What Australian retailers must do to ride out the next recession
Michael Tutek, founder and CEO at Preezie reflects on how Australia's first recession in almost 30 years will hit the retail market.
Australia is staring down the threat of its first recession in decades, sending shockwaves through the economy. In the wake of the RBA’s surprise May rate rise, consumers are increasingly feeling the sting of inflation and cost-of-living pressures. This month’s Federal Budget announcement, however, has forecasted potential relief for households and businesses - but not without adverse conditions on the road to recovery.
Major Aussie retailers are already predicting significant hits to their earnings, but for those in the trade, economic downturns actually present a unique opportunity for growth through innovative marketing strategies.
In the face of financial constraints, due to the economy receding, the vast majority of retailers’ first instinct is to retreat and cut budgets. And while this may seem like a common response, it’s not always the best option. By maintaining a strong focus on marketing and customer experience, retailers can not only sustain brand visibility but also capitalize on opportunities that others may shy away from. For example, prioritizing customer loyalty can help ensure long-term success even in the face of a challenging economic climate. However, retailers are often backed into a dilemma; accept that their business will continue on a downward slope, or find new and innovative ways to reinforce growth and future success, taking advantage of services or solutions they previously wouldn't have considered.
With many likely to choose the latter, the silver lining of the situation is that amid this economic adversity, retailers have the unique opportunity to re-evaluate their business models and marketing strategies to experiment and adapt to a changing landscape. This creates openings for smarter and more innovative approaches that were considered too risky or unimportant. In such a climate, here are some key marketing tactics retailers can implement.
Opportunities amid adversity
Facing financial barriers, retailers must rethink their business, sales, and marketing strategy to align with the changing retail landscape. During a recession, many businesses tend to cut back on their marketing budgets, but they really shouldn't. Instead, retailers should reallocate funds into cheaper services, or alternative marketing and advertising services that maximize value for money, such as next buy – and also rewire their sales strategy to tap into new customer markets that can be discovered through new channels and initiatives.
Likewise, by reallocating funds towards targeted, data-driven marketing campaigns, retailers can effectively reach and engage with their audience by connecting on a deeper level and delivering personalized experiences. This can also lead to increased customer loyalty, a higher conversion rate, and ultimately, improved revenue as you increase lifetime value.
Even in hard times, it's possible (and beneficial) to look for the silver lining. In this case, this means using these economic headwinds as an opportunity to win more loyal customers, increase productivity, and strengthen your brand’s position in the market with a strategic revamp. Thanks to some of the initiatives announced in this year’s Federal Budget, this challenge to fund new marketing strategies may be far more achievable for Aussie-run retailers than before.
Suggested newsletters for you
Embracing e-commerce for ‘exclusive’ marketing
One area where experimentation has become increasingly important is in the realm of digital transformation through eCommerce. As the pandemic forced many businesses to close their physical doors, there has been a significant shift over the last three years toward optimizing online stores. Retailers who have been able to capitalize on this trend by offering seamless digital retail experiences have seen a surge in sales as a result. Investing in eCommerce platforms and digital marketing strategies is no longer optional for retailers. It’s a necessity.
The key, however, is to make the online shopping experience as personalized to the customer as possible. Such a marketing strategy includes utilizing the data and resources you may already have at your disposal, like using customer data to suggest new and relevant products that customers will be interested in, or assisting them with the products they are looking for. This can be achieved through anything from AI chatbots to virtual retail assistants. Further, by collecting and using first-party customer data insights, like a customer’s budget, style, or even the special occasion they may be shopping for, retailers can offer an online experience that mirrors the in-store experience.
Shopper incentives, such as free shipping or free gifts also work as great motivators to entice customers, offering limited-time offers and discounts, exclusive products and services, and even access to buy trending and high-demand products that are sold only by your brands' (and retail partners’) online storefront.
The importance of collaboration
One final aspect of experimentation is the fostering of collaboration between retailers, suppliers, third-party marketers, and other industry stakeholders. By working together, businesses can pull together resources, share insights, and develop innovative solutions to common problems and smarter ways to market to target consumer demographics.
Collaboration can also provide new marketing opportunities by sharing audiences, selling trending items or popular products, offering deals on bulk purchases and/or discounts on larger quantities, or working together with other retailers and suppliers to build competitive and comprehensive offerings around exclusive shopping events such as Black Friday and Cyber Monday.
In the face of adversity, collaboration can serve as a powerful tool to drive growth and navigate tough economic challenges. Forward-thinking retailers who embrace this mindset will be well-positioned to succeed in the future.
The bottom line
While the threat of a recession undeniably presents numerous challenges for retailers, it also offers the chance to innovate and experiment – especially if they are eligible for government initiatives that can provide them with greater cashflow utility. By embracing digital transformation, reallocating funds to smarter and more effective marketing, and fostering collaborations, retailers can pave the way for a brighter future. Ultimately, this period of economic hardship can serve as a catalyst for positive change within the industry.