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Fifteen years ago, the collapse of the U.S. housing market led to the Great Recession — a prolonged, painful economic downturn that caused businesses to close and people to lose their homes. The Great Recession was particularly disastrous for small businesses. The number of startups founded in the years following the financial crisis plummeted, and 1.8 million small businesses went out of business entirely during the two-year period between December 2008 and December 2010.
In our current environment, many economic observers are sounding the alarm about another potential recession. Inflation, supply chain challenges and a worldwide cost of living crisis are making it more difficult for people to do business or make ends meet. This can be a scary moment with apparent parallels to the Great Recession.
But there are a few dramatic differences between today’s economic crisis and the Great Recession in 2008, giving business owners reason to be confident. New technologies, strategies and mindsets that have emerged over the last 15 years are empowering shrewd business owners to survive the current downturn and emerge stronger during the inevitable recovery.
Related: 3 Recession-Proof Strategies for Small Business Owners
Global solutions for a global downturn
The most significant difference between an economic downturn in 2023 and the Great Recession is the rise of globalization. In 2008, a small business was often limited geographically to those who could visit a physical, brick-and-mortar store. While ecommerce behemoth Amazon now sees more than two billion unique visitors in an average month, the company had only 615 million visitors in total during 2008. Shopping malls and popular brick-and-mortar retailers remained the first shopping choice for most consumers, and for small businesses, ecommerce was still an unattainable goal. When demand fell as a result of the Great Recession, small businesses had nowhere to turn. Local buyers reduced spending, and small business owners were limited to a single sales channel — their physical locations. These small businesses had no easy way to expand their potential sales audience.
We now live and work in a truly global economy. Innovations like dropship and marketplace platforms allow small businesses to reach potential customers in every corner of the world. If a business owner’s local community is hit particularly hard by the current downturn, the brand can pivot to find new customers, whether by selling in different geographies or by exploring new channels that serve different customer segments.
That pivot has benefits beyond merely increasing sales. Expanding into multiple online channels gives small business owners access to a wealth of customer data, making it easier to anticipate when demand is shifting. It also provides a testing ground to identify potential new customer segments, which can make it easier to uncover opportunities for growth and direct marketing investments. These contingency plans ultimately ensure that businesses can maintain their audience, even as economic pressures cause some customers to close their wallets.
Related: 3 Tips for Small Businesses to Survive and Thrive During a Recession
Recovering in the platform economy
While small businesses can try to expand their audience directly, new platform technologies make it much easier to reach a broader, more global customer base. Enterprise marketplaces allow small retailers to team up with larger brands, gaining access to their audiences and benefiting from the credibility of their existing reputation.
For small businesses considering whether to become third-party sellers on enterprise marketplaces, these three considerations can help to drive sales and success:
Cover a range of price points: Consumers don’t stop purchasing during a downturn, they simply adapt to what’s within their budget. A woman who likes to shop for designer handbags may instead choose to treat herself with less expensive cosmetics by the same designer. A college student who loves attending live concerts may skip out on the big national tour in favor of a local gig. Marketplace sellers can increase their sales by offering products covering multiple price points, ensuring a potential customer doesn’t fall off the ladder if they can’t afford the most expensive option.
Prioritize customer satisfaction: The brand halo of a marketplace operator will get shoppers in the door to look at a seller’s products, but it’s the seller rating that will convert them into a paying customer. Convenient shipping options, attentive customer service and high product quality will make a significant difference for customer satisfaction, leading to a bump in seller rating that will have a direct impact on sales. The seller rating effect works in both directions: a few bad customer interactions could put a marketplace seller in a downward spiral.
Diversify the opportunity: Once a small business has listed its products on an enterprise marketplace, it becomes easier to list those same products on a second, third, fifth or tenth marketplace. The more a seller is able to diversify their sales strategy across multiple marketplaces with multiple audiences, the more resilient that seller will be against potential fluctuations in demand. Enterprise marketplaces don’t require monogamy — build as many relationships as possible to maximize ROI.
No business owner can predict how difficult the current downturn will become or how long it will last. With platform technologies and an agile, global mindset, small retailers can take control of their destinies and put themselves in a strong position to survive a recession. And when the economy begins to pick back up, the platform approach will make it easy for small businesses to scale as customers increase spending.
Related: 4 Tips for Small Business Owners as They Navigate an Economic Downturn