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5 Ways To Prepare Your E-commerce Business for a Cooling Economy

Supply chain issues, inflation, and growing interest rates are things you can’t control. Focus on what is within your control. Set up your e-commerce business to thrive in a cooling economy and bounce back better when the economy strengthens.

In this article, we’ll deep-dive into 5 ways to prepare for success no matter the economic landscape (plus some actionable tips to get started).

The Scoop on Preparing Your E-commerce Business for Success in a Cooling Economy 

  • Analyze common business metrics to discover opportunities to enhance operations.
  • Increase customer retention with programs that create excitement.
  • Nail your branding by getting to know your customer base better than ever before.
  • Develop a strategic inventory approach so you never go out of stock.
  • Use data to discover what’s working and optimize, optimize, optimize.

As the economy changes, so will your funding needs. Don’t let a cooling economy derail your e-commerce business! Get fast, flexible, and simple Working Capital Funding to stock up on inventory, invest more in advertising, and much more. 

#1 Get a Handle On Your Business Metrics

Understanding trends can reveal hidden opportunities to fortify your business. Take a closer look at these common KPIs ⁠— along with tips on how to improve them during an economic slowdown.

1. It may seem like a no-brainer, though sales revenue is the first place to analyze.

While sales revenue may be on a downward trend because of shifting consumer behaviors, reviewing competitor pricing may give an indication of whether or not products are priced right for the current market.

Traffic sources are another area to dig into in case there are shifting trends to get ahead of. In any case, look for the levers that are driving growth ⁠— then double down.

Get hands-on with your cash flow to truly understand what is driving it.

If costs are lower than sales, cash flow will be positive. If the opposite is happening, it’s time to analyze and prioritize spending.

2.  Net profit margin is another important metric that is not to be ignored.

There are several tactics that can be implemented to improve profit margin.

One is to reduce operational costs. Dig in deep and analyze your expenses. See which areas take up a disproportional amount of the budget.

This could be labor, shipping, or maintenance costs. Reduce wherever you can to improve your profit margin.

Another method is to offer a subscription service. It sets up a recurring revenue stream that works to bolster your net profit margin.

You can start a subscription by offering auto-shipping for products on a monthly, quarterly, or yearly basis. This builds a seamless system for customer purchases and your profit forecasting.

3. Average Order Value (AOV) is an indicator of consumers’ purchasing habits and buying patterns.

A high AOV translates to increased revenue and typically profit.

One easy way to increase AOV is to ensure upsells are positioned well in product photography, listing info, and description copy.

D2C brands can also make these upsells front and center after items are added to the cart with a pop-up that displays accessories or related items that pair well with the original product (think: products that are frequently purchased together and products with high margins).

Another idea is to create product bundle SKUs, possibly at a slightly lower price point than if items were purchased separately so that it takes fewer clicks and less decision-making to get the lift in AOV.

#2 Drive Customer Retention

When an economy cools there’s usually less spending overall, which makes retention even more important. Keeping existing customers coming back is easier and more cost-effective than acquiring new ones no matter the economic landscape.

Since this segment of customers is already familiar with your brand, the focus needs to be on driving repeat behavior. Remind past customers of your brand’s value and how your products help solve a problem or fulfill a need. Sometimes it requires out-of-the-box thinking to be most effective.

Create Loyalty Programs

If you don’t already have a loyalty program, it’s time to consider one. Who doesn’t love to be appreciated for their loyalty? When consumers feel that a brand values them, it makes the brand more memorable ⁠— and thus they are top of mind for the next purchase when the time is ready. Or it’s easier for the brand to create product demand. Sometimes it even helps to drive up AOV, depending on the program perks.

One example of how to drive loyalty is to send email subscribers an exclusive offer or even a bonus offer on top of a current promo. Some people are more likely to buy if they are getting something extra special that’s not for anyone else.

This one simple email increased both revenue and Average Order Volume.

There are many different loyalty program service providers so it’s important to choose one that makes sense for your business and budget. When in doubt, keep it simple and do what makes sense as it relates to achieving your goals.

Start a Referral Program

A referral program is another way to encourage loyalty by showing appreciation to active customers who help drive new business growth by sharing your brand and products to their family, friends, and network.

When a reward is offered to both existing and potential new customers, it increases the odds of them making that first purchase.

Building a successful program starts with keeping your brand goals in mind and choosing an incentive that’ll be most compelling to your shoppers. Discounts or free items are great ideas to test.

