The US economy is slowing. Markets are in a decline. Inflation is rising. A global recession seems imminent.
No doubt, running your e-commerce brand during a recession or economic downturn can be very scary.
But exactly how do you prepare your eCommerce store for a recession? How do you continue to keep sales flowing in? How can you scale and grow while everyone around you is penny pinching, trying to survive the economic turmoil?
Questions like this may be running through your brain, but don’t fret. My team and I are here to help you optimize your Google Ads campaigns during a recession.
See How My Agency Can 10x Your Brand's Sales With Google Ads
Google Ads – effective targeting and scaling methods for ROI.
Bing Ads – dominating the market of a fairly untouched platform.
Facebook Ads (Retargeting) – helping stop the leaks from all sides of the bucket, especially with retargeting.
Before we talk about eCommerce and Google Ads specifically, however, it’s important to build a strong foundation.
So let’s start off with the basics.
What is a Recession?
In simple words, a recession is a decline in economic performance over an extended period of time.
Markets drop, unemployment skyrockets, people get poorer and stop spending money on unnecessary items.
When the stock market goes down, people start to panic. The end of the world seems near.
Businesses struggle to keep their doors open, eCommerce store revenues take a big hit, and the stock market starts to crash.
Are we in a Recession?
If you take a look at the US stock market performance over the last 6 months, the current downturn becomes extremely clear.
A quick glance at the Giant retail chain, Target, and we see more indicators of an approaching recession.
Target’s sales have been far lower than projected in Q2 of 2022. As a result, they are slashing prices to dump unwanted inventory. These things might seem irrelevant but they’ll have a head-on impact on many eCommerce brands because pricing and other factors we competed on will no longer help with continued growth.
If those issues aren’t enough to expose a recession in the works, lets cover some more indicators.
Recession Indicators for Ecommerce Stores
- Consumer spending slows down. People try to accumulate savings to protect themselves in an economic downturn.
- Less non-essential spending. Most people’s disposable income is used on essentials like food and household goods.
- Markets become more competitive. Businesses seek to maintain their sales even as consumer spending declines.
- Inflation rises. Merchants and suppliers jack up prices to offset falling sales. This lowers the value of every dollar.
While not every country is seeing a downturn in their economy, the US will not be the only ones affected. When the US starts to go into a downfall, every country around the world will feel the effects.
Other countries’ eCommerce store trends follow the US. As your ad performance in the USA begins to suffer, so too will your ad campaigns running in other countries.
How to Prepare your Ecommerce store for a Recession
To prepare your brand for the coming months or remedy any damage the recession has already had on your brand, here are some key things to look out for:
1. Decrease in Buyer Intent Keyword Search
If you are an essential eCommerce store selling products that people cannot survive without, then you’re probably gonna be okay during this recession.
But, if you’re like 95% to 99% of other eCommerce brands out there that sell things that people can live without, you are going to start seeing a heavy drop in sales. These industries include fashion, high-end jewelry, beauty products, and sporting goods.
Let’s rewind a bit to understand where this drop in sales would eventually come from
As I mentioned earlier, during a turmoil filled period, people stop spending as much. They only spend money on the essentials and have less money to spend on lifestyle items.
This means that you can expect to see a drop in search volume for certain buying intent keywords..
For example, let’s imagine a website that sells 3d printers.
If a lot of sales were coming from keywords like ‘buy 3d printer’ or ‘3d printer for sale’, this recession could dramatically impact those sales. When money is tight, people would prefer to go to a library to print out whatever they need, or to save money, they might avoid doing things that involve a 3d printer.
2. Ad Spend Drops
So, what happens when the number of impressions on your ad campaigns for that given keyword start to diminish? The snowball effect begins.
Because the number of people that were searching for ‘buy 3d printer’ or ‘3d printer for sale’ has started to drop, so too will your ad impressions.
Once the impressions drop, Google’s Algorithm will realize that there are not enough people searching for ‘buy 3d printer’ or ‘3d printer for sale’. As a result, the algorithm will begin to lower your daily ad spend.
Unless you go in and manually change your budget for those campaigns, your ad spend will drop, along with your impressions and conversions.
