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Business owners around the world have turned the page to 2023 facing a complex set of challenges. A host of macroeconomic forces work together to make life difficult for small businesses and large corporations alike. These economic trends will have a variety of effects on employers, employees, job seekers, and customers, freezing some businesses into a state of paralysis.
In countries around the world, the ongoing challenge of inflation is making it more expensive for businesses to pay for the goods and services they need to survive. Whether it’s a local restaurant that buys ingredients and prints menus or a global company that pays for software subscriptions, rising costs have a domino effect that eventually reaches the end consumer. When inflation is not kept in check, it becomes a perpetual suffering machine: consumers with diminished purchasing power are left to choose between the goods and services they need, leaving businesses to contend with increased competition for portfolio share.
In particular, e-commerce companies are dealing with inflation headaches while also dealing with the long-term effects of global conflict and the cascading impact of the Covid-19 pandemic. Inventory challenges caused by supply chain disruptions make it difficult for companies to ship orders and meet customer expectations. Some organizations are not agile to keep up with increases in demand, while others are left with warehouses full of unsold inventory.
The era of easy money is over, and business leaders know that the margin for error will be smaller by 2023 and beyond. However, the basic instincts of how to survive a recession—cut spending, lay off employees and wait for a recovery—could prove fatal in the current downturn. Previous recessions have shown that investing in innovation pays huge dividends during tough economic times. While it may seem counterintuitive, now is the time to bet big on digital transformation and race the keenest competitors.
Related: How Ecommerce Companies Can Grow During a Recession
A pivotal moment for platform investments
When there’s a little cash to run around with, there’s no need to be careful – it pays to be smart. Consumer-facing companies must be able to respond quickly to changes in demand or customer sentiment. If a product suddenly takes off, the retailer needs to be able to stock it. If a service provider starts to see subscriber numbers drop, it needs to quickly adjust offerings to stop the bleeding. Those who take a “wait and see” approach to their problems will eventually find that they are overtaken by those who move quickly and it will be too late to save themselves.
How can businesses use digital transformation to achieve more agility in 2023? The key is to take advantage of the platform’s technologies. Platform approaches such as enterprise marketplaces and dropship models allow organizations large and small to minimize their risk and maximize upside for potential recovery. By investing in market technology, B2B and B2C businesses can rely on a network of third-party vendors when they need to respond to a sudden surge in demand.
This seller network also provides a new layer of financial security — if demand suddenly drops, the burden of unsold inventory is spread throughout the network rather than being concentrated in a single warehouse. Marketplace and dropship models also allow companies to diversify their supply chain and quickly weather some of the short-term crises that have characterized the past two years.
Most importantly, the platform’s investments ensure that the organization is in the lead when the economy begins to recover. Overly cautious organizations will cut costs and reduce inventory during an economic downturn, putting them behind the curve when they inevitably need to increase inventory. Agile companies can rely on their platform technologies to scale without roadblocks on the rise, and rely on partner inventories to ensure that a hot product is never out of stock. While economic downturns often separate successful companies from their doomed competitors, it is recovery that truly reveals which organizations will become market leaders.
Related: Why Retailers Should Move to a Market Model
The only way forward
In the aftermath of the Great Recession, retailers struggled for years to weather economic headwinds and regain business momentum. However, the onset of the Covid-19 pandemic has led to a brief period of uncertainty before companies adjust to the new playing field. No one can predict the extent of the current deflation and how long it will take for inflation to return to Earth – nor can they predict what will happen next.
Companies in every industry, but e-commerce companies in particular, can’t afford to wait indefinitely for the economic waves to roll over. We’ve seen the ups and downs become more frequent and more volatile in the past decade, and the only way to stay afloat during changes is to move forward and focus on agility. By committing to digital transformation — investing in platform technologies while others stand — e-commerce companies can take advantage of the current slowdown and race ahead of the competition for long-term recovery.
Related: 9 Smart Ways to Prove Your Business Stalls (Fast)