Key in on Your Customer Experience 

The experience that customers have is extremely important to driving retention. Be intentional when planning out your customer journey. Make learning about your products, making purchases, and getting help from customer service a seamless experience.

#3 Level Up Your Branding

In a cooling economy, your brand is positioned against the competition matters more than ever.

Use these tactics to start doing just that.

Listen To Your Customers

Understanding how customers are spending money during these times can help maximize the effect of your branding efforts. Use your company data to discover what customers love about your brand.

Then tailor campaigns and content around these insights to create trust and loyalty with your target audience.

Pay Attention To Brand Equity 

Brand equity is the value of a brand and its influence on consumers. So high brand equity means your customers think your offer is cooler, more, fun, or just all-around better than your competition!

There’s no one way to measure brand equity. It could be the price premium you can charge over a similar product, long-term customer loyalty, or brand recognition but you’ll know it when you see it. They are the brands recommended to you by your friends or that one product you would never go without.

A few ways to strengthen brand equity are building up your brand identity to make it more recognizable in different marketing channels, growing your authentic connection with customers, and improving any pain points a shopper may have when interacting with your business.

Prioritize Consistency

Always strive to have consistent messaging, tone & voice, across all channels. Companies that prioritize marketing in a stagnant economy will typically get better results than those who stop investing in marketing altogether.

It’s a matter of finding the areas where that investment can make the biggest impact. Paid ads, on-site content, social media, and all else is fair game. Reallocate your effort and cash toward your most successful channels.

This is a marathon, not a sprint — build for the long haul.

If you’re looking for more ways to optimize your e-commerce brand and marketing strategy, even in a cooling economy, sign up for our newsletter and get all the latest e-commerce insights sent straight to your inbox.

#4 Optimize Inventory For A Resilient Supply Chain

By reviewing your supply chain from end to end, you may end up fine-tuning areas that add padding to operating expenses during a sluggish economy.

Use Data To Forecast Demand

Predictive analytics gives a general idea of your product’s current demand so you can adjust pricing as needed to stay competitive while still bringing in a good profit.

Sales cycles, historical demand, and lead times will inform good inventory management decisions as consumer behaviors and the competitive landscape change.

Understand Inventory Levels

Keep store operations running smoothly by knowing the minimum inventory levels needed to keep up with sales. This can change during a cooling economy due to shifts in demand patterns and manufacturing schedules.

As sales change, inventory needs will too. There may be times when lower-performing products start selling much better and your best sellers might have a demand reduction. If baseline sales improve for a particular product, shift resources to stock up for more.

Never Stop Auditing Your Supply Chain

Auditing your supply chain can reveal opportunities to make changes for the better.

Ecommerce businesses with complex or unique products may have several suppliers to manage, but even with just a couple of vendors, an audit is still worthwhile.

Set a regular reminder to lay out your supply chain’s main parts and how they work together.

Measure lead times, cost of goods, rate of returns, and other data points. Then compare those with past periods to illustrate trends, and evaluate the ROI of the individual parts of your supply chain.

Oh hey, there! If you’re looking for more ways to get ahead of the game with inventory, check out our article on Cash Flow Meets Supply Chain: Why You’ll Need to Optimize Both for Success in 2022.

#5 Optimize What Works

Paying attention to what’s going well gives you the chance to build on that success.

Let Data Lead The Way

Use data and insights to discover where your business truly shines and how that can be even better.

If you already have great brand awareness and social media interaction, listen to all of that feedback to make product offerings more enticing.

For example, adding sought-after features your target customers have already been asking for is a great way to show you value customers’ opinions.

If you have a streamlined supply chain, see how you can further optimize to reduce costs and speed up timelines.

Lean Into Community

It can be hard to see every opportunity for e-commerce success in a cooling economy. That’s what makes getting different perspectives so valuable. E-commerce communities are great places to get useful feedback and support.🤝🏽

There are a lot of quality groups out there.

Check out Facebook Groups like E-commerce Elites Mastermind and Ecom Empires or stand-alone online groups like Ecommerce Fuel Forum.

Ecommerce Subreddits and Discord Servers also are great places to start building a community.

After joining one of these groups, spend time exchanging ideas and feedback to continue to grow.

The Final Word on Achieving (and Maintaining) E-commerce Success in a Cooling Economy

Building a business that’s sound both financially and operationally will give you a competitive edge regardless of the status of the economy. So start taking steps to get bigger wins now, and imagine the possibilities of your future growth once the economy begins to bounce back.

If you’re looking for fast, flexible e-commerce funding to help fuel growth check out our quick two-minute demo to learn more.


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