Memo #7

Closing in Market Recession, What to Do to Survive and Capitalize as eCommerce Business?


2020th for eCommerce owners and Facebook Ads buyers will be one of the most interesting years in the last decade.

The thing that is closing in is - a market recession.

Not sure when it will hit with all, it’s weight, but signs are already there for some time — for example, an inverted US bond yield curve which time over time signaled upcoming market recessions.

What I’m going to share here is what you can expect to happen with your store, media buying channels like Facebook Ads, and some of the best practices on how to properly prepare for it as an eCommerce business.

Keep in mind that I’m not a professional financial advisor, so this advice comes more from my network of successful people (Some with net worths of more than 400MM.)

They are based on what these people have advised me or what they are themselves doing with their capital and businesses recourses. What strategies are they taking etc.

How Things Most Likely Will Go

Let’s start with the most likely scenario that will happen. Initial steps of the reverse will be slow (well technically it’s already happening), it’s just that a lot of people choose to ignore it.

But a day will come when a crash in markets will happen almost immediately. Investors and Wallstreet will start to dump their shares, open big shorts on markets, media will pick up on that, and suddenly the “crisis” will happen within a few days, and you are going to see the markets and shares plummeting.

That will cause a considerable panic wave across the masses and regular consumers. After all, they are used to associate market crash = being fired = pain and poverty.

They’ll start spending less almost overnight.

The decrease in liquid cash will cause all the businesses revenues to drop; some of them will start to close doors and fire people.

This, in turn, will cause even bigger panic.

This wave of panic usually lasts for a year. Afterward, things slowly start to recover. (Based on the previous market crashes average for recovery after the downturn market is 22 months, but usually, the first wave of panic passes in 6-8 months).

And that’s is the most crucial moment that each eCommerce business out there will have to deal with.

How to Prepare for Market Crash

1) Optimize your business; make sure each dollar goes maximum length.

First thing I’m seeing smart people are doing is optimizing their business resources, taking care of the wastages, and making sure each dollar goes the maximum mile.

They make their businesses lean, mean cash machines that are miles ahead of their competitors. If you are still not there, right now is the time to talk with us or somebody else who understands omnichannel marketing and see if they or we can help.

In eCommerce case:

1. Be sure that your store has better conversion rates than your competitors.

2. That you have email sequences that allow maximizing reorder rates.

3. That your core products are better than your competitors.

4. That your ads strategies are the best out there and allow you to maximize every cent value.

2) Have a Cash Reserve

The next thing is - expect the ROAS and sales to drop during the first 6 months period.

Have enough liquid cash in the bank to sustain this period.

This might mean sacrificing a luxury lifestyle for a bit, but it’s worth it.

I strongly recommend not to cut on advertising investments.

Even experimenting more with micro tests and finding what works right now will allow you to have the edge over your competitors (look back at the previous part of the list about having an unfair advantage).

Also, what if, for some reason, the crisis doesn’t happen as soon as expected? Or it’s smaller than expected? Not experimenting will cause you to fall behind.

Cut what is not needed and focus on what is important.

Now getting back to the downturn. After the first 3-6 months, a lot of your competitors who haven’t prepped right will start closing their stores down, firing off their personnel or at least cutting their marketing budgets, and experiencing various problems.

The goal during this time frame is simple – to survive. Run some ads with maximum optimization for profitability; that’s there all the prior optimization will kick in. You should already have an unfair advantage over your competitors at this point.

3) Play to Win, not to Survive

The stage where other competitors will start dropping one by one like flies. Auction based systems in advertising channels like Facebook Ads or Google Adwords will become much cheaper to advertise in.

Other businesses would already have exhausted their resources at this time and will not be able to invest so much. They might even have to lay off part of the team that would support their fast growth.

At this time, there will be a moment to go all in, and seeing positive ROAS start acquiring the market share, raising ad budgets, and revenues as long as you’re running on the breakeven or small positive ROI.

This will hinder the competitors coming back into the market, and you will be able to enjoy a bigger part of the pie later on via repeated sales.

And in some cases, if you are at the “big boy’s” level, even acquiring your competitor’s businesses with a considerable discount makes sense 😉.

There are a few people that I know are prepping to do. They are right now building supporting and value-adding infrastructure and raising tens of millions in the capital while it’s still easy to do it.

With the plans of acquiring about 30 to 50 coaching businesses. Then using this infrastructure and cash to grow and accelerate their growth, waiting 3-4 years, and selling them for x4-x10 profit.

So that is my thoughts on the whole situation. Once again, I’ll mention that I’m not a financial advisor, but a businessman and advertiser who leverages other people “smarts” to educate myself and our eCommerce partners about the best course of action.

I hope you find this valuable!

- Darius, Co-founder at AdKings Agency

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