Think your brand is recession-proof? Think again.

Pete Martin, MD at digital commerce agency SMP
By Pete Martin, MD at digital commerce agency SMP

While certain FMCG categories might feel ‘recession-proof’ – whether that’s pets, parenting or personal care – this isn’t necessarily the case. All sorts of brands are going to feel the pressure as consumers prioritise budgets over convenience this winter – even when it comes to nappies and dog food.

In particular, direct commerce innovations that took off during the pandemic, such as rapid delivery, are set to be scaled back as consumers try to save money. Getir’s advanced talks to acquire Gorillas is a strong sign that the home delivery boom might be slowing down.

Consumer confidence has hit record lows and households’ weekly spending power has decreased by £30 year-on-year. While ‘essentials’ labels across FMCG categories have historically made the incumbent grocery brands more resilient to disruption than other categories, FMCG as a whole is still at risk.

Any business, even in a supposedly ‘safe’ category, would be short-sighted to assume it can navigate the cost-of-living crisis without a shift in strategy.

Fresh considerations for a new recession

Shopping behaviours have diversified at scale since the last recession in 2008. Social media was in its infancy and we were on the edge of the e-commerce boom. Sixteen years on, the market looks very different, which has been to the benefit of the direct commerce sector.

Notably, subscriptions and rapid grocery delivery have come to play a core role in what many FMCG brands offer, and in dictating what consumers choose – or choose not – to spend their money on. However, each of these examples would constitute a luxury option, which may not sit well during a downturn.

That said, many direct commerce businesses became adept at pivoting during Covid, so should be better prepared to adjust their offer and supply chain in the coming recession.

The smart recession-proof brands will now be paying close attention to the eCommerce landscape as a whole, while monitoring what customers are buying from them and how their shopping habits are changing. As well as what and how people are buying, where they are buying is an equally significant consideration.

A look at new Springboard data reveals footfall in Northern retail zones is significantly lower than in London, so we might also assume these trends will apply to digital commerce too as inflation bites. In which case, marketing teams will need to weigh up regional targeting to align to demand, while ensuring overall visibility for the longer term.

Get the balance right

Online retailer Ocado has reported that the price of its average customer basket has fallen by six per cent, with its chief executive saying that consumers are either switching to value-based brands or buying smaller quantities.

Clearly then, as even loyal customers for the upscale retailers make changes to their shopping habits, there’s pressure to (literally) take stock and invest in marketing their more affordable ranges.

While shoppers are looking for bargains, it doesn’t mean they’re falling completely out of love with higher-end products. At least within reason. The Lipstick Index, a theory that consumers invest in affordable luxuries to boost their moods when an economy nosedives, should give brand marketers hope that small-ticket luxury goods – such as grooming and self-care products – are still categories that can do well.

Brands can’t assume the strategies they had in place at the beginning of the year are applicable now. You may need to reconsider which product lines to focus on as customer behaviours change, for instance, but using the digital commerce tools at your disposal can make this an informed choice.

Businesses that can successfully balance essential ranges to bring shoppers in with affordable treats are best positioned to weather the coming storm, and could even see new customers come on board.

The customer is still king

Speedy deliveries, frictionless transactions, greater personalisation, and digital communication with experts will remain fundamental to driving a purchase and customer retention – this remains true even when shoppers are feeling the pinch.

Those that understand audience needs, balance affordable essentials and ‘feel-good’ moments, and maintain consistently high customer experience can maintain their market position – even see growth. That’s even in the face of increased competition from the discounters, as well as the current and coming economic turmoil.


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