05 Oct
Table of contents:
Introduction
List Trader presents 8 valuable wholesale tips for recession 2023. Follow these tips to make profits and grow your business even in difficult times such as a Recession.
In September 2022, the World Economic Forum (WEF) conducted a survey of 50 economic experts from various industries and organizations across the world. This survey indicated that a Global Recession is likely to take place in 2023 because of consistently rising inflation and declining real wages.
The real wages will keep failing to fuel the rising cost of living across the globe in the latter half of 2022 and the situation may get worse in 2023.
Moreover, in low-income economies along with the surging prices, real wages are expected to decline. This reduced household purchasing power is expected to increase poverty levels across most low-income countries. This inflation is expected to settle until 2023.
There are a lot of questions that need to be addressed such as; “Are recession fears real?”, “Will recession come in 2023?”, and “Can recession be avoided? If yes, then how?”.
Knowing the answers to these questions will help us safeguard at least ourselves from this economic calamity.
Global Economy is a massive and complex web of countless factors that affect each other. Even a slight amount of recession may change a lot of things and firms need to prepare and adapt to the change. The Recession may impact the world in a major or minor way and affects a variety of industries depending on its magnitude.
The Wholesale and Retail industry is no different.
Therefore let’s learn about the impacts of the upcoming Recession on the wholesale and retail industry and how to prepare for the change. But to understand that better, let’s first understand what recession means and how recession works.
What is a Recession?
A Recession is a significant economic downfall that is usually widespread and chronic in nature. A recession is normally predicted when two consecutive quarters of decline in Gross Domestic Product (GDP) is shown.
Its three major impacts; economic output, consumer demand, and unemployment. These are also the reasons why recession happens in the first place.
Recessions are common in any economic landscape and have grown to be less frequent and shorter lately.
A recession is of concern because it can cause a spiral or self-perpetuating effect and the situation may worsen if measures are not taken.
For instance, reduced demand causes layoffs in the job market which in turn hits the income and spending of the newly unemployed. This spiral effect depresses demand further.
How Recession happens?
To understand how recession works we need to keep in mind several factors that influence the economy. Nonfarm payrolls, industrial production, and wholesale and retail sales, and a few other top indicators are precisely considered as the cause and solution of a U.S. recession, according to NBER.
On the other hand, a recession cannot be solely predicted based on a few factors. For instance, the NBER predicted that the widespread economic disruption caused by the COVID-19 pandemic in 2020 will turn out to be a chronic recession but instead it only prevailed for roughly 2 to 3 months.
When did the previous recession happen?
The shortest recession of roughly 2 months was recorded during the COVID-19 pandemic.
The financial crisis in the United States in 2007–08 is also known as the Subprime Mortgage crisis.
During this recession, a severe contraction of liquidity in global financial markets was seen to have originated from the United States. This contraction in liquidity was a result of the poorly performing U.S. housing market.
If you’re wondering which recession was the worst, this crisis in 2007-2009 in the U.S was the worst and most impactful preceding The Great Depression that happened in 1937-1938.
All these recessions forced the governments around the world to adopt certain policies to ensure that ordinary recessions are suppressed on a preliminary level and don’t shape into an economic calamity.
“September and October of 2008 was the worst financial crisis in global history, including the Great Depression”
Ben Bernanke
U.S. FED Chairman during the crisis.
Impacts of Recession on the Wholesale & Retail Trade
Recessions are, undoubtedly, challenging for wholesalers and retailers. Traders across the globe are worried about the Increasing inflation and its adverse impacts on their trade.
In times as exigent as recessions, only the smartest lot of traders will instinctively know what should be done in order to make their business survive.
Let’s see how recession affects business, specifically wholesale and retail trading.
- Hike in price from supplier is seen. Consequences of this are either low sales due to higher selling price (sudden diminished sales may result in inventory storage issue) or narrow profit margin.
- Increase in product price leads to less consumer demand. Consumer demand is even lesser for non-essential goods.
- Inflation affects your warehouse or store rent, electricity and other energy costs, warehousing, order fulfillment.
- Employees demand a hike in their wage to fulfill a better standard of living. The pressure to hire and retain workers increases, as many employees leave their jobs to get a new one for better wages. To retain an employee, their wages need to be reconsidered which further squeezes a wholesalers or retailers profit margin.
- A surge and lag in shipping costs during inflation significantly reduces wholesaler and retailer margins and it also causes inventory backlogs. Delays in shipping means smaller sales windows and quicker markdowns to let new seasonal products come in.
"Recessions are hard on traders. Discretionary spend goes down and inventory piles up."
Dan McCormick
Chief of Staff at Not Boring
Apart from these, there are a plethora of impacts of a Recession on a wholesale and retail trading business. It is usually difficult for a government to handle a recession situation as an organization, let alone an individual. What individual traders or MSME companies can do is to find their own way out.
Let’s discuss some tips for wholesalers and retailers to survive during a Recession.
8 Top Hacks for Traders to survive a Recession
First and foremost, surviving a recession needs preparation and flexibility. Wholesalers and retailers need to find opportunities to increase productivity, gain customer loyalty, and build up market position. Let’s look at solutions that traders can adapt to and stay competitive even during challenging times such as recessions.