Back to the 3D Printer example, let’s say your ad campaign was spending $50 a day and was receiving 100,000 impressions. If the impressions were cut in half, the campaign will stop spending $50 per day. Instead, it might only spend 25 to 30 dollars on ads per day or less.
3. Less Clicks and Conversions
The negative effects to your Ad campaigns really begin to snowball here.
Because your ad spend has started to decrease, you will also begin to see a lower amount of clicks on that campaign. This means less traffic, and less sales for your store.
Because your ad is now shown to a lower number of people, your clicks are going to go down.
In a recession when money is tight, people who search for your products may only be window shopping. This means they are more likely to click on your ad, but not purchase anything. This lowers your CTR and negatively affects your profits.
As you can see, one thing after another can cause a pretty heavy drop in your ad performance. It starts with less searches, and quickly impacts your CTRs and clicks on your campaigns, leading to a drop in conversions.
4. Lower Ad Quality Score
Unfortunately, the snowball doesn’t stop rolling there either. Because your Click-Through-Rate has dropped, your ad quality score is also going to be affected.
If your ad campaign has a CTR of 1% prior to the recession, your quality score may be a 7, 8, 9, or even a 10 out of 10. If this CTR drops to 0.5%, your quality score is going to rapidly decline.
Google will now think there are issues with your ad. As a result, your ad quality score can drop from a 10/10 to a 4/10 or 5/10.
And unfortunately for us, the algorithm isn’t smart enough to attribute this drop to a recession; it’s simply going to think your shopping ads or search ads are not providing a good enough experience.
Your ads will end up severely penalized.
5. Cost Per Click Increases and Return On Ad Spend (ROAS) decreases
As your ad quality score decreases, your cost per link click will begin to skyrocket. Ultimately, this will have a negative effect on your return on ad spend (ROAS).
An ad that once had an average CPC of 50 cents will start to increase rapidly. As a result, you can end up paying 60 cents, 80 cents, or even above $1 to get that same customer you once got for just 50 cents – bummer.
In a period of economic downturn, these are the effects we see on eCommerce brands. The moment that CPC starts to go up, your ROAS begins to diminish and your total conversions will likely drop.
That was a lot. But we’ve gotten through all the turmoil and the pinpointing of exactly what happens during a recession.
Let’s start talking about some solutions.
How to Grow your Ecommerce Brand with Google Ads during a Recession
While reducing your advertising costs may feel like the right thing to do in a time like this, it would be a mistake to make significant cuts.
Marketing is more crucial than ever during a recession. As consumer spending drops, you have to fight harder against your competition to remain at the same profit levels.
Therefore, in order to stand out from the competition and attract new clients, your ad campaigns, copy, and page design will need to be more effective than ever.
So, do you give up on your eCommerce brand completely during a time like this? Do you just try to ride it out and stay alive? Or do you take advantage of new opportunities in the market and continue to grow your brand?
Research shows that people who invest in advertising during a recession both outperform competitors during the downturn and quickly capture market share as markets improve.
Keeping that in mind, I strongly recommend increasing or maintaining your current Google Ad campaigns in order to prepare your eCommerce store for new consumer shopping habits during a recession.
But it all starts off with identifying your main goal.
Is your main goal right now to grow and get more sales or is it to maintain profits?
These two goals will lead you to very different strategies and extremely different results. Lets walk through both scenarios.
How to Scale your Store in A Recession
In past recessions, advertisers who kept or boosted their ad spend saw an increase in both sales and market share.
Additionally, they were able to maintain this increase in the years following the recession thanks to the ad campaigns’ knock-on effects.
There is an enormous advantage to advertising amid a downturn in the economy.
First off, as other eCommerce stores cut their advertising expenses, there is less competition of brands within the auction itself. Fortunately, this can significantly lower CPC, if you know where to look.
Secondly, when an Ecommerce brand cuts its ad expenses, it risks losing its market share. This creates an opportunity for competing brands to grab that portion of the market share and acquire new and loyal customers.
