Don't Get Lost in Recession

How Will the Recession Affect Your eCommerce Business in 2023 and Beyond?

Table of Contents

The question everyone wants to ask, but they’re afraid to: are we entering a recession?

Some even believe that inflation is already happening. Prices are skyrocketing. Stock market prices are falling. Tech giants are conducting huge layoffs. With all of these happening, entrepreneurs have started to wonder:

What does this mean for eCommerce businesses? How should eCommerce businesses adjust their strategies?

Recession: Is it real or just a buzzword?

It’s actually both. Current market conditions are already proving to be challenging with interest rates rising, increasing cost of capital, and higher cost of living… even credit card balances are up 15% from a year ago—which may not be the most ideal situation to be in during a recession.

All of these are already impacting businesses all over the world. Even huge tech brands like Twitter, Meta, and Google have resorted to conducting the biggest layoffs.

Businesses are going to feel the negative impact of a declining economy.
Tshili Khupe photo
Tshili Khupe
Head of Growth & Partnerships, LTVplus

So while “recession” in itself is very much a buzzword today, it is also very real.

Bold predictions: How will the recession affect eCommerce businesses?

Prediction #1: Consumers will be more conscious of spending—but this doesn’t mean they will spend less

It’s a strange time. The world is coming out of a pandemic—face-to-face events are returning, revenge travel is a thing, and even brick-and-mortar shops are making a comeback. However, there are so many talks about how we’re headed into a challenging recession time.

Does this mean that consumers are cutting down on spending? Well, it’s not a yes. But it’s not a no either. 

Sara Pereda, Senior Partner Manager from Yotpo says that people are still spending. However, they are just aligning their spending with their values. Whether they are prioritizing travel, time with family, fitness, or home improvement, their spending is now more intentional in a sense.

Even with this change in behavior, Black Friday 2022 actually set a new record of $9.12 billion in sales. Cyber Monday also broke its own record, totaling $11.3 billion in online sales. Yes, items may be more expensive, but consumers are spending on what they find valuable.  

Sara shares a few more numbers:

  • 82% of shoppers who said they’re spending less actually still buy from their favorite brands.
  • More than 65% are willing to spend more for an item if it’s more convenient to buy.

The takeaway? eCommerce brands need to provide as much value as they can to their target customers and potential ones. With a recession on the horizon, the brands that users will turn to are the brands that they know and trust.

When consumers feel the pinch, they will still give you their business—but only if they love you and feel a connection to your brand.
Sara Pereda photo
Sara Pereda
Senior Partner Manager, Yotpo

Prediction #2: Merchants will be cutting down on costs—but which ones, specifically?

If customers are doing more “intentional” spending, merchants will do something similar. In fact, it’s already happening.

Blake Imperl, Head of Merchant Growth & Enablement at Wonderment, says that it’s been a topsy-turvy ride. Some merchants are reporting fewer sales, so they’re started cutting down on their tech stack waste and pulling back on ad spend. He has observed merchants asking their retention and CX teams to do more with less.

Meanwhile, Erik Christiansen, CEO & Co-Founder of Justuno that DTC brands will reallocate their investments to focus more on customer experience as customer acquisition cost continues to rise.

“Merchants will focus on bringing the Amazon customer experience into their own websites. Study the market, and we can all learn from Amazon and that’s why they’re winning.” he expounds.

A word of advice from Andrew Sugar from Front on what eCommerce merchants can do right now:

Review the recent market cycle. Look out for impending recessionary signals like supply chain issues, the rising cost of materials or input, or decrease in consumer spending.
Andrew Sugar photo
Andrew Sugar
Business Development & Partnerships, Front

Keep an open eye on anything that might signal a recession. That way, you can tackle the main issue depending on the symptoms and you don’t end up cutting costs that could have been working for you.

Prediction #3: Brands will rethink their funnel strategy

This prediction is an after-effect of the second one. Since merchants will be more conscious of their budgets, they will distribute more toward retention channels:

From a marketing perspective, brands are going to think about their funnels differently.
Sarah Grosz photo
Sarah Grosz
Founder, goodCPG

After all, 80% of your income comes from 20% of your repeat customers. This doesn’t mean that brands should totally forego acquisition efforts. 

However, Sarah Grosz, founder of goodCPG emphasizes that traditional acquisition channels like social ads will become too expensive. Retention channels are not as expensive, and if the right strategies are implemented, they produce higher returns.

Prediction #4: Subscription businesses will get a new lease on life

A survey from Yotpo reported that four out of ten consumers wished that their favorite brand offered subscriptions. This supports Sara Pedera’s prediction on how subscriptions will be a strong tool for retention this 2023.

Subscriptions took off in 2020 due to necessity. Physical stores were locked during the pandemic and consumers had to figure out new ways to get the products they regularly needed. This opened the door to a surge of subscription businesses that grew quickly. As a result, many brands were able to stay afloat and even thrive during the pandemic.

