How to Crisis Proof Your Ecommerce Business

Crisis will come. Downturns will happen. Winter will always be one of the seasons. It is inevitable. Everything is a cycle. It may be more or less severe. It could be specific to your business or it might be a global pandemic like the one we are facing today with COVID-19. But there is no questioning that it will come. Times may be scary, but fear should never play a role in your decision-making. Wondering how to do that? Here’s how we do it. The key is planning appropriately and anticipating the cycles, so that you and your business can survive and actually thrive during those times.

The crisis we are all facing in Coronavirus is unprecedented. In just a matter of weeks, industries have entirely shut down or changed completely in a way no one anticipated. We should all take this as a reminder that literally anything can happen. Don’t be naive and think you’re safe or exempt from disruption. No one is.

In ecommerce and retail as an industry there is a span from companies facing complete revenue shutdown to businesses thriving more now than ever. While ecommerce as a channel is actually the thing sustaining most businesses during COVID-19, many ecommerce brands are still at risk and they may not even know it.

In this guide, we’ll walk through 14 critical ways to help crisis-proof your ecommerce (retail, or DTC) business so you can strengthen your business now and be ready when that next cycle hits. These actions are grouped in 3 ares: 1) Planning 2) Diversification and 3) Opportunity

Despite the pain associated with disruption, the resulting adaptation will be positive.

1. Plan for Down Cycles

Believe it or not, if you’re prepared, you can not only survive an unexpected crisis, but even thrive through it.

Wealth is made in winter. Opportunity often comes through disruption. But in order to take advantage of these opportunities, you need to be prepared to weather the storm and move during it.

When is the best time to plan? When everything is going right. That is when you should be planning for when things might go wrong. Once a crisis has hit or an unexpected change has occurred, it is too late to start planning.

Here are 3 steps you should take starting right now to plan the next season:

1. Believe planning is important

This needs to be a core value. Be of the mindset that planning is crucial for your business. The problem is most businesses (and people) put planning in the “nice-to-have” category. When things are good, we believe the illusion that things will always be the way they are. The truth is, planning is never easy, and it will never be urgent until it’s too late. You must be intentional. Know that you don’t know everything, no matter how confident you are or how successful your business is. In November of 2019 no one would have ever dreamed people would be locked in their homes because of a new virus, yet here we are just 4 months later. Proactive thinking will always be more effective (and successful) than reactive scrambling.

2. Have financial reserves

Make sure that you are financially stable. As an ecommerce-primary business your goal should be to have at least 1 year of operating capital and 3 months of inventory on hand. If you had that before the coronavirus hit, you’d be relatively okay right now. The 3 months of inventory might run through before the crisis is over, but you won’t be going out of business overnight. You’d also have the money on hand to take advantage of actual opportunities, like building your brand, that might arise in the marketplace in the midst of the crisis.

3. Identify your weaknesses

All businesses have weaknesses and it’s impossible to cover all of them. The problem is when you are not aware of your weaknesses and they take you by surprise. This can kill businesses. Be aware of your business vulnerabilities and analyze them often (even in the good times). You may or may not choose to act to strengthen these areas of your business, but continually assessing them is key.

2. Diversify Your Business

If your business isn’t diversified, you are extremely vulnerable. All of your eggs are in one basket. So what happens if that basket is heavily affected (or worse shut down entirely) in a crisis? This is the case for many businesses in the midst of the coronavirus pandemic. In the last 10 years we’ve seen massive growth and as a results tons of businesses aren’t diversified. They enter a channel, find success, and never invest in finding additional channels. We’ve been spoiled and unfortunately many have paid the price. If your eggs are in one basket and that basket is pushed off a cliff… you’re done.

Note: Diversification means you will need to invest into areas with no immediate return.

ANNOUNCEMENT: If this happened to you and your business is hurting badly, we’d love to help with our skillset. Read here how we can help.

Here are 7 key places to focus on diversifying your current ecommerce business:

1. Diversify Marketing Channels

This is a BIG one. How many successful ecommerce brands rely on a single marketing channel for most of their sales? Diversify your marketing channels before it’s too late. Relying on a single channel is risky even in times when your business is booming. Many brands rely on Facebook marketing for new customer acquisition and when Facebook changes their algorithm, or shuts their ad account, they are left in the lurch.

Make sure you are spreading your advertising dollars across several channels (paid and organic, online and offline). Yes, I said offline.

2. Diversify Customer Service

Customer service is the front line of fan creation. And customer service representatives become even more important in times of crisis. We recommend you have both outsourced customer service and in-house customer service in place, or have a plan for how to transition to an alternate customer service option if your primary team can no longer meet your needs in a crisis.

