How to grow your e-commerce business in 2022 as consumers tighten their belts

Retailers around the world are bracing for a major economic downturn, with supply, demand, geopolitical, and fiscal policies all contributing to a consumer environment that sends jitters through some quarters.

Lingering supply chain constraints from the recent pandemic, political events, and elevated American demand – boosted by plentiful jobs and $6.5 trillion in Covid stimulus have coalesced to instill pessimism among both business leaders and consumers. Four out of five U.S. CEOs expect the world’s largest economy to enter a recession.

Unlike the hit Covid delivered however, the currently brewing perfect storm threatens to blow through the global e-commerce market, as well.

Originally expected to build off consumers’ Covid-driven reliance on online shopping, e-commerce instead is headed for its first-ever year-over year decline, according to most sources. After e-commerce accounted for 14.9 percent of all U.S. retail sales at the beginning of the year, Statista pegs it at just 15.4 percent at the midway point. Demand for online shopping inspired millions of entrepreneurs to start dropshipping and other e-commerce businesses and accelerated bricks-and-motor stores’ plans to add digital shopping channels to their offerings.

At the same time, the participants in this more-crowded market are fighting for fewer customer dollars, as rampant inflation and other economic factors are driving consumers to hunker down, making less discretionary cash available to e-retailers.

History has demonstrated that e-commerce companies fare better than their physical-location counterparts during an economic downturn, thanks to lower overheads, lean operation, global markets, and ability to pivot to new products, delivery methods, and marketing priorities. Still, e-commerce enterprises will not be immune from the 2022-23 economic downturn.

It is important to realize, however, that the recession will not affect all e-commerce organizations the same. Some will fail; some will survive; and the smart ones will even prosper during this period while positioning themselves for even greater success as the world emerges from the darkness.

Increasing e-commerce sales during down times

There are several measures companies can take to improve their chances of maintaining revenues and increasing their share of the global e-commerce market during and after the rough times that lie ahead. While it may be prudent for consumers, hunkering down and trying to ride out the storm is not the best strategies for e-commerce companies to adopt during tough times. Perhaps counterintuitively, now may be the best time for online retailers to invest in the technologies, marketing campaigns, and business development initiatives aimed at drawing new business and maximizing existing customers’ lifetime value.

E-commerce companies should consider the activities outlined below to insulate themselves from the impending downturn, empower themselves to hit the ground running when brighter days prevail, and build resiliency into their companies to prepare for the next disruption to come along.

1. Streamline your logistics and supply chain

In an era of rising prices, consumers place even greater value on e-commerce convenience. Any lapse in inventory availability, fulfillment, or delivery can easily drive customers into the arms of competitors. The current lull is a great time to examine your supply chain operations, partners, and processes. Trying times demand flexibility. Diversifying supply sources, reducing the number of touchpoints and “chain-of-custody” transfers give your e-commerce firm the nimbleness to postpone supply shipments, amend order amounts, negotiate terms, and otherwise respond quickly to depressed demand and dynamic customer desires.

Just as important, a supply chain review now will grease the rails when the recession ends and it’s once again time to scale up production.

For many, taking greater control of the supply chain allows them to leverage multimodal delivery, mitigates supply shortages, respond to demand shifts and regulatory developments, and work around weather delays and regional conflicts. For some large e-commerce companies, this might mean vertically integrating to gain more complete control over their logistics. American Eagle, for example, purchased a logistics firm to improve its “agility, speed and diversification” at the first sign of post-Covid disruption. But you don’t have to shell out $350 million to gain control of your supply change. Incremental steps can work wonders.

Managing your own logistics can be resource-intensive, but if you have the in-house expertise, the control you can wield can pay dividends. As the ultimate “buck stops here" method, you can detect and resolve bottlenecks quickly to minimize their detrimental effects on production, delivery, and customer satisfaction.

If, on the other hand, you prefer to leverage the external knowhow and resources that come with outsourcing logistics, take this time to vet your current provider and investigate potentially more responsive vendors. Engaging third-party logistics companies puts industry experience at your disposal without spending money on infrastructure, personnel, and management oversight.

With extreme weather events occurring more frequently and international relations becoming more unstable, McKinsey & Company has determined that e-commerce companies can expect a supply chain disruption lasting a month or more every 3.7 years, on average. Even if you’re happy with your current fulfillment and transportation partners, locking in redundant raw material suppliers and alternate delivery mechanisms can provide critical flexibility and resilience to your value chain.

2. Refocus on customer service

E-commerce flourished during Covid because it responded more quickly and adroitly to consumer desires that traditional retailers. The industry’s innate advantages should help savvy e-commerce companies power through the current circumstances, as well.

To accomplish this, data must become your best friend. While customers become more cost-conscious as prices rise, across-the-board discounts can hurt your business more than they help by leaving money on the table and cutting off much-needed revenue. Instead of slashing prices in a desperate attempt to keep customers, make even greater use of your customer data to tailor promotions, messages, products, and interactions to which they will respond.

There are many ways to reward customers without sacrificing the bottom line:

• Ease your service terms – Extend product warranties and return windows to make the buying decision easier.

• Upsell and bundle – use order histories and other data to recommend products each customer may appreciate. Better yet, create custom packages of products that complement each other and increase buyers’ basket size.

• Incentivize subscriptions – Offer a premium or other tangible reward for signing up for monthly services, discounts, and perks. Maximizing monthly recurring revenue irons out wrinkles in cash flow and simplifies forecasting.

• Segment and target – Make use of the Pareto Principle and direct 80 percent of your marketing efforts toward the 20 percent of your customer base that accounts for 80 percent of your profits. Again, your data can identify these vital few based on their purchase recency, frequency, and monetary amounts (RFM).

