These Small Businesses Face the Biggest Risk in a Recession

Smaller brands that sell home appliances and clothing face the biggest risk if a recession is on the horizon. That’s just one of the findings from NielsenIQ’s The Brand Balancing Act.

The global study focused on how the new inflationary market is affecting consumers’ outlook on SMEs.

“When inflation or a recession hits, consumer spending naturally declines. With portfolio tightening, less impulse or indulgent purchases occur,” writes Andrew Criezis, senior vice president and general manager of the NielsenIQ SMB business. “It certainly opens up brands in those spaces that aren’t flexible during a recession to be at risk.”

NielsenIQ Brand Balancing Act Report

Criezis mentioned the two examples listed above. He then highlighted a few other ways smaller businesses and their brands could be vulnerable in a downturn.

“Of shoppers surveyed who consider themselves exclusive to buying small brands, 17% look to private label to save money.”

Smaller package sizes

Another percentage (15%) are looking to buy smaller packages to save money.

“Small brands that don’t have an answer for economy sizes or are amenable to a private label option could be at risk,” Criezis says.

The Brand Balance Act also notes that the Internet makes a difference during any potential recession. The study found that one in four shoppers will price items online. This means that smaller brands promoting digitally can do well. Likewise for those small businesses that participate in large online shopping events.

There is more good news for SMEs in the report. Especially those who focus on giving back.

explains Criezis.

Buy small brands

“There’s also a fair amount of shoppers who want to buy small brands no matter what,” he says. “This is because 82% of respondents associate these brands with supporting the local community.”

Four out of 10 shoppers also associate these options with environmentally friendly and sustainable actions.

“For some buyers, that will still matter, even in the midst of a recession,” he adds.

So how can small businesses weather the storm using strategies and resources? Criezis suggests the answer is simple. You just have to do your homework.

“During these times, it’s more important than ever to understand and research your buyers,” he says. “Small brands need to dig deep and understand how their shoppers buy products to save money.”

Smaller packaging could be an answer. Perhaps business owners need to look at retailers’ own brands. And, of course, they have to look for new buyers. The Law of Brand Balance study found that there are 41% of shoppers who are “agnostic” when it comes to brand preference.

Criezis suggests how to shut these people down.

He says, “Small businesses can use their local, sustainable or healthy and natural stories to appeal to these agnostics.”

Digital marketing

Smaller brands also need to use digital marketing and other online tools to get the most out of it. Shoppers like to shop these brands within local, independent and smaller stores. But companies still have to think about growth in the face of a possible recession.

“To stand out and grow beyond that, small brands need to reach online shoppers and expand into larger format stores,” Criezis says. He goes on to say that they need to use e-commerce tactics to position themselves for in-store retail.

Traditional values

The Brand Balancing Act also emphasized some traditional values. For example, 90% of responding shoppers said affordability is most important. But there is a deeper layer that the report uncovers. Criezis explains:

“The survey found that 82% of shoppers also choose a brand if they had a memorable experience. And 90% said they choose based on product quality. Shoppers typically say they buy the item with lowest price available. But the product must be good, meaningful and deliver on its promises.”

Crafting a successful branding strategy to weather the headwinds of a recession can seem difficult. But Criezis offers some closing suggestions based on America’s favorite pastime.

β€œThe four foundations – preference, performance, trend cycle and differentiation – are important guides for small brands to lean into and execute a winning brand strategy,” he says. “The goal is to round all four bases and touch them all.”

Image: Depositphotos

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