1. Find your USP (Unique Selling Point)
Define, implement and communicate your USP (Unique Selling Point or Unique Value Proposition).
“The main thing you can do is figure out what sets you apart from your competition. What attracts customers to your products or stores? Find those positive attributes and emphasize them. Embracing your core message is what keeps consumers coming back in the long run."
Bob Hoyler
Euromonitor International
People tend to buy selective products because of inflation and reduction in real wages.
The questions such as; “Why should we buy your product?“
Upgrade into something like; “Why should we buy your products for such a high price?“ during a recession period.
Therefore, during recession a wholesaler and a retailer needs to either add or find a USP in their products to gain a competitive advantage. If the product or service already has a USP, the flexibility to mold it according to the consumer demand is needed.
2. Use List exchange and wholesale bidding platforms
Wholesale List exchange and automatic bidding platforms such as List Trader are a must for today’s wholesale and retail business. These AI based streamlined software grant immense power in the form of state-of-the-art features and are easy to use and navigate. List trader has all its features on a single dashboard. List Trader has helped countless wholesale and retail businesses to flourish.
Get your subscription to the best in class, and most trusted List Exchange and Trading platform in the industry.
3. Understand the consumer's preferences
- Wholesaler point of view: Wholesalers collect the market data and understand the customer behavior and preferences. They usually buy goods that are in demand and have the potential to make profit. They share these details gathered from the retailers and consumers with the manufacturer as feedback. The manufacturer then makes changes to the product or service to adapt to the consumer needs.
- Retailer point of view: Retailers are the one who usually face the consumer and gathering data such as consumer preference gets easier. Every opportunity of gathering data should be considered. Retailers should focus on “Why?” consumers are buying those products and “How?” brands can fulfill those demands.
Times such as recession calls for such adaptation. Providing the best value to the customer is imperative and is only possible if each part of the supply chain understands the preferences from their own perspective but communicates efficiently among themselves.
4. Create the best consumer experience
Whether you are a wholesaler or a retailer, whoever your customers are you should be able to create a simple to navigate yet interesting and engaging journey for your customers in the buying process and even after the purchase. Customers will hesitate to buy from a dealer who doesn’t offer a great customer experience. This is even more vital in case of services.
5. Rethink costs and profit margin
Identifying and reducing unnecessary costs is extremely vital to a business during a recession .
Readjusting the trading expenses if they are upside down and aligning them to the recession circumstances is important.
Rethinking the number and need of employees working for you, renegotiation of a contract with an employee, employee salaries, inventory management, marketing costs, are all factors to be considered to put your finances in order.
Adjustments in profit margins may help sell the product. This may or may not help gain more profit but it keeps the inventory rolling.
6. Think creative and give discounts and offers
Marketing wholesale bulk goods to sell it for a reasonable or high price during recession is difficult and needs creativity. You can offer wholesale discounts to retailers and consumers and retailers can offer retail discounts to end customers cutting the discount cost from their profit share.
Offers such as combo offers or a “buy 3 get 1 free” offer can prove to be fruitful. Creating such offers attract consumers and also create repeating customers.
7. Create an online omni-channel presence
An online presence allows retailers to order products in bulk from your website or any ecommerce platform you’re available on. Online presence will let the customers choose and place orders from their home without having them spend on transportation costs. Examples of ecommerce platforms are: amazon.com, flipkart.com, alibaba.com, etc.
Omni-channel presence will let you showcase your products on various channels increasing your search visibility. It will let your customers directly order products from wherever you’re present.
List Trader is one of the most trusted platforms for wholesalers and retailers to be present on. It offers the best in class services and state-of-the-art features, all in one single dashboard. List Trader lets you buy or sell your products on its platform using a single central repository that allows your demands to match with other’s supply. Click below for more info.
8. Convert into a D2C model
Companies started adapting the D2C model after the 2009 recession. This model allows any member of the supply chain to directly send the products to the end consumer no matter which party has placed the order.
This means that if an end consumer has placed an order with a retailer and if the retailer doesn’t have the product, the retailer will forward the order to the wholesaler while charging the retailer’s profit. The wholesaler will send the goods directly to the customer without having it delivered to the retailer.
If you are a wholesaler selling products that both retailers and end customers buy then you should start a D2C platform. You can market your products digitally and end consumers will buy from you without any other party involved as a middle man, as you are now directly delivering these goods to those end consumers. This helps simplify the supply chain process and can prove to be beneficial during recessions.
Conclusion
While wholesale and retail trading businesses’ can be difficult to manage during recessions, experienced and smart traders see recessions as an opportunity to examine their trade and align their business with the recession and post-recessions circumstances.
To be a successful wholesaler or a retailer during a recession, you should be flexible, aware, have deep knowledge and 360 degree perspective about your business and market and look for new opportunities being creative.
List Trader is a trusted wholesale and retail software for List Exchange and wholesale bidding. Your one-stop solution for all your wholesale and retail trading needs!
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