It an unavoidable truth of our times: the economy swings up and swings down. Recent stock market fluctuations, combined with coronavirus related concerns, have caused DOW and S&P 500 charts to look like the side view of a roller coaster. Add to that financial analysts whispering things like “we’ve been a bull market for a really long time,” and people get nervous – rightly or wrongly. For that reason, many eCommerce store owners have begun to wonder: “what are some recession-proof products I can sell online?”
The market’s precise machinations are known to no one, but we can all say with certainty that a recession will come. We don’t know when: it could be now or it could be five years from now. We’re not in the business of forecasting the unpredictable waves of the economy. However, we are in the business of helping small businesses succeed, no matter what. One way we can do that? Share our observations on which products perform well in a recession and which are suitable for online sales.
We were born in the Great Recession of 2008, and we succeeded because we provided a necessary service. No matter how bad things get, some products and some services never go out of style. Strong businesses need a plan to survive the good times and the bad times. Hopefully, this helps you create your plan.
To answer this question, let’s first thing about what kind of companies perform well in recessions. This will provide some keen insight into the sort of products that will be most likely to succeed.
In short, necessities and vices tend to do well. This may sound like bad news since many consumer products sold online are luxuries purchased with discretionary income. But it’s not: and there’s a simple principle at work behind the changes in consumer behavior during a recession.
Cheaper products perform better in a recession.
I know. I know. This is the kind of deep-dive analysis that you couldn’t get anywhere else. But it needs to be said explicitly because this can have some interesting second-order effects.
Think about it: if you sell something inexpensive, such as Hershey’s Kiss chocolates, you might benefit from the economic downturn. A Big Mac is a lot cheaper than dinner at a night at a fancy sit-down restaurant. Camping is cheaper than a lavish vacation. Repairing a car is cheaper than buying a new one.
A lot of items sold online are inexpensive. Not to mention, companies like our own can help businesses save money by efficiently filling orders and taking advantage of our heavily discounted postage rates. Combine that with the staggering growth predictions for eCommerce in general, and the possibility that more people will be in their home because of the coronavirus outbreak. That means a recession actually opens up a ton of new business opportunities.
It doesn’t matter what the stock market is doing when it comes to some items. You need laundry detergent, toothpaste, napkins, tissues, bottled water, and canned goods no matter what. Any item that falls under the consumer staples umbrella is generally a lot safer to sell during a recession.
According to the S&P 500, consumer staples come in six basic categories:
Lavish vacations to distant lands are not as attractive during recessions. Yet the need to “get away from it all” doesn’t go away when the economy is bad. If anything, it grows!
Many people see camping as a good alternative to travel and traditional vacations. That’s good news if you sell tents, coolers, camping stoves, sleeping bags, or fishing gear!
After your 401(k) gets clobbered and your pay gets cut, the idea of buying a brand new Lexus is off the table. Repairing that 2002 Honda Civic, though, becomes a much more attractive prospect. During recessions, people are a lot less likely to treat their beloved cars and trucks as disposable, which is good news for mechanics and part manufacturers.
People love their caffeine. Much like tobacco and alcohol, caffeinated beverages do not suffer as much from the economic pressures of a recession. People need their fix!
Fortunately, with coffee and tea, there is a lot of room to differentiate your product from others. At the same time, there are relatively few regulatory hurdles to clear, compared to other “vices” such as alcohol and nicotine.
One of the consequences of a recession is that more people cook meals at home. That means leftovers, and those have to be stored. For this reason, tupperware tends to overperform during economic recessions.
Economic downturns are stressful. Job prospects are grim and hours may be long. Many workers in high-stress situation find themselves reaching for their coworker’s candy bowls, filled to the brim with sugary sweets and cheap chocolates.
Candy is one of the most recession-proof industries to be in. Cadbury’s profits went up by 30% in 2008 and Nestle’s went up by 11% at the same time. Can’t make this stuff up!
The desire to look good doesn’t go away when the economy takes a dive. However, instead of extreme makeovers, expensive haircuts, and new wardrobes, women look to cheaper options. For that reason, cosmetics companies and even nail salons have a surprisingly easy time surviving recessions.
It may seem paradoxical that people still buy luxury goods such as cosmetics in a crisis, but the tendency has been studied over the course of several recessions. There’s even a name for it: lipstick effect. “Instead of buying expensive fur coats, people will buy expensive lipstick.”
We’ve talked about pet care before on this blog, and it bears repeating. People love their pets – so much so that the demand for pet products continued to grow through both the 2001 and 2008-2009 recessions. The majority of US households have a pet, and people love pampering their pets, no matter what the NASDAQ says!
A night on the town is expensive. A night indoors is not! People still need entertainment when the economy is bad, perhaps even more so than when the economy is good. During recessions, cheap entertainment – movies, TV, video games, and other similar products – see a jump in demand.
People still wear clothes during recessions. Shirts will be undone by stray fabrics and all shoes eventually have their soles ground down to dust if used enough. If you sell clothing during an economic downturn, you are likely to be insulated from the worst impacts.
When you’re a parent, you have to take care of your child no matter what. For that reason, baby products – clothing, diapers, formula, and so on – continue to outperform the market as a whole. This is also true for daycare/childcare services, whose work increases when the economy turns sour and parents return to the workplace.
Last but certainly not least, food and drink continue to be essentials during economic downturns. You may think that consumers turn to rice, potatoes, and tap water when money is tight, but this isn’t always this case! Many times, luxury food and drink products perform well for a few reasons:
That’s surprisingly good news for business owners who specialize in organic flaxseed, hemp, and chia kombucha.
Recessions can be very difficult, but they’re not a death sentence for businesses. Many successful businesses have been launched during recessions simply because of the structural changes economies undergo during them. We know from firsthand experience because we launched in 2009!
Opportunities are especially abundant in eCommerce, a segment of the economy which is growing rapidly. Think of ways to save your customers money during the bad times and you’ll win them over for many years to come!