The Economy Is In Flux. Here’s How Retailers Can Stay On Track In 2023

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Last year, I went old school and did some of my holiday shopping in physical stores. It was mid-December, but the sales staff I spoke to reported foot traffic was down – the surge they’d been expecting didn’t materialize. That holiday slowdown however, may have been self-inflicted.  

In an attempt to move inventory, retailers like Amazon and Target started sales earlier than usual. These Black Friday-like discounts in October gave consumers a chance to jumpstart their seasonal shopping while saving – too good of a deal to pass up, amidst record inflation and rising interest rates. 

More importantly, the slowdown of holiday foot traffic was a clear sign that ecommerce has taken a permanent bite out of in-person shopping. And that’s not a bad thing. With Walmart expanding its digital presence, it’s clear even large retailers see the benefits of providing an omnichannel experience as buyers demand flexibility in how they shop. In fact, there’s evidence shoppers are seeing brick and mortar and ecommerce as more complementary than ever post pandemic. Shoppers are eager to return to stores, but aren’t ready to permanently sway from the digital commerce habits they’ve formed.

As we navigate a down economy, consumer choice is more important than ever. Throughout my career, I’ve worked with thousands of retailers with distinct needs through economic booms and busts. Regardless of the vertical, there are common mistakes you don’t want to make when the economy is unstable:

Mistake 1: Holding onto product too long

Inventory is a retailer’s biggest expense and when the economy is uncertain it’s important to have agility in how you deploy capital.

Yet, a recent survey found the 20 biggest U.S public apparel companies had, on average, 26% more inventory compared to pre-pandemic levels. Too much inventory can put stores at risk if customers slow their spending. Just consider Lululemon – the company’s stock dropped the most since March 2020 when the athleisure wear brand reported lower profitability accompanied by an inventory pileup.

Gauging inventory demand can be difficult, but one tactic is to work closer with local suppliers. This makes retailers less vulnerable to supply chain disruptions and allows them to procure goods more quickly. I saw this trend emerge during the pandemic and it continues to serve many retailers. Sure, there may be a drop in margin, but the benefit of not having to carry more overhead can be worth it in tough economic times. 

Other shops have found success introducing special services or price drops to move stock. Regardless of how it's done, retailers that shorten the period between paying for goods and selling them, will be better positioned to weather the economic storm. 

"In other words, investing in retail employees means a better customer experience — a pillar for success in any economy."

Mistake 2: Under Investing In Customer Service 

It may seem counterintuitive at a time when businesses are looking to cut costs, but one common mistake I see retailers make when the economy turns, is underinvesting in their people.

Nearly nine million people work in retail in the U.S. and have the ability to make or break customer experience. When retail workers are undervalued, however, not only does recruitment and retention become an issue, but the customer experience is greatly affected. And it’s increasingly clear the sector has a problem: retail job vacancies more than doubled from about 446,000 in April 2020 to more than a million by December 2021.

This lack of investment in retail employees doesn’t just affect brick and mortar. A survey by Shopify found the in-store shopping experience is greatly influenced by online browsing, and vice versa.

While AI chatbots have become a popular customer service option in ecommerce, a recent report says nearly 80% of shoppers still prefer customer service over the phone. Consumers want to feel understood and valued – a tall order for a robot. In fact, 49% of survey respondents said they were more likely to purchase from a brand that provides personalization. 

In other words, investing in retail employees means a better customer experience — a pillar for success in any economy.

Mistake 3: Over-relying on pay-per-click

Laws have changed over the last few years, and so has the advertising landscape. With acquisition costs reaching upwards of $100 per customer, retailers are better off getting back to basics and deploying proven strategies for attracting (and retaining) buyers. 

Equally important in a down economy is ensuring your existing shoppers come back. In fact, this is why we’re seeing more and more brands investing in ecommerce and social commerce – they understand the benefit in meeting consumers where they are. Take the time to listen to what your customers’ behavior is telling you and you will have a much better idea of where your marketing dollars would be better spent. 

It’s also wise to double down on ensuring your customers are getting an immersive and memorable shopping experience. In fact, it’s a surefire way to build community around your brand. Experiential retail can deliver the personalized, exciting interactions shoppers crave while creating an insiders’ feel. 

Regardless of whether your product is online, in-person (or both), there's always something you can do to stimulate conversation around your product and pique your customers’ interest. 

When the economy turns, it’s a challenge for any sector, but these hardships don’t come without reward. Retailers are forced to get more creative and change the way they operate. Those that stay agile in their operations and continue to invest in the customer experience with understanding and flexibility will find ways to thrive in any economic climate. 

Thanks for reading! I'd love to hear about your thoughts or experiences in the comments below. And for more ideas that challenge the status quo, subscribe to Making A Diff.

(Content from this post was originally featured in Forbes.)