Businesses are understandably nervous about how the economy is going to look for the rest of the year. Inflation is on the rise, interest rates are going up, and concerns about consumer spending are all over the headlines.
But as tempting as it might be to cut back budgets across the board, Chatdesk CEO Aneto Okonkwo advises e-commerce brands to avoid being too conservative. When other brands are only focused on survival, that presents new opportunities for your brand to grow faster.
The reasons for his optimism? Find out here.
Plenty of products are resilient in the face of economic uncertainty. Aneto points to categories like underwear, pet food, and baby products. No matter what the economy is doing, consumers will keep buying those products, he said.
Less appreciated, too, is just how loyal customers have become to certain kinds of brands. While price is still king, other factors are influencing the shopping journey, too. 84% of customers say they buy from brands with values that align with theirs, for instance. And this is especially true in e-commerce, where brands often fill specific niches that may not have existed to the same extent a decade ago.
Maybe you only buy from vegan beauty brands, for instance, or from fashion brands that have strong sustainability initiatives. Once consumers find their niche, they won’t be as likely to switch away because of price as they would have been 15 years ago.
Take Darn Tough Vermont, the fastest-growing sock manufacturer of performance outdoor and lifestyle socks in America with over $50 million in annual revenue. They’re also a Chatdesk client.
A value they emphasize is keeping 100% of their manufacturing operations in the US. This helps them retain customer loyalty - especially with the US military, which is required by law to purchase supplies from domestic producers. In fact, sales to the armed forces account for ⅓ of Darn Tough Vermont’s revenue.
Aneto recites this quote from the Brazilian race car driver Ayrton Senna. When asked how to get ahead in a car race, Senna pointed to weather changes:
When it rains, in other words, everyone else drives more slowly. “That’s how it is in business, too, when it’s raining. Everyone starts doing layoffs, pulling back on spending, pulling back on marketing,” Aneto explains.
But when everyone else is scaling back, that also means less competition and an easier opportunity to stand out. Think how much further your advertising dollars can go, for example, when the price per bid is lower.
In fact, Thinx, the leading period underwear brand, knows this better than anyone. They recently launched a new product line called Thinx Teens and instead of purely relying on organic growth, they decided to go big in promoting their new line with online and TV ads. They even hired award-winning actor, director, producer and screenwriter, Pamela Adlon to direct the ads.
Going into 2022, Americans had accrued $2.6 trillion dollars in extra savings as compared to January 2020. Remarkably, those savings cut across all economic groups. Even the bottom quarter of earners had 65% more savings at the start of 2022 than at the start of 2020, before the pandemic.
All that extra savings means that your customers have deeper pockets than usual—and might be more resilient to economic turmoil than they would have been, say, three years ago.
“You don't want to go into a bunker and say, ‘Hey, people are gonna stop spending altogether,” notes Aneto.
This moment also looks very different from the last two recessions in several important ways. Here’s what business leaders need to keep in mind:
But we started from a high point: this time last year, consumer spending was reaching record levels.
So far, inflation, not job loss, is driving this current period of economic turmoil. Unemployment is at 3.6%, and it has yet to change in a notable way even as inflation rises. This reality might bode well for consumer spending in the long term.
Switching to on-demand models was not an option back then, but it’s becoming more prevalent now. And more importantly, it lets companies scale back their budgets without scaling back growth because they’re removing inefficiencies. One area this is happening is in customer service.
In previous decades, brands routed their customer service inquiries to a call center, staffed with their own agents. They would pay each agent hourly rates regardless of the volume of customer service tickets handled; so if you pay your agents an average hourly rate of $15/hour, it doesn’t matter if they’re handling 10 or 100 tickets. For growing brands with seasonal trends, that traditional model results in resource and budget inefficiency, as well as productivity loss.
“Traditionally, it's a fixed cost. That's inefficient,”says Aneto. But in 2022, “you can make customer service into a variable cost, so you only pay for what you use. That's what Chatdesk offers. It makes customer service into a revenue driver to help you grow. So it's actually the ideal solution for the current time.”