With the Threat of Another Recession Looming, What Should Retailers Do?
According to RetailWire, unemployment is at near historic lows, and the the stock market isn’t doing too bad either…so how worried should retailers be about a possible recession?
If you ask BDO International, there are potential reasons for concern. Some of these concerns include:
- the unpredictability of consumer spending in recent months
- consumer concern for potential distress in brick and mortar stores
- online spending affected by online sales tax due to a recent legal ruling
With threats of a recession in the near future growing louder, retail experts weigh in on 5 things business owners must do to weather the potential economic hardship:
1. View the Recession in a Different Light:
“In my view, a recession will accelerate current trends and those retailers currently posting bad results will see even more attrition . . . I am not entirely sure that’s a bad thing. Clearing out the weak so that stronger and newer alternatives have more room to grow is kind of evolutionary.”
2. Think of a Recession as an Opportunity:
“Never waste a good recession. For industry leaders and disrupters, a recession provides an opportunity for growth in market share . . . for those less fit to survive, recessions are extinction events.”
3. Stay Up to Date on Consumer Behavior:
“I believe it’s the consumer impact over the ‘recovery’ that sets the stage for the next recession. Consumers learned how to constrict spending and that included going to malls less often, as well as cutting back on gas to get there. Online sales have benefited from that learning. Of course, there is more to the success of online, but lessons learned in the past recession impacted consumer behavior then and continue to influence shopping today. Anticipation of a new recession will reflect lessons learned and new shopping patterns.”
4. Plan Ahead
“Any loss in confidence and the impact of a recession will impact sales. It always does. But consider this… Noah didn’t build the Ark after it rained. We know a recession is looming ahead. We also know that digital/online sales are playing a factor in traditional brick-and-mortar and mall sales (and traffic). It’s time to plan, and if done well, [it] will help minimize economic impact. It will be there, but it will be the retailers that can adjust that will survive.”
5. Learn to Adapt
“Recessions are tipping points, filters if you will. It’s not apocalyptic and it’s not Armageddon. Resilient businesses that have demonstrated adaptability will do ok. Will Target survive? Of course. Will J.C. Penney survive? Doubtful. Theoretically, every retailer is doing their best right now to adapt and create some new kind of model. Theoretically. So it might come down to balance sheets. Good ideas with strong balance sheets — no problem. Weak ideas with weak balance sheets, nice knowing you. In between is a coin toss.”
Information found on RetailWire indicates that 59% of consumers think a recession is likely, while 44% of retailers are actively preparing for a downturn.
BDO International recommends that retailers prioritize the following accordingly:
- supply chain optimization
- updating mobile shopping platforms and apps
- improving social media use
- offering meaningful loyalty and rewards programs
- partnering with exclusive influencers to reach younger shoppers
As Forbes once suggested, even if the storm clouds of recession seem far off, being prepared for bad weather is much easier than trying to weather a storm with a leaky boat.
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