For those who work in retail, recession fears only add to the uncertainty of conducting business in today’s economy. Unfortunately, there’s not much you can do about the market as a whole, but there are some strategies you can adopt to weather a period of economic downturn.
Here’s what a 2022 recession can mean for your retail business, along with some ways to keep your head above the water even when the flood starts to rise.
What Is a Recession (2022)?
Economists have different ways of defining a recession. According to the National Bureau of Economic Research (NBER), a recession is “a significant decline in economic activity spread across the economy.”
This typically lasts more than a couple of months and is often visible through metrics, such as real GDP, income, employment rates, levels of production, and retail sales.
Other economists identify a recession based on two consecutive quarters of a declining GDP. And while there’s no agreement as to whether America has officially entered a recession, the New York Times has indicated that the nation’s chances are “uncomfortably high.”
What are the signs of a recession for your business? Retailers might measure a recession using such KPIs as:
- Sales declining from the same quarter in previous years
- Operating costs exceeding previous levels
- Less working capital for ordering inventory or covering costs
These signs can indicate that your retail business is experiencing a recession, which means it may be time to adjust your strategy.
The Impact of Recession on Retail Industry
Retailers can be hit hard during a recession, depending on the type of products they sell. What do consumers buy during a recession? Most consumers stick to the essentials, such as food, cosmetics, and toiletry items. Luxury spending declines, which can significantly impact retail in a recession.
How to Prepare for a Recession (2022)
Retail in recession periods can be particularly challenging unless you prepare. Here are some of the best strategies for navigating the world of retail in a struggling economy.
1. Reexamine Your “Why”
What makes your business unique? What advantage do you offer over your competitors? During a recession, it’s important to find a value proposition that keeps you focused and keeps customers coming through your doors.
Adjusting your business model to accent discount items might be a way to satisfy thrifty customers without reducing your revenue store-wide.
2. Create Margin
During a recession, your overall revenue may decline. If your overhead costs remain the same, declining sales can be devastating. By reducing the cost of your administrative expenses, you can give yourself some margin to absorb the loss created by a reduction in sales.
3. Emphasize Customer Service
Your customers may come to you not just for your products but for an unparalleled customer experience. Even if you must lay off some of your staff, stay focused on high-quality customer service. This can ensure loyalty from your core customer base, helping you retain strong relationships even after the market stabilizes.
4. Adapt to New Needs
The products that sold well during a healthy economy may no longer meet consumer needs during a recession. Retailers might adjust their product selection or introduce a new product line.
Instead of getting frustrated about what’s not selling, ask yourself, “What could be selling?” You may discover a new customer need that your business can uniquely satisfy.
5. Optimize Your Customer Experience
Even before the recession, customers placed a high value on convenience, which is one of the reasons that brick-and-mortar retailers are losing ground to eCommerce merchants.
Retailers can adapt by introducing online shopping options, and those with a physical store can weld these two worlds with a “buy online, pick up in store” option to entice customers to buy. (Not sure pick-up in store is the most convenient thing (unless it’s a restaurant), they should offer shipping and/or hire a drop shipper for their merchandise)
6. Get Local
Do you operate more than one retail location? If so, you might tailor each location to the unique needs of the surrounding community. For example, an urban neighborhood might have different needs than a store in a suburban shopping center.
Tailoring each location to your unique customer niche can further help you satisfy consumer demand during a recession.
7. Rethink Your Marketing Strategy
For most retailers, marketing is all about helping consumers understand why they want your product. But during a recession, it’s important to communicate why your customers need your product. Digital marketing (email, social media, pay-per-click) can likewise help you fine-tune your marketing efforts and make your business more visible to your target audience.
Adapting to the Challenge: Financial Options for Retailers
Is your retail business losing money? We can help. Idea Financial can provide additional financing that can ease the pain of a recession. In some cases, these financial vehicles can serve as a stopgap, helping you mitigate the loss you experience from unmet revenue goals or cover costly overheads to keep you in business.
Idea Financial can provide financing for businesses that do at least $15,000. Provided you meet these requirements, you have access to flexible, low-cost options to help your business during a recession.
Business Loan
A term loan provides a lump-sum amount to fund your business. Idea Financial offers flexible, affordable terms and options ideal for businesses of every size, and retailers can expect an approval decision in under three hours.
Business Line of Credit (LOC)
Much like a consumer credit card, a business line of credit allows you to spend money up to a certain amount and then repay this debt every month. As long as you repay your balance, you can use your LOC indefinitely during the draw period.
Shelter in a Storm: Give us a Call Today
Idea Financial is here for you. Give us a call today to discuss your options and see if you qualify for financing options that can help you weather an unstable economy.
