Blog Soft Gorillas

18 July 2023
4 min read

Preparing for the Looming Recession: Navigating Ecommerce ROI

Introduction

The looming recession in 2023 has become a major concern for ecommerce brands. While economists have differing opinions on whether it will actually happen, the potential impact is something that brands need to prepare for. In this article, we will explore what the recession means for ecommerce and delve into the underlying reasons that have contributed to its possibility. We will also discuss how brands can navigate through this challenging time and optimize their ecommerce ROI.

Factors Leading to a Possible Recession

There are several factors that have contributed to the possibility of a recession in 2023. The pandemic, which sparked the economic downturn, is one of the key factors. At the start of the pandemic, consumers were hesitant to spend their discretionary income, resulting in high amounts of unsold non-essential goods. Many businesses faced unprofitability during this time.

Although consumers are now ready to spend again, ecommerce retailers have faced challenges in meeting the increased demand due to supply chain strains. Delays and disruptions in the supply chain have led to empty shelves and “sold out” products online. The surge in online sales has also added significant strain on freight across different modes of transportation. Strikes and worker shortages have further worsened the situation, especially in the furniture industry.

In addition to these challenges, there is a shortage of available materials, which has contributed to low inventory levels. Disruptions have occurred at every step of the production process, making it difficult to ease the strain on the supply chain.

Impact of Inflation

Another key factor in the impending recession is rising inflation rates. These rates have been influenced by supply chain disruptions and material shortages caused by the pandemic. Manufacturers underestimated the increase in consumer demand when pandemic restrictions started to be lifted, resulting in decreased supply and higher costs for available items. Additionally, labor shortages and natural disasters have contributed to higher food and beverage prices.

Although inflation rates are expected to slow down as the Federal Reserve continues to take action, it remains a concern. The Federal Reserve aims to increase interest rates to decrease consumer demand, which in turn should lead to more supply, slower price growth, and lower inflation rates. However, the potential benefits of higher interest rates, such as lower inflation, could be overshadowed by a slower economy caused by increased unemployment rates.

Impact on Unemployment

As the Federal Reserve increases interest rates to decrease consumer demand, the overall economy could slow down, resulting in higher unemployment rates. Major companies have already announced layoffs, and by the end of 2023, unemployment rates are expected to reach 5.6%. This increase in unemployment could further slow down the economy and impact the potential benefits of higher interest rates.

Strategies for Ecommerce Brands

Given the potential for a recession, it is crucial for ecommerce brands to find strategic ways to save money, mitigate risks, and remain profitable. One key trend that has emerged is the focus on optimizing existing resources instead of increasing budgets. SEO, UX optimization, and conversion rate optimization are areas that brands can focus on to navigate through the recession profitably.

If budgets for paid search ads are limited, brands can invest in SEO to improve their organic visibility on search engine result pages. This long-term strategy may take some time to show results but can help increase awareness without additional ad spending. Additionally, optimizing landing pages and utilizing A/B testing can improve conversion rates and entice more customers to make purchases.

Budget reallocation is another strategy that brands can consider. Shifting funds from underperforming paid advertising channels to conversion rate optimization can lead to more growth. By focusing on A/B testing and optimizing conversion rates, brands can make the most of their existing budget and increase profitability.

Conclusion

While the possibility of a recession in 2023 brings uncertainty, ecommerce brands can still navigate through these challenging times by employing strategic measures. By optimizing existing resources, focusing on SEO and conversion rate optimization, and reallocating budgets, brands can weather the storm and remain resilient. At ROI Revolution, our team of experts is dedicated to staying updated on the latest developments and helping brands grow profitably through these uncertain times. Contact us to explore how we can assist your business.

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