These Small Businesses Face the Biggest Risk in a Recession

small businesses facing the biggest risk in a recession

Smaller brands selling big-ticket appliances and apparel face the biggest risk if a recession is on the horizon. This is just one of the takeaways from The Brand Balancing Act from NielsenIQ.

The global study focused on how the new inflationary marketplace is affecting consumer perspectives on SMBs.

“When inflation or a recession hits, consumer spending naturally goes down. With the tightening of the wallet comes less impulsive or indulgent purchases,” Andrew Criezis, the Senior Vice President and General Manager of NielsenIQ SMB business, writes.  “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. Then he underscored some other ways smaller businesses and their brands could be vulnerable in a downswing.

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

Smaller Pack Sizes

Another percentage (15%) look to buy smaller pack sizes to save money.

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

The Brand Balancing Act also points to the internet making a difference during any possible recession. The study found that one in four shoppers will be pricing out items online. This means smaller brands that promote digitally might do well. Likewise for those small businesses that take part in bigger online shopping events.

There’s more good news for SMBs in the report. