The current cost of living crisis is having a global impact, with Covid and events like the war in Ukraine playing a significant role. In the UK, Brexit has further contributed to slowing economic growth. It all points to people spending less as they become more cautious with their money. Consumers are feeling the pinch of the highest prices they’ve seen in a generation, with energy bills soaring, food costs rising, and mortgage interest rates reaching 15-year highs.
As a result, inflation hit a 40-year high of 11.1 percent last November, and while it is too early to predict its future direction, it is currently having a dramatic effect on people and businesses. And, inflation is not the only challenge facing businesses. Supply chain and labor shortages are also significantly impacting eCommerce stores, contributing to higher manufacturing costs and fewer products in production.
Yet, that doesn’t mean it’s the end of the road for businesses operating in online sales. eCommerce might see a slight slowdown in growth, but there are still opportunities for online stores to meet consumer demand. For many, it’s a case of rethinking strategies and refocusing to align with a changing consumer mindset.
It is of course worth noting that the eCommerce boom during the pandemic was bound to see some stagnation in the wake of brick-and-mortar shops reopening. Even if online shopping is the future, consumers aren’t ready to give up on high-street shopping just yet.
More competition and skyrocketing living costs led eCommerce sales to fall to 25 percent of all UK retail sales in June 2022, its lowest number since the pandemic. Shoppers are reigning in on their spending, buying fewer goods in the process. However, this trend does appear to have reversed, online at least. The latest figures from the ONS in October 2022 indicate that online sales are at the highest level since the beginning of the year standing at £2.2bn. Consumer confidence has undoubtedly been damaged by the cost-of-living crisis and high inflation levels but it is a complex picture.
Businesses across all industries see less appetite for their products and services during an economic downturn. For that reason, companies need to pay extra attention to the details and craft a service that customers highly value.
Online stores can do this in several ways, including:
Re-examining your conversion funnel
Moving your customers along their purchase journey through a conversion funnel allows them to make small actions that lead to a purchase. Think of it as a diagram paving the way for your buyers to make a purchase. And, consider the three growth lanes — performance marketing, virality and content.
Maximizing special occasions
Even during times of recession, companies can still maximize special occasions. Whether it’s the festive season, summer holidays or special days like Valentines Day, these occasions offer eCommerce solutions a chance to catch customers when they’re more inclined to spend. Now, more than ever, is the time to double down on promotions and advertising around special days in the calendar.
Focusing on customer service
Service has never been more critical, especially in the aftermath of Covid when many complaints centered around the lack of high-quality service on offer in many sectors. By establishing yourself as a brand known for its customer-centered approach, you can build loyalty with customers. When it does come to spending, they’ll be more inclined to shop with your store thanks to its heightened level of customer service.
Increasing retention rate
Focusing on existing customers is essential during any economic situation. But it takes on even more importance when there consumer demand is down. You want consumers to keep coming back and buying your products or services. For that reason, a significant part of your strategy should involve customer retention and keeping loyal shoppers coming back for more. Increasing the percentage of new users who return to your store can compensate for the lack of first-time and one-off customers.
Reviewing your value proposition
While the internet provides the perfect platform to obtain new customers, it’s also the ideal distraction and can be hard to keep people’s attention. Having a watertight value proposition helps cut through the noise and allows you to engage with the right type of shoppers. Know your target audience and refine your message, so it resonates with them and positions your online store as the best place to get what they need.
Creating a sense of urgency
Create a feeling of exclusivity around your products and services, whether by offering exclusive access, creating the fear of missing out or building strong word of mouth by constricting supply to stress a sense of urgency. Taking this approach can be a powerful motivator and lead to more conversion opportunities.
Involving your customers (UGC)
Shopping has evolved, and customers want to feel like they’re part of the brand. Allow them to be brand ambassadors by encouraging your shoppers to submit content you can use in marketing materials. Ask them to post images on social media using your products with the relevant hashtag or run competitions that require them to use content with themselves and your products. There are several benefits to user-generated content (UGC), including getting your audience more engaged and giving back to them. Plus, it’s a more affordable form of marketing, and shoppers are far more likely to buy and use products and services when they see others like themselves using them.
Making the checkout experience seamless
Cart abandonment is a genuine concern for online stores, with about 70 percent of shoppers dropping off at the checkout stage in the UK. In times of economic uncertainty, refocusing on your checkout experience is even more important. Does your checkout offer a fluid experience for shoppers? Can they easily enter their information, and do you remove friction from the methods used for paying? Your checkout experience needs to offer a ten-out-of-ten experience for shoppers. Otherwise, you risk losing them to a competitor with a better shopping experience.
Offering alternative payment methods
Giving people the option to use different payment methods is arguably the best way to combat a complex financial landscape. An increasing number of customers prefer to pay with alternative payment methods, such as buy now, pay later (BNPL). In fact, four in ten Brits have used BNPL and choose to do so over other ways of paying. If your online store doesn’t offer a wide variety of ways to pay, you risk losing customers to other eCommerce options with more extensive payment options.
The role of retail finance
Providing finance to your customers gives them a choice, something that takes on even more importance during an economic downturn. Retail finance gives them more financial freedom and helps them feel more confident about making a purchase.
Whereas the idea of paying for an item outright might be enough to stop shoppers from going through with the sale, having the ability to spread the cost will likely have the opposite effect. Alternative payment methods, such as buy now pay later, can help reduce cart abandonment while making customers feel more empowered about their shopping choices.
The current climate will see many people be more careful with their money. They’ll put off buying that new TV unless it’s absolutely necessary. They’ll consider cheaper jewellery options for special occasions. And they’ll think twice before committing to a subscription service.
You can increase shopper confidence by offering payment solutions like retail finance, BNPL and other forms of digital credit. Suddenly, having the option to pay for a TV over installments with zero interest is far more appealing than forking out the total price all in one go.
Other products such as digital credit accounts have a similar effect: customers can manage their finances and avoid feeling the burden of paying high prices all in one setting. As a result, they feel more confident and are increasingly likely to make purchases, even during economic uncertainty. Digital Credit also gives the added benefit of having a credit line a customer can utilize with repeat purchases.
Stores that offer customers the freedom to use their preferred payment method of choice will see increased levels of customer loyalty. Customers are already seeking out online stores that provide multiple payment options. Offering credit, debit, and PayPal is no longer enough, with shoppers wanting options like BNPL so they can be more responsible with their money. If you give consumers the finance choices they desire, they will appreciate the flexibility, and you increase the chances of them shopping with you more than once.
Offering finance at your store is a no-brainer, as it gives customers more control over their spending. It can be the difference between a shopper buying from you and going elsewhere to find the products they want.
The economic landscape is heading into an uncertain space, with consumers feeling the pinch and evaluating their spending. This poses an issue for eCommerce businesses, who are yet to face long-term consumer decline.
To ensure you stay relevant and in the mind of shoppers, you’ll need to diversify your approach and focus on the core elements that really matter to customers. From offering an excellent service to providing retail finance and the payment options they desire; your business can remain relevant and flourish in these difficult times to see vital business growth.