3. Diversify Your Product Line

Whether or not a crisis hits, a static product line can only take your business so far. Invest in R&D to future-proof your business, expand your revenue, and you’ll also be better prepared in times of crisis.

4. Diversify Fulfillment

Shipping is a key part of the customer experience. This is big at the moment with COVID-19. If your fulfillment is diversified, you’re in a better position to continue serving your customers in the midst of this pandemic. Be prepared to move beyond your primary method of fulfillment if needed. Having FBA and fulfillment in-house are good backups to your 3PL. If you’re fulfilling in-house, have a 3PL lined up to jump in as needed. In fact, you should have several 3PL relationships in place at any time.

5. Diversify Sales Channels

In person retail has been hit hard. If you only have a physical retail presence, you are without any way to sell. Ecommerce businesses are also hurting in some industries, but not nearly as badly. For many businesses, ecommerce is the only thing keeping them afloat. Make sure you have multiple sales channels (or a plan to move into additional sales channels as needed). Also make sure to have distributor and wholesale relationships in place, be on various marketplaces and explore affiliate programs.

As a consumer product company your goal should be to have at least 5 sales channels in your business plan: Direct-to-consumer (ecommerce via Shopify or other), Marketplace (Amazon, Walmart, etc), Affiliate (others selling your products on commission), Wholesale (3rd Party Retailers, Distributors, etc) and Offline (in person retail).

6. Diversify Your Team

We’ve addressed the debate on hiring in-house vs freelancer vs agencies as your team at length. The answer is: you need all. Leverage a blend of your in-house team, agencies, and perhaps freelancers to get the best results. This not only will ensure that you’re blending the best resources in each area, but you’ll be set up to continue working throughout a crisis even if some of your workforce is unable to perform.

7. Diversify Manufacturing

Manufacturing and supply chain is difficult to diversify because it’s all about relationships that are often continents away. While it may not be feasible to have multiple manufacturers depending on your stage of business, build relationships with multiple manufacturers and suppliers in case you need to make a sudden change and as you can distribute your sourcing from multiple suppliers and manufacturers.

3. Look for New Opportunities Amidst the Crisis

If you are prepared for a crisis and have diversified your business, when a crisis hits you don’t act out of fear in desperation. Instead of buying into the chaos and the craziness around you, you can calmly approach the situation and take advantage of opportunities. Now let’s be clear, this is not about being opportunistic and unethical. You must be of the mindset to take advantage of opportunities in a positive and healthy way.

Here are 4 ways to assess opportunities in a downward market:

1. Build Your Brand

Use this as an opportunity to connect with your customers and create fans. In the case of COVID-19, this is the perfect time to do this. Advertising costs are down and consumption of digital media is high. There is also a lot of uncertainty in the world and your audience is most likely looking for a little hope. Get creative and find a way to help while getting your brand name out there. We’ve written about this at length, here.

2. Advertise

When a company is in a financial crisis, one of the first things to go is typically ad spend. while this may actually be counter-productive, it’s still often the case. Many companies are pulling ad spend in this season. Do the opposite. While your ROAS might be lower (although for many ecommerce brands it’s been growing higher) during this time, you have the opportunity to affordably get in front of a lot of potential new customers and begin building a relationship. Even if new customers aren’t in a position to buy right now, you make a memorable impression so that you’ll be top of mind when they are ready, and you can do it in a less noisy and more affordable environment.

3. Consider New Product Uses

Crisis brings about new needs. Disruption breeds adaptation. This may mean there are new uses for your product that you hadn’t considered before. You may or may not need to change your product. It may just be an adjustment of messaging to take advantage of the new needs in the marketplace. Step outside the box and get creative. Position your product and brand appropriately in the context of the current situation.

4. Recycle & Reassign

What elements of your business are currently underutilized due to this crisis? Can you use these resources for something different? You might have resources laying dormant in one area that could be well-positioned in another. Figure out how to use these things. Perhaps you can use your thriving in-house fulfillment center in this time when other fulfillment solutions are getting shut down or overwhelmed by selling that service to another company.

Go Be Great

Crisis can be scary. But it’s also where heroes rise from. That doesn’t mean a crisis is a good thing. However, when it happens (and it will), people need leaders to emerge and give hope both in life and in business. If your business can do this, then your business will thrive through bad situations and actually come out better then when you went in. You may not thrive in terms of revenue in the short term, but you’ll be able to weather the storm and be set up for long term growth when everything settles.

 

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