According to a recent Bloomberg survey of economists, the likelihood of a recession occurring within the next year stands at 47.5% – up from 30% just a few months ago.
Record levels of inflation, geopolitical uncertainty, and a cost of living crisis are all key contributors to this rising risk, and B2B eCommerce businesses of all shapes and sizes need to start putting plans in place to weather a potential downturn. Although eCommerce has been thriving in recent years, a recession could change all of that.
Source: US Bureau of Labor Statistics
Why B2B Companies Must Prepare for the Recession
Once supply chains become disrupted and businesses put off non-essential purchases, those that sell online B2B products and services are likely to see a significant drop in demand. As a result, the global B2B eCommerce industry is just as susceptible to economic downturns as any other sector (if not more).
How bad the recession will be, and how long it will last, is impossible to predict. But if one thing is for certain, the companies that make preparations will have the best chance of succeeding with eCommerce during recession. In fact, those that are agile enough may even be able to turn eCommerce recession into an opportunity for growth.
Diving into historical data, the Harvard Business Review found that during the recessions of 1980, 1990, and 2000, 9% of companies were able to flourish despite the challenging economic conditions.
Analysis showed that the key to success with eCommerce in recession was a company’s ability to adapt its marketing strategy accordingly – a strategy that is conducive to growth rather than just mere survival.
While this may seem counterintuitive, it’s important to remember that recessions don’t last forever. As such, B2B businesses need to focus on the long-term and invest in strategies that will help them emerge from the other side stronger than before.
Practical Tips to Recession-Proof Your eCommerce Business
1. Conduct a go-to-market forecast assessment
The first step in preparing your B2B eCommerce business for a recession is to take a close look at how your go-to-market strategy may change once the economy takes a turn for the worse. This will involve forecasting different scenarios and how they might impact your business.
Some key considerations include:
- The potential impact on buyer segments – Which of your buyer segments are most likely to be affected by a recession the most? How will their buying habits change as a result? Pay special attention to those that are still not fully recovered from the pandemic.
- How buyers will respond – How will buyers respond to having their budgets decreased or frozen? Will they continue to purchase the same products and services? Will they look for cheaper alternatives?
- Customer acquisition and customer engagement – What will happen to your customer engagement levels? If your business model is based on usage, will customers still use your products and services as much?
While it is difficult to get an accurate prediction of how a recession might play out, by running different forecasting scenarios, you can at least get an idea of the potential impact and start to plan accordingly.
Using OroCRM, you will be able to access a 360-degree view of your customers, giving unparalleled insights into the buyer journey. The platform captures data across almost every conceivable customer interaction, including product views, email responses, support tickets, and so on. Along with the insights this data provides, you’ll be in a much better position to adapt your go-to-market strategy for a recession-proof future.
2. Keep an eye on your expenses
In times of economic hardship, businesses need to be extra vigilant about their expenses. This means taking a close look at both your fixed and variable costs, and seeing where cuts can be made. For example, you might consider downsizing your office space, renegotiating supplier contracts, or cutting back on non-essential advertising and marketing spend.
Of course, you need to be careful not to cut too deeply into your operations, as this could impact your ability to function during a recession.
As mentioned earlier, simply switching to a survival strategy is not enough – you need to be able to adapt and still be able to grow. Nevertheless making small, strategic cuts to your expenses can help you free up cash flow and make your business more resilient in the event of a downturn.
3. Optimize cash flows
According to Zippia, 82% of all business failures experience cash flow problems, so it goes without saying that this is one of the first areas that businesses need to focus on during a recession.
Without having access to adequate cash reserves, companies will quickly find themselves in hot water, and their options for weathering the storm will be severely limited.
Image Source: Zippia
With this in mind, optimizing cash flows and managing working capital before a recession hits is vital if you want to give your business the best chance of survival. This means taking steps such as:
- Improving inventory management – Take a close look at your inventory levels and make sure you are not carrying too much stock. This ties up valuable cash flow that could be used elsewhere.
- Reducing accounts receivable – Make sure you have an effective accounts receivable process in place so that you are not waiting too long to get paid by customers. This could involve offering early payment discounts or using invoice financing.
- Minimizing accounts payable – Take advantage of early payment discounts from suppliers where possible, and make sure you are not paying any unnecessary late fees.
There are plenty of tools out there designed to assist B2B sellers with these types of issues. 8fig, for example, helps eCommerce store owners plan for the future with a B2B supply chain management platform. It breaks down batches of products and analyzes their past and future financial impact on the business, taking into account eCommerce sales history and demand forecast.
This helps guide business owners to make more data-informed decisions and evaluate opportunity cost more efficiently when it comes to business operations such as inventory management, freight, shipping, and marketing, which may prove pivotal during a recession. 8fig also provides equity-free funding with flexible remittance schedules, as part of a larger growth plan designed to help businesses optimize their cash flows.