With a possible recession in the cards, it’s very likely that eCommerce brands will try to get a piece of the subscription pie. It may be tricky to find an angle depending on your product, but Sara mentions that brands can always offer an educational aspect that will focus on product usage.

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The Don’ts: 3 things eCommerce brands must avoid doing during a recession

Don’t panic and cut your marketing budget off right away

It’s understandable how the terms “inflation” or “recession” can easily push business owners to make rash decisions. One of the first decisions usually is to dump the marketing budget since it’s more “controllable.”

Mats Forsgren, VP of Operations at eDesk, emphasizes that this should not be the case. 

Consumers are still shopping, although this might slow down. But there will always be opportunities to grow and take market share.
Mats Forsgen photo
Mats Forsgren
Former VP of Operations, eDesk

Do not panic! Keep in mind that there will always be opportunities. Cutting off your budget right away will not solve anything. Instead, you’ll just be cutting off channels that could have been helping you grow. 

So what should eCommerce brands do? Take a look at your numbers and figure out what efforts and channels you should invest in more. Make strategic decisions, not impulsive ones.

Erik Christiansen summarizes it quite nicely.

Look at your expenditure and identify where you’re seeing ROI. Don’t invest where you’re not seeing it, but ensure that you’re creating a great, seamless customer experience. In short, look after your customers.
Erik Christiansen photo
Erik Christiansen
CEO & Co-Founder, Justuno

Don’t downgrade your human resources

It may be tempting to resort to layoffs or cutting contracts with outsourced partners. Tshili Khupe, Head of Growth & Partnerships at LTVplus explains that usually, customer service staff bear the brunt of the initial cuts.

Merchants think that since there’s a recession, their sales are going to slow down and they won’t need as many customer support agents. This mindset is wrong—it’s like acknowledging that your business will dwindle as a result of the recession.

However, if you look after your customers, they will keep coming back. “Giving your customers a great experience should be a massive priority,” Tshili explains. Plus, the cost of retaining customers is significantly lower than acquiring new ones. And since customer support plays a huge role in taking care of existing customers, there’s really no need to cut them off.

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Don’t underestimate the diversification of marketing channels

“Don’t make the mistake of not diversifying your marketing channels,” Sarah Grosz says. She explains that a lot of eCommerce merchants tend to put in so much on paid social for acquisition.

The truth is, there may be other marketing channels that may be outdated or underrated—but will work wonders. Going into omnichannel marketing also has a lot of benefits. For example, marketers who used three or more channels in a campaign generated a 494% higher order rate compared to those who only used one channel. 

Additionally, this doesn’t mean that you should rush into creating a presence on all platforms and channels you can get your hands on. Make sure that these channels make sense for your business and your customers. 

3 tips to “recession-proof” your business

Finally, here are some action items that you can start implementing right away.

Offer flexible payment options for customers

Almost 60% of consumers prefer “Buy Now, Pay Later” plans over credit cards. The Buy Now, Pay Later option allows flexibility for customers and promotes less debt compared to using credit cards. This is a good alternative to offer to your customers especially during a recession when they are more conscious of their spending habits. 

You can also explore alternative payment methods like Afterpay, Affirm, or Klarna which allow customers to pay over a period of installments.

Focus on customer retention and keeping churn rate low

Look after your customers and make sure you are delivering value despite a recession.

However, it’s also important to keep the business going without being too hard-sell and being considerate of what your customers might be going through.

Here’s what you can do:

Bundle Up

Look into introducing creative bundles which will help increase the average order value of customers while providing them with better deals.

Nurture Existing Customers

Invest in referral marketing programs or loyalty programs. Plus, a loyalty program is a great source of first-party data which will help you personalize your strategies.

Invest in delivering an awesome customer experience

Blake Imperl, Head of Merchant Growth & Enablement at Wonderment could not emphasize it more. “Invest in customer experience. Double down on your transactional channels and study the experience once a customer makes a purchase.”

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Take control of shipping and delivery.

He explains that the post-purchase experience, which includes everything about shipping and logistics, is a focal point for onboarding, upselling, and cross-selling.

Storytelling, education, onboarding, this is really how you help customers see the value.
Blake Imperl photo
Blake Imperl
Head of Merchant Growth & Enablement, Wonderment

Here’s something you can try:

  • Spend time being a customer of your own site.
  • Explore every feature, from signing up, to browsing, to adding to the cart, and checking out.
  • You can even try out your existing customer support channels.

If it doesn’t live up to what you feel is a good customer experience through and through, then it’s time to fix it.

Remember, in a recession, the brands that will succeed are those that can really drive repeat purchases because of the quality of customer experience they can deliver.

What’s next for you?

The economy is unstable, and there will always be ups and downs. The best thing eCommerce businesses can do is to start putting more into creating strong and meaningful relationships with customers.

By continuously putting their needs first and delivering great customer service, your eCommerce business will not only survive during a recession—it will even thrive.


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