“Why Retailers Must Embrace Experimentation in an Economic Downturn” By Quoc Nguyen, Co-Founder Preezie
With the United States’ battling rising interest rates, sluggish economic growth and worsening inflation, the threat of a looming recession is very real. Even despite recent economic optimism, the Fed has indicated that additional rate rises in the immediate future are not off the cards just yet.
According to Deutsche Bank’s latest forecast, an economic downtown in the US is 100% inevitable. On top of this, American consumers are increasingly feeling the sting of inflation and cost-of-living pressures, with 84% of American consumers reporting that inflation has impacted their spending.
The recent US federal budget for 2023 holds potential relief for retailers facing economic headwinds in the form of better infrastructure investments and supply chain optimization, but this won’t do much to actively help retailers navigate the potential of a looming recession.
Major American retailers are already predicting significant hits to their earnings, but for those in the trade, economic downturns actually present a unique opportunity for growth and innovation.
See, despite the common wisdom of ‘battening down the hatches’ and weathering the storm, the key to future growth and resilience in rough markets is experimentation.
When the vast majority of the market retreats and cuts budgets, the costs associated with marketing and services tend to become cheaper as companies rush to secure new business. As a result of this, retailers are backed into a dilemma; either accept that their business will suffer a downward slope, or find new and innovative ways to reinforce growth and future success, taking advantage of services or solutions they previously wouldn’t have considered.
Opportunities Amidst Adversity
Challenged by financial barriers, retailers must rethink their business, sales and marketing strategy to align with the changing retail landscape. When the economy takes a hit, many businesses tend to cut back on their marketing budgets — but this may not always be the best move. Instead, retailers would be smart to reallocate funds into cheaper services, or alternative marketing and advertising services such as nextbuy. It’s also important to rewire the sales strategy to tap into new customer markets that can be discovered through new channels and initiatives that they otherwise may not have considered.
Likewise, by reallocating funds towards targeted, data-driven marketing campaigns, retailers can more effectively reach and engage with their audience. This can also lead to increased customer loyalty, a higher conversion rate — and ultimately, improved revenue as you increase lifetime value.
Even in hard times, it’s possible (and beneficial) to look for the silver lining. Use economic headwinds as an opportunity to win more loyal customers, increase productivity, and strengthen your brand’s position in the market with a strategic revamp.
When it comes to government support, the US 2023 Federal budget presents opportunities for retailers to navigate the challenging landscape of inflation and cost of living increases; focusing on key areas such as infrastructure, workforce development, and small business support.
Investments in infrastructure will likely enhance logistics and supply chain efficiency, potentially reducing operational costs for retailers. Workforce development programs can empower retailers to up-skill their employees, resulting in a more productive and adaptable workforce. Additionally, small business support measures can provide a lifeline for retailers experiencing financial strain.
While the Federal budget cannot single-handedly alleviate all challenges, it does provide a foundation for retailers to adapt and thrive in an increasingly competitive market. By leveraging these investments, retailers can continue to innovate and enhance their customer experience, ultimately bridging the gap between online and in-store shopping experiences.
Embracing Digital Transformation
One area where experimentation has become increasingly important is in the realm of digital transformation. As the pandemic forced many businesses to close their physical doors, there has been a significant shift towards online shopping. Retailers who have been able to capitalize on this trend by offering seamless online experiences have seen a surge in sales as a result.
Investing in eCommerce platforms and digital marketing strategies is no longer optional for retailers. It’s a necessity.
Experimenting with New Technologies
Another way for retailers to experiment in recession-like conditions is through the adoption of cutting-edge technologies. Augmented reality (AR) and artificial intelligence (AI) have shown promising results in the retail sector. These tools can be used to create immersive shopping experiences, streamlined logistics, and personalized marketing campaigns.
By embracing technology, retailers can not only optimize their current operations but also gain a competitive edge in the market. This is also crucial in post-downturn landscapes, as businesses must remain agile, modern and adaptable to stay ahead.
The Importance of Collaboration
One final aspect of experimentation is the fostering of collaboration between retailers, suppliers, and other industry stakeholders. By working together, businesses can pull together resources, share insights, and develop innovative solutions to common problems.
In the face of adversity, collaboration can serve as a powerful tool to drive growth and navigate tough economic challenges. Forward-thinking retailers who embrace this mindset will be well-positioned to succeed in the future.
The Bottom Line
While the threat of a looming recession undeniably presents numerous challenges for retailers, it also offers the chance to innovate and experiment. By embracing digital transformation, adopting new technologies, reallocating funds into smarter and more affecting marketing, and fostering collaborations, retailers can pave the way for a brighter future. Ultimately, this period of economic hardship can serve as a catalyst for positive change within the industry.
Meet Our Contributor — Quoc Nguyen
About Quoc Nguyen Co-Founder, preezie With over 20 years of experience in corporate finance and executive positions working for companies with the common mandate of business growth, Quoc co-founded preezie with a passion for technology and taking the experiences he’s learnt to perfect the customer experience. Working with leading retailers like Dell, Guitar Center, Canon, and Adore Beauty, preezie is a platform for retailers to bring the curated and personalized shopping experience to enhance customer experience and build value to their business.