Some of you remember playing “choose your own adventure” games. The story moves forward based on the choices you make. Open one door, and you have to fight a dragon. Open another, and an elf king is waiting to assign you a quest that will bring you riches and fame.
As we move into the next phase of impacts from COVID-19, many e-commerce retailers can think of the different types of recovery as similar.
Economists often talk about three scenarios for recovery. A V-shaped recovery goes back up immediately after it hits its low point. A U-shaped recovery remains at lows for quite some time before starting to trend back upwards. And a W-shaped recovery seems like a cruel trick — the economy goes up for a short time, and then goes back down before moving on to sustainable growth.
As a merchant, you can’t change the shape of recovery from the global economy, but you can make choices that favor one scenario or another for your business. It’s all about controlling the things you can manage and understanding the things you can’t.
Now, we know that basically, any retail business is hoping for a V-shaped recovery. You know things got tough for you as shoppers cut back on discretionary spending, and you want any signals of recovery to take you back to where you were before, and beyond.
There are four things you should do if you want to improve the odds of this V-shaped recovery:
- Back off on deep discounts, but slowly. Many retailers fell into a fire sale mentality during the past three months. Unless you are lucky enough to sell household essentials, you almost certainly saw a deep drop in demand or a shift in buying patterns. We broke down the trends as they were emerging earlier this year.
As you think about recovered shoppers (i.e., shoppers who have returned to earning a full salary, or shoppers who put off spending until they saw where the pandemic was heading), you should start to adjust discounts. If you had 30% offers, back them off to 20% or 10%. Try eliminating discounts from your seasonal best sellers. - Layer in new sorts of promotion. For the discounts that you keep in place, be sure to frame them as seasonal or summer holiday promotions, to help shift focus away from crisis-mode. By doing this, you change the tone with your shoppers
Seasonal discounts help give the impression that the world is going back to normal, at least for your business and your shopper. They create a sense of familiarity, such as Fourth of July sales in the U.S., or back to school sales. We don’t mean to suggest that you completely ignore changes in the way people spend their time or attend school, but helping your shoppers tap into familiar rituals will improve your results. - Offer newness. You can help bring your shoppers back by offering them something new. This newness gives you a reason to reach out via email, launch new ad campaigns, and more.
What you promote is up to you. It can be a new site design, a new mobile-friendly feature, a loyalty or incentive program, or a new category of merchandise. While some shoppers are experiencing direct and real financial impact from the crisis, others have held off out of uncertainty. This approach gives them a reason to come back to you with pent-up demand rather than to your competitor. You don’t have to win them from scratch, but they often will need a nudge. - Provide new ways to pay. We’d be remiss if we didn’t suggest this. Consumers who are reigniting their spending habits may prefer to do so cautiously. They may also have deferred a higher-ticket purchase and have decided that now is the time. Installment payment solutions are a proven tool for helping shoppers manage their budgets more flexibly.
However, they may not want to take out new lines of credit to make their purchases. Splitit gives them an alternative. Splitit shoppers use their existing credit card to pay over time, which keeps their payments small so they keep more of their money for living. It has boosted conversion and Average Order Value in good times and bad. Now would be an excellent time to make it part of your V-shaped recovery toolkit.
If you want to pursue a U-shaped or a W-shaped recovery, then just keep doing what you are doing. If you continue to make consumers feel like the world is unstable and risky, and continue to train them that deeper discounts are just around the corner, you are likely to stay in the trough, or perhaps see a quick bounce back before heading down again.
In reality, we know that retailers don’t want either of those scenarios. It’s just a cautionary tale. When you play choose your own adventure, sometimes you get subtle clues that there’s a dragon behind the door, so it’s helpful to point them out.
What you actually want is the door that leads you to treasure, and lets you be the hero of the adventure.
If you have any questions about your quest for a healthy recovery, please be in touch. We’d love to help.