Recessionary times can present challenges and opportunities for any business, not just e-commerce. Here are some considerations to think about.
1. A decline in consumer spending
- Higher CPA/CAC
- Slower LTV profit lift
Naturally, when consumer spending slows down, it is reasonable to expect less demand or to expect to pay more for it. For return customer revenue, assuming the business margins can handle a lower amount of consumers spending dollars as frequently with a brand, this side of things can be much easier to manage.
What can get more difficult is when a drop in spending leads to less favourable acquisition metrics on channels like paid ads. This is when focusing on LTV and offers becomes more crucial than ever.
2. How to manage
- Create strategies now on LTV to improve profitability
- Product / collection specific post-purchase funnels
- Product strategies surrounding affinity-based metrics
- Offer-based strategies on paid acquisition
- Running historical top-performing offers may be an option here, the counterargument is brand identity but if needed this can always be an option
- Focus on the conversion of SKUs with the highest LTV as this may not give immediate profit feedback but will provide more stability on longer timeframes
- It can be easy at times to pull back ad spend, but this can damage profitability and opportunity on medium and long-term time windows
Learn more in the video above about considerations for an e-commerce business in periods of tightening in consumer spending!
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