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Business growth in the downturn - a guide with a focus on digitalisation in the retail industry

Successful retailers do not see an economic crisis as a threat. They have recognised that economic cycles are opportunities to overtake the competition. In order to succeed, instead of a wait-and-see attitude, courage is needed for anti-cyclical action and operational implementation strength.

What makes a successful retail company in times of crisis?

In recessionary phases the market environment often changes massively. Previous priorities have to be reviewed and adapted to the new situation. Now it is important to react correctly and not to wait. Those who act smarter and faster than others can either gain market share already in the downturn or make more targeted use of the subsequent market recovery.

Our guide looks at four areas: Corporate liquidity, decision-making processes, dealing with employees and digital transformation. One insight runs through all areas: If retailers want to successfully navigate through a difficult phase, the formula for success is to be courageous, flexible and adaptable.

1. Secure future viability through digital technologies

The greatest foundation for growth during an economic downturn is technology. Digital investments should thus remain at a high level for growth potential. It is highly likely that companies operating accordingly will remain digitally successful after the crisis.

Retailers should place a fundamental line of investment in the area of company-owned customer data because this is where a significant revenue lever lies.

Many retailers are already acting accordingly data-driven in online marketing or are setting up their own loyalty programmes - even companies that previously focused on stationary retail.

A necessary further development in retail is to merge the channels with each other, to combine online and offline data and to use them holistically in the future.

Specifically, there are these approaches for an individual data strategy:

  • First-party data should increasingly be built up via a login. Especially in the post-cookie world there is a need for this first-party data.

  • Data partnerships with other companies should be decided upon in order to learn more and better insights about one's own consumers in the future and to optimise the customer approach. The introduction of a customer ID and the cooperation with universal IDs also enable the use of the generated insights for the activation of marketing channels.

  • Regional, stationary touchpoints in connection with the digital channels along the customer journey also open up new potentials for small and medium-sized retailers.

2. Adept financial management

A combination of margin-stabilising cost reductions in relevant areas with a continued focus on strategic growth areas in which further investments are made is recommended. This combination strengthens the company in the long term and leads to above-average value generation.

3. Strengthening decentralised decision-making

In its definition, decentralisation of decision-making means an increased distribution of decision-making powers in the individual divisions.

A decentralised company organisation is illustrated by regional, product- or customer-oriented units. Due to the proximity to the market, customer needs can be better perceived and satisfied. Experience shows that decentralised companies are able to implement changes in competition-relevant strategies more quickly than centralised traders and to react to emerging opportunities and risks.

4. Dealing with employees

Firing employees to reduce costs seems like an easy solution in the first impulse. However, companies that emerge the strongest from a crisis are less likely to resort to job cuts to reduce costs. The reason is that layoffs do not only hurt the affected workers. They are also costly for companies due to possible severance payments. Layoffs can also depress employee morale and morale in the company, thereby lowering productivity, which is doubly difficult at this time.

In principle, management should consider ways of performance-based pay, the introduction of OKR's or short-time work to reduce labour costs not only during an economic downturn but also in the long term.

It is important to be flexible in securing talent and not have to find and hire again as soon as the economy picks up.

Conclusion: Success requires decisive action in all departments of the company and is the responsibility of the management. In crises it is important to take the strategies, such as digital and technological initiatives and investments, to be able to accelerate one's growth.



Image from Freepik

Gartner (2022): Frühzeitiges Handeln angesichts der drohenden Rezession, Gartner, [online], Link [retrieved on 12.12.2022]


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