Can Online Retail Businesses Survive a Recession?

The UK’s economic outlook at the present moment is bleak. A year of instability in global wholesale markets – precipitated in large part by the Brexit withdrawal agreement, the invasion of Ukraine and the aftershock of the coronavirus pandemic – has resulted in a crisis for the average household, and an existential crisis for businesses.
The continued rise in the rate of inflation has forced the Bank of England to raise interest rates by 50 basis points, representing the largest rise in 27 years. This also represents downward pressure on growth for many businesses, especially those with credit obligations.
The result is an economy on the brink of recession, as businesses struggle with growing financial difficulties and decreased consumer spending. Online retail is one of the fastest-growing industries in living memory, but changes in consumer habits could spell danger; can such businesses survive?

Decrease in Spending
A recession is not a national economic ‘event’, per se; rather, it is a state of economy defined by a set of behaviours and outcomes, a descriptor for a period of economic difficulty. Specifically, recession describes a period in which economic activity is in decline, whether on the part of consumers spending less money or businesses trading less wealth.
The consumer spending part of the equation is of particular importance to B2C industries, and the various suppliers and distributors that rely on them. The downturn in spending directly and actively harms profits, limiting cash flow and endangering already-struggling businesses – with key knock-on effects on their creditors.

E-Commerce and Recession
E-commerce is the modern-day frontline for consumer spending. The high streets have been in relatively continuous decline for decades, with the demise of some high-profile businesses accelerated by the onset of the coronavirus pandemic and its subsequent lockdown restrictions.
As such, online retailers are facing the brunt of the damage from the perspective of recession. New business models are facing the prospect of a national-scale stress test, and smaller independents may struggle to tread water in a world of higher-than-average supply costs.

Bucking the Trend
But recession need not spell the end for every e-commerce business. Indeed, there are several routes that businesses can take to minimise the impact of the recession on their business stability. Speaking to Investment management experts can help a business with understanding its present standing, and provide unique insights into weathering the storm.
One of the key pieces of advice many businesses will be receiving is to ensure their cash flow remains positive. Negative cash flow can heavily impact investor trust, and lead to future instability. Further investments as opposed to the paying-off of debt can leave a business in real short-term hardship.
On the retail side, it is also important to retain as many existing customers as possible. Incentive marketing campaigns with bespoke deals for regular customers can ensure that the core user base of service remains happy and engaged.