The impact of the economic downturn on e-commerce
Any economic downturn, whatever its intensity, can affect eCommerce businesses in a number of ways. The most important of these has to do with changes in consumer income and therefore also in consumer preferences, as individuals have less money available to spend on goods and services. As a result, the sales of online businesses suffer significantly.
Economic theory says that economic crises affect those companies whose products have a higher income elasticity of demand. In other words, those shops that sell luxury or non-essential goods and therefore, are more affected by the change in consumer income. However, crises will have less impact on businesses that sell staple goods, such as online supermarkets.
In addition, economic downturns often lead to restrictions in the supply of credit. Banks and other companies that provide financing to businesses and households do not have sufficient capacity to meet demand, which can limit investment by eCommerce companies.
In reality, the impact of an economic downturn on e-commerce is not that different from the impact on any physical shop or manufacturing industry. If consumer spending suffers, sales are reduced, causing problems for business balance sheets, especially where cash management is concerned.
Fortunately, there are ways to protect your business from the feared, and more than likely, recession. The way to do this is far from simple, but at least it will help you to keep your business afloat when it happens.
