This is an excerpt from Ryder E-commerce by Whiplash’s latest ebook “Brand-building during a downturn: How merchants grow loyalty in a recession.”
Warren Buffet famously said, “attempt to be fearful when others are greedy, and to be greedy only when others are fearful.” In other words, when your competitors are downsizing their efforts, this is the perfect time to double down on the customer experience.
The word ‘recession’ is on many commentators’ lips as brands look down the barrel of an economic slowdown. Inflation and rising borrowing costs are causing consumer confidence to slip despite a robust labor market, with households planning to delay purchases of big-ticket items over the next six months.
When consumer spending tightens, it’s often a retailer’s first impulse to cut back on CX initiatives and operational efficiency until the hard times pass. But studies show that it’s the hard times that hold the key to building customer loyalty and future demand.
According to the 2010 Harvard Business Review article “Roaring Out of Recession,” 9% of the companies didn’t simply survive after the recession – they thrived, outperforming their competitors by at least 10%.
Instead of opting for austerity, these brands voted to eliminate inefficiencies and craft better buying journeys, setting themselves up to respond more quickly to shifts in a dynamic marketplace.
Why? Because consumer expectations for seamless experiences don’t ebb and flow with the tides of the economy. With services like curbside pick-up or hassle-free returns now the new normal, consumers will expect brands to keep on delivering – no matter how challenging the climate is.
By prioritizing your customer in the worst of times as well as the best of times, the specter of an upcoming recession signals opportunity and growth— rather than disaster.
Recessions are characterized by tight consumer spending and greater consideration by shoppers of where their hard-earned cash is spent. But in the era of digital transformation, brands have far more opportunities to sweeten their value proposition.
Unlike the Global Financial Crisis in 2008, when automation and real-time operational visibility were still in their infancy, retail and e-commerce have experienced over a decade of development. Moreover, these advancements have been sped up by the unique demands of the COVID-19 pandemic: McKinsey’s 2020 survey of executives found that the pandemic had accelerated the average company’s digitization of supply chain and customer interactions by 3-4 years.
In sum, the power of omnichannel is no stranger in post-pandemic retailing. Once-futuristic services like rapid home delivery have fast become standard offerings. While the short-term economic outlook might appear bleak, brands have a strong foundation to continue enhancing customer touchpoints.
Rather than just looking for ways to save valuable dollars on labor via self-service, CX initiatives during a downturn should focus on new service offerings that wrap around your core products and help to diversify revenue.
It’s very telling that while 87% of companies believe they provide an excellent customer experience, only 11% of customers agree this is the case. This reveals a clear disconnect between the experience that brands believe they are providing versus the friction that customers are encountering during the shopping journey.
When there’s less money to invest in CX, brands need to double down on how they add value to different stages of the shopping journey. This should start from the moment an order is placed to when a shopper decides to return or exchange a purchase. According to IDC’s Infobrief sponsored by PayPal, the most common CX frustrations experienced by customers are:
Services like order tracking and streamlined exchanges certainly add value to the customer experience. But the core building blocks of your operation will determine whether your business has a strong enough foundation for these offerings to perform at their best.
When the economy is good, it’s easy for businesses to focus on production and acquisition in an effort to supercharge their growth, rather than diverting resources into bolstering their supply chain and inventory management capabilities.
But by having a clear and accurate understanding of their supply chain, businesses have the ability to identify bottlenecks and inefficiencies and take the necessary steps to address them. This leads to cost savings and improved efficiency, which is vital during a recession when every dollar counts. Not only is improved supply chain efficiency a great cost-cutting measure; it gives you the ability to pass improved visibility and transparency onto your customers.
During an economic downturn, consistency and reliability is the key to winning over a more cautious and skeptical consumer. This also means that uncertain times are not the time to get too experimental with your product selection or your marketing efforts.
Boosting shopper confidence, maintaining brand familiarity via tight product assortments makes inventory and supply chain planning a much more streamlined process for retailers.
AI supply chain solutions are fast emerging as a cost-effective way to optimize demand planning, real-time visibility, transparency, and more. According to McKinsey, AI-enabled technology allows businesses to:
With another rocky period for the economy on the horizon, it’s high time for retailers to begin planning their strategy for success in a leaner market. Instead of slashing CX spending and risking your brand becoming irrelevant in the eyes of customers, this climate should be all about the reinforcement of your core service offerings.
A shiny new product range makes for great marketing material, but can’t make up for a bottlenecked supply chain or ballooning SKU base. Likewise, an easy-to-navigate e-commerce website experience can be ruined if the customer receives radio silence after placing an order. Unless you have the basic tenets of a positive e-commerce experience covered, you cannot expect customers to flock to your brand.
Let’s be honest: supply chain management and demand planning aren’t usually areas that get a founder’s blood pumping. But while a tidy backyard might not be visible from the front of the house, it’s vital to meet the demands of a rapidly evolving marketplace.
In sum, every single one of these touchpoints plays a key role in fostering customer loyalty during a recession. It’s about making sure that your brand has strong enough foundations to withstand the twists and turns of faltering consumer demand. Brand loyalty eventuates when customers feel confident in a brand’s ability to coordinate a seamless, end-to-end experience—one that doesn’t ask shoppers to jump through hoops to meet their needs.
Even if the coming year feels a little bleak for business growth, remember, going back to basics holds the key to making sure that your customers continue supporting your brand and being an advocate for your offerings. A recession offers the ultimate test of whether a brand is willing to stand by its customers—or not.
Enjoyed this excerpt? Check out the rest of our ebook on how e-commerce brands and retailers can future-proof their success against downturns in the economic landscape: