important, they are increasingly comfortable with self-service channels. Digital portals provide multiple opportunities for efficient self-service: customers can log in to check product prices, request quotations, choose the necessary items, check out, log back in to track orders, and so on.
- After-sales support: Companies that provide after-sales services report increased customer satisfaction and brand loyalty. Devise mechanisms that work with buyer returns and complaints to both relieve your technical support from tasks that could be safely automated and increase transparency between your customers and your business.
- Loyalty program: As many as 77% of customers are more likely to continue using a brand’s services if it has a loyalty program. A loyalty program is a fantastic tool in the company’s marketing arsenal that’s not only about rewarding customers but also about creatively maximizing customer engagement. Consider offering loyalty points for referring potential customers, writing reviews, or ordering in bulk. Exchange points for the brand’s products or services or discounts for the next orders.
Reduce cart abandonment
According to research, 73% of shopping carts are abandoned on desktops and 86% on mobile devices. Consider how much of that lost income can be potentially retrieved if you send a friendly reminder to customers about products in their carts. Probably not much, but it’s still worth trying. In fact, there are many other ways that you can reduce the cart abandonment rate, from simplifying your checkout process to lowering shipping fees.
Click on the banner below to learn more about different strategies to win back abandoned cart revenue.
Continue to market your business
Unfortunately, when times get tough, many businesses often make an erroneous decision to cut their marketing expenditure, which is counterproductive. History has repeatedly shown that businesses that continue to invest in advertising and marketing during an economic downturn benefit long-term. The McGraw-Hill study that surveyed more than 600 businesses amid the recession of the early 1980s confirmed that those who upped their marketing spending benefited from higher sales after the economy recovered.
A recession creates unique opportunities to boost visibility and achieve a greater return on investment across marketing campaigns. With digital marketing, in particular, a lot of marketing costs are low – think email marketing, social media interaction, and SEO.
SEO, above all, is one of the most profitable marketing channels that, if done right, delivers mind-blowing ROI at a fraction of the price. Unfortunately, during a recession, many companies mistakenly decide to cut back on SEO, which allows competitors to spike up in rankings and take a bigger pie of search visibility. Instead, companies should take advantage of a less competitive market during a downturn and ramp up their content production. By the time the market rebounds, companies that continue investment in SEO will see higher organic traffic and, consequently, more qualified leads and better sales.
Conclusion: Why Invest in Digital during Recession
Recessions are always temporary; economic forces will eventually stabilize, and the market will recover. Although it’s wise to contain expenditure at the moment, savvy managers will continue investing in digital and adaptable commerce, in particular, because it has tremendous potential to both cut costs now and pay off in the future. For those of you who are looking for an adaptable ecommerce platform, Virto Commerce is the right platform. It’s open-source, composable, headless, and API-first. What’s even more important is that Virto Commerce can accommodate any business model, scenario, feature, or function.
Interested? Schedule a demo by clicking on the banner below!