4. Diversify revenue streams
Don’t put all your eggs in one basket. If your business is reliant on a single product or service, you are more vulnerable to a downturn in the market. If for one reason or another, buyers decide that your product/service is not a priority purchase, you could find yourself in hot water – and fast.
That’s why it’s important to have multiple revenue streams to fall back on. This could involve selling complementary products or services, or even expanding into new markets. For example, if you’re a B2B eCommerce business that sells office supplies, you might diversify your revenue streams by selling office furniture or offering a subscription-based service for regularly delivered consumables.
Diversifying your revenue streams will not only make your business more resilient in the event of a recession, but it will also provide you with opportunities for growth.
4. Address supply chain challenges now (Consider sourcing locally)
Covid-19 showed us how frail global supply chains can be. Therefore, if you’re relying on suppliers based in countries that are hard-hit by a recession, you could find yourself facing significant delays or even complete disruptions to your supply chain.
A recent New York Times report highlighted the current issues surrounding container prices for overseas shipments. In some cases, companies were forced to pay over $15,000 per container. This is not a sum that most businesses can afford – particularly during a recession.
Of course, it’s not always possible to source everything locally, but where possible, it’s worth trying to build up a buffer of inventory so that you are not left high and dry in the event of a supply chain issue.
It’s also worth considering diversifying your supplier base so that you are not too reliant on any one contact. This will give you more flexibility and choice if there are problems with your supply chain. Ravacan is an excellent digital solution that can help you achieve this, as it allows companies to exchange real-time information with suppliers.
The platform enables the tracking of orders, inventory, prices, lead times, or any other type of online store related information. It’s an online collaboration tool that will help you remain agile and remove dependencies.
5. Focus on adding value
At times of eCommerce and recession, businesses need to focus on adding value for their customers. This means offering products and services that solve real problems for your target market. It’s also important to remember that value is not always about the price tag.
In fact, many customers are happy to pay more for a product or service if they perceive it to be of a higher quality or offering more value – even during an economic slowdown.
It’s also worth considering how you can add value for your customers outside of your products and services. For example, you could offer free resources such as eBooks, templates, or even access to exclusive content. These are all valuable assets that your customers will appreciate – especially during tough times.
Finally, don’t forget that adding value also applies to your employees. In a recession, it’s more important than ever to focus on employee retention and satisfaction. After all, your team is one of your most valuable assets.
Investing in employee training and development, offering flexible working arrangements, and providing perks and benefits will all help to keep your team happy – and motivated to do their best work.
6. Invest in a B2B eCommerce platform
Recession or not, customers will always be attracted to businesses that understand their needs and personalize the buying experience for them. They expect to easily find products, compare their given options, and know how much their items will cost and when they will arrive.
For B2B customers, in particular, configuring complex products, real-time lead times, personalized pricing, reordering, approvals, and shipment tracking are quickly becoming must-haves. Aside from customer-facing features, the right B2B eCommerce platform should give you the flexibility to adjust to changing times and optimize resources during a recession.
Seek out an eCommerce platform or a B2B marketplace platform that can accommodate multiple product catalogs, calculate prices, generate quotes, and personalize checkout. Look for flexibility to integrate existing legacy applications and incorporate new ones. OroCommerce’s B2B eCommerce software was designed from the ground up for B2B businesses like manufacturers and distributors.
Ecommerce and Recession: Plan Toward a Bright Future
While embroiled in the midst of a global recession, it can be easy to panic and lose sight of your long-term goals. However, short-term “survivalist” thinking is not going to help your business in the long run. That’s why it’s important to take a step back, assess the situation, and put together a plan for how your company should navigate the market if the worst does come to pass.
Fortunately, with a bit of preparation, your business can emerge from a recession stronger than ever and may even have the opportunity to capitalize on new markets and opportunities that were not accessible before.
Questions and Answers
Are businesses protected from a recession?
Rising inflation is not just a threat to the world economy. It affects consumer behavior and spending, primarily hitting lower-income consumers. According to analysts, many medium to small businesses, as well as upper-middle-class consumers, have a financial cushion that makes them more likely to weather the storm ahead.
What businesses do well in a recession?
Some of the most recession-proof businesses tend to be service-based B2B businesses. However, many B2B businesses can postpone non-essential purchases, including equipment and supplies. That’s because as companies grow wary about the economic outlook, they reign in spending, and the reduced optimism forces them to wait things out.
Will eCommerce continue to grow?
Digital commerce has proven to be a lifeline for businesses during the COVID-19 pandemic. However, in times of slow or weak economic growth and high inflation (known as stagflation), virtually all merchants will feel the pinch. While companies will spend less on marketing and cut out poor-performing products, eCommerce will remain a critical sales channel.
What sells best in a recession?
The best recession-proof products are things that consumers and businesses need in their day-to-day operations. These include food, clothing, and pet products. Everything from raw materials to replenishable items to technology that optimizes operations tends to sell best during recessions.