My top recommendations for scaling your store during an economic downturn:
- Lower Bids or Increase Target ROAS
- Launch More Campaigns
- Focus More on Smart Bidding and Smart Shopping Campaigns
- Rely on Retargeting Via Search Campaigns and Shopping Campaigns
- Add More Products to your Ecommerce Store
1. Lower Bid or Increase Target ROAS
If your main goal is to maintain sales and possibly increase revenue, you should keep your budget the same for your campaigns, regardless of what is going on right now.
If it’s a standard shopping campaign, look to decrease bids or budgets every 4 to 7 days based on how positive the results are.
If you are noticing a big drop in return on ad spend already, I recommend adding or increasing the target ROAS to set some restrictions.
For example, let’s say you are running a smart shopping campaign at a target ROAS of 307%, and it is not performing as well as you would like. Your next step is to increase the target ROAS percentage by 5% to 10% every 4 to 7 days.
In this situation, you can increase target ROAS to 322% or so and reassess the following week.
To prevent large losses during a recession, I suggest lowering your ad costs. You do not have to drop your daily ad spend, but lowering your current bid will help to minimize expenses.
Lowering the bids or increasing the target ROAS will allow you to minimize wasted ad costs and continue to get the same amount of revenue.
Keep repeating this every 4 to 7 days as necessary.
2. Launch More Campaigns
Don’t stop here if you want to maintain your revenue. Your next step to scaling your eCommerce brand is to go out and launch more shopping or search campaigns.
In a recession, campaign performance will be much more volatile. Broaden your scope and you will be less affected by inconsistent ad performance.
It is not an ideal approach to only run one or two types of campaign types. To help stabilize sales, ensure you run at least one campaign type per category.
In fact, metrics like cost-per-link-click and cost-per-impression may drop when competitors leave the market. And not surprisingly, this makes the entire Google Ads platform much more affordable for the normal user.
There’s a lot of different campaigns you can play around with but I highly recommend adding these campaigns (ordered from most important to least):
- Performance Max Campaigns
- Smart Shopping Campaigns
- Search Campaigns
- Display Campaigns
- Discovery Campaigns
- Youtube Campaigns
The most important thing you need to ensure is that these campaigns are based on certain ‘smart’ strategies.
3. Focus More on Smart Bidding and Smart Shopping Campaigns
During a period of turmoil, new competitors will emerge, and old competitors will leave the market.
This opens up new chances for you to increase your market share, target new audience types, and outperform old competitors.
It is hard to manage the bidding yourself, because bids will fluctuate heavily during this time. Instead of trying to pinpoint the right bid amount and constantly monitoring your ad, work with smarter bidding options or a smart campaign types (smart shopping or performance max).
The algorithm is smart enough to not only pinpoint your perfect audience (if there are enough conversions), but to also bid appropriately as needed.
If you plan to use standard shopping campaigns, stick to target ROAS.
But keep in mind that just targeting cold traffic is not ideal during this time.
4. Rely on Retargeting Via Search Campaigns and Shopping Campaigns
As people tighten their spending in a recession, your target market will be harder to convert. You will have to expose people to multiple ads before they make a decision to buy.
The solution to this is effective retargeting.
Within a standard shopping campaign, you can go into the audiences section and target remarketing audiences via observation.
This means that Google will observe your audience and target similar people to these, further expanding your online reach.
Your smart shopping campaign should already do this for you. Just ensure that you have created those audiences within the campaign.
For search campaigns, launch a remarketing dynamic search campaign or a dynamic search campaign targeting cold, warm, or hot traffic. Remarketing search campaigns often result in a higher conversion rate.
This is because you can aim your ads at people who are already familiar with your brand, offering, or products. Combine this with new products and you’re doing better than 90% of the eCommerce brands out there.
5. Add More Products to your Ecommerce Store
To avoid your business dying out in the near future, you want to consistently add new products.
This is not a time to just sit back and relax. If there has ever been a time to put your head down and work, now is the time. If you sit back and relax, before long, your current stream of products will end up extinct.
In a recession, Google will no longer be able to find the right audience for your once successful eCommerce products – that’s just how it works unfortunately.
For assistance with your Google Ads campaigns, and managing your Ecommerce store, book a free call with me. We can work together to help you capitalize on the opportunities this recession will provide.
How to Stay Alive and Maintain Ecommerce Store Profits During a Recession
Always make sure to focus on profits. No matter how much you want to grow your revenue or sales, during a recession, it’s vital to know when you are operating profitably or not.
We don’t know how long this recession will last and honestly, it’s not always advised that you focus too much on scaling.
If you are in a position to scale, go for it. But, if you are just trying to keep your store running, focus on maintaining revenue and profit margins.
To keep your cash flow rolling in an economic downturn, here’s exactly what you should be doing:
1. Lower Ad Budget
Simple and effective way to keep things steady; drop those extra expenses.
Look to drop your ad budget by 10% to 20%, every four to seven days and also see what apps, services, softwares, etc. you really don’t need..
During the 2008 recession, ad spend dropped by over 13% in the United States.
If you are overspending on ads or your ads are unprofitable, now is the time to cut costs on these. This will allow you to focus your ad budget on the ads with the highest ROI.
2. Get Clear on Your PPC Strategy
If you are looking to minimize costs, don’t try to dip your toes into new campaign types.
Focus your efforts on what’s working for your eCommerce brand. If shopping campaigns are working well, look to launch a performance max campaign, a smart shopping campaign, or a search campaign.
It’s not wise to launch random ad campaigns without a clear strategy. Get clear on what products bring the most revenue into your business and test new shopping campaigns and search campaigns around these products.
Follow some of the strategies laid out on my Youtube channel.
3. Use Smart Bidding and Smart Shopping Campaigns
In volatile times like these, it pays to depend more on Google’s algorithm. Don’t try to launch standard shopping campaigns and don’t try to manually set your bid rate or CPC. Let Google do the hard work for you.
Remember, Google is a business that wants to make money, even in a recession. While Google receives profit from every ad click on their platform, it cares for its users first. The algorithm will only favor ads which consumers are interacting with the most.
The less risky approach to managing your ad campaigns is to focus more on smart bidding like Target ROAS and Target CPA.
Set a Target ROAS % on your ad campaigns and just let the campaign run.
4. Focus on Remarketing
Remarketing is a popular form of digital marketing in which Google shows your ads to users who have previously visited your website. It’s a great technique to reach customers who have already expressed an interest in your company or brand.
In a time period like this, a majority of your sales will be made through retargeting. Be sure to optimize your retargeting campaign to ensure it is performing at its best.
5. Add More Products
During an economic downfall, you don’t just want to launch products that won’t sell. But when a profitable opportunity presents itself, take it.
What new problems could your customers be facing in a recession? Can you sell a product that solves these problems?
If you’re just trying to maintain your revenue or increase it during this time period, don’t go too crazy. Keep your business systems simple. Try different things to see what works for you, and ultimately what brings your website more sales.
Running your Ecommerce Brand in a Recession – Final Thoughts
“These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.” John D Rockefeller.
Every economic downturn ever experienced in history has ended with an economic upturn.
A recession is a scary time for eCommerce stores. Uncertainty is high. But if you keep pushing through, you will be poised to take advantage of future opportunities that come your way.
Here are a few final pointers to help you grow your eCommerce store in a recession:
- Don’t give up on market share. Don’t cut your budget just because you’re unprofitable right now. Monitor it, optimize where necessary and make decisions based on the data that you’re getting.
- Keep your Google Ad Campaigns running. If you shut off your campaigns completely, it takes a long time to get back to the level they were at before the low period.
- Rely more on Google Smart Bidding options and Smart Shopping Campaigns. Don’t assume that you are smart enough to determine the bids during a time period like this, as they will fluctuate dramatically.
- Focus your efforts on retargeting. A large majority of your sales will come from remarketing in a time period like this.
Don’t let the stress of an impending recession lead you to closing your Ecommerce store. Focus on the things that keep profit coming into your business, minimize costs, and systemize your efficient processes.
If you do these things you will come out the other side of the recession in a more favorable position.
I would love to see how I can help you scale your ecommerce brand to the next level, even during a recession. If you’re doing $30,000 or more in sales and you need some help scaling your e-commerce brand further, click here to book a free call with me.