A Practical Guide to Navigating Economic Uncertainty in the Retail Industry During periods of economic uncertainty, it's essential to have a solid foundation on which to run your business. Now is a good time to return to the basics and get your retail ducks in a row.
By Ana Wight Edited by Micah Zimmerman
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Retailers today are operating under extremely uncertain conditions. Between inflation and labor shortages, supply chain challenges and recession fears, many retail stores may face an uphill battle in 2023.
The good news is there are steps you can take to navigate today's macroeconomic climate. By getting your retail fundamentals right and streamlining your operations, you'll set up your business for success and ensure that you're prepared to take on the challenges this year might bring.
Related: 4 Tips for Small Business Owners as They Navigate an Economic Downturn
Start with a strong foundation
During periods of economic uncertainty, it's essential to have a solid foundation on which to run your business. Now is a good time to return to the basics and get your retail ducks in a row.
Streamline your operations. Keep your business running like a well-oiled machine by automating and optimizing your stores' different systems and processes. Work on your most tedious and time-consuming tasks and see if you can streamline them by leveraging technology.
For instance, if your teams are re-entering data from one app to the next, see if you can connect the various solutions you're using so that information automatically flows between them.
Integrating your point of sale (POS) system with your accounting solution can keep your financial data updated on both platforms, eliminating discrepancies and limiting the potential for user error. Similarly, connecting your payment processor with your POS can speed up the checkout process by automatically syncing payment data when ringing up sales.
You can also keep your operations in check by streamlining access to data. Are your managers constantly having to call in for status updates and data? Make that info more accessible by using cloud-based platforms.
Know your numbers. An important part of running a healthy retail business (especially in this economy) is to develop an awareness of where you're at financially. Run the numbers in your business so you know exactly how you're doing and which areas to improve.
In particular, see that you accurately view your revenues and profits. Knowing how much money enters your bank account — and how much the business is actually keeping — will enable you to make smarter decisions.
It is also a good idea to break down your expenses. Reducing your costs is often necessary amidst economic uncertainty, so knowing how much you're spending each month will make it easier to identify ways to cut back.
Cater to modern shoppers
Consumer behavior has seemingly shifted alongside inflation. According to the National Retail Federation (NRF), 45% of shoppers are switching to cheaper alternatives, and 44% look for coupons and sales more often to combat rising costs.
Customers are much more intentional about where they shop, so you need to work smarter to win their business.
Run better promotions. With customers increasingly looking for better deals, it may make sense to implement sales and discounts in your stores. Just make sure your offers don't eat too much into your profits.
See to it that you have a solid discounting strategy before putting a prominent "SALE" sign up the window, and make sure you're clear on your objectives. If the goal is to move excess inventory, then a multi-buy promotion (e.g., "buy one, get one") may be a good idea. On the other hand, offering conditional promotions (e.g., "Free shipping on all orders above $100") might be a better move if you're looking to increase average order values.
Related: More Is Not Better: How to Effectively Target Retail Promotions
Be flexible with payments. Higher prices may result in more people taking on debt — particularly credit card debt. Your business must be equipped to accept credit cards, along with similar payment methods like mobile and digital payments.
During these periods, it's also a good idea to provide payment options and flexibility. Consider implementing layaway programs to enable customers to reserve items until they can pay in full or offer "buy now, pay later" programs to encourage shoppers to spend more in your business.
Ramp up your customer retention practices. While customer acquisition will always be a priority, don't forget that it is generally less expensive to market and sell to existing customers than it is to engage new ones.
As such, make sure you're constantly making an effort to connect with your current customer base. Equip your business with tools that enable you to collect customer details like their contact information and purchase history. Put that information to good use by sending personalized messages, product recommendations and other offers.
Related: Six Strategies To Navigate Through Uncertainty
Final words
The economy may be facing a bumpy period, but this doesn't mean your business has to suffer. Navigate today's retail climate by ensuring your business tools enable you to do more with less. From there, strive to support your customers through flexible payment programs and smarter marketing practices.