• Explore partnerships – Co-branding with another company that attracts a similar audience stretches marketing budgets, opens new markets, and delivers value to customers.

• Ask for and act on feedback – Soliciting customer opinions not only helps you improve service but also encounters customers during or shortly after they interact with your products to keep your e-commerce operation top of mind.

Loyal customers may not be as price inelastic as you think. A personal touch and a true understanding of their wants and needs are more reliable contributors to repeat business than a one-time sale. Value, not price, is what keeps customers during economic turbulence.

3. Invest, automate, and adapt

While of course it is prudent for e-commerce companies to limit their expenses during periods when revenue dries up. The trap many fall into, however, is forgetting that just because something costs money, it is not necessarily a cost.

Marketing, automation, territorial expansion, worker training, and product development, for instance represent investments in future success.

Rather than sitting on accrued profits, e-commerce companies can stack the odds in their favor by adopting technologies and investing in business practices that pay off in the long run.

In reviewing the last two major economic downturns – the “Great Recession” of the late 2000s and the dot.com bust in the late 1990s, Deloitte discovered that “companies that reinvested during the recession earned higher growth during the recovery.”

In fact, those with high investment rates enjoyed about 5% higher compound annual growth rates than low investors over the first four years of the recovery.

• Automation - Automating routine, repetitive, or complex tasks frees you and your workforce to concentrate on more creative, soft-skill endeavors that add value to your products and services. Moreover, trusting robotic processes to manage returns, payment processing, inventory, ordering, and even some aspects of marketing eliminates data entry and mathematical errors so you make decisions based on correct, current data. Technology exists to assist companies increase e-commerce sales, right-size their inventories, communicate with customers, and manage other requirements for tapping the global e-commerce market.

• Marketing – Shortsighted e-commerce companies and retailers in general often cut promotional budgets at the first sign of revenue challenges. As brand consultant and columnist Mark Ritson notes, “They see marketing as a cost. Advertising as a luxury. And brand building as the ultimate vanity. Ergo, when times get tough it’s obvious that the first thing to go is the esoteric brand budget…That is exactly the wrong move.” Companies that resist the urge to cut advertising spend will accrue first-mover advantages when the recession ends and create inertia that can be leveraged over the long term.

• Training – With sales slowing, the downturn is a good time to hone your team’s skills without taking them away from revenue-generating activities. Training reinforces that you will come through the storm just fine and puts team members’ minds at ease. After all, why would you train someone you are planning to lay off? If your competitors resort to cutting their workforces, they risk losing their best people, the very resources that could make the recovery lucrative.

Setting yourself up with the tools to keep track of customers and orders, and trigger merchandise reorders will ensure you can ramp up profitable activities faster than the competition.

4. Expand territories and channels

The global e-commerce market is just that – global. Make use of the economic downturn to integrate into new geographies, products, and sales channels. If you have followed our earlier advice about building resilience and simplicity into your supply chain and investing in technology to automate marketing and fulfillment, expanding into international sales can be well within your reach. Shopify and other platforms facilitate integrations with eBay and Amazon, whose off-the-shelf front- and back-office tools help manage shipping and transaction logistics and present the potential for increasing e-commerce sales exponentially.

“There is a lot of scope for cross-border fulfilment…which allows you to handle multi-currency, multi-settlement, shipment rules, payment rules, duties and taxes,” says Sean Pieres, director of Sydney-based MindArc e-commerce growth agency. “The app marketplace [acts] as a stop gap to any functionalities or strategies required to fit operations, customer service, fulfilment, and payment requirements.”

Smaller e-commerce operations may prefer a multinational approach, incorporating standalone storefronts in each country into which they wish to expand. This will mitigate the expenses involved but the trade-off is that some finance, accounting, and other functions must be performed outside the chosen SaaS platform – possibly even manually. Businesses poised to scale and larger players in the global e-commerce market can take advantage of Adobe, BigCommerce, and other vendors’ SaaS functionality that fosters a multi-store architecture using cloud-based infrastructure and third-party hosting.

New geographies are not the only frontiers e-commerce companies can exploit during an economic downturn. Extending the purchase opportunity to as many venues as possible can generate revenues to keep you afloat for the short-term and set the stage for increasing e-commerce sales throughout the recovery and beyond. Providing customers with diverse channels, mobile-optimized platforms, and social selling resources puts you in front of shoppers when and where they are most likely to buy.

• Mobile commerce – E-commerce retailers are well aware that optimizing their storefronts for mobile shoppers is not optional. Frictionless login, browsing, and point-of-sale features that add to mobile users’ experience opens more than half the B2C market – 56 percent to be exact, according to TechBullion, which notes that mobile-friendly websites “increase the number of leads and increase the amount of revenue. Studies show that websites with a high user-friendliness rating get more traffic and conversions than sites with poor UX.

• Social commerce – Incorporating social media, micro-influencers, and short video features into marketing your company and products becomes even more important during an economic downturn. With consumers seeking out leisurely outlets, they are even more attracted to entertaining and informative commercial social content. This gives you a portal to position your brand, demonstrate your commitment to the environment and social justice to the global e-commerce market.

• Interactive commerce – Assisted virtual shopping may represent the next big thing for increasing e-commerce sales. A possible precursor to metaverse retail, interactive commerce invites buyers to virtual showrooms and enlists the assistance of online product experts who help customers evaluate, try out, and compare products from the comfort of their own home. Younger generations, especially, value online personalized service more highly than the in-store experience, and Adobe reports that 58% of all shoppers will look elsewhere if a brand fails to delivery personal experiences they value.

An economic downturn is not the time for e-commerce businesses to sit back and hope for the best. On the contrary, statistics show that investment in customer experience, technology, and supply chain resilience are instrumental in surviving the recession, increasing e-commerce sales during the lean times, and dominating the global e-commerce market throughout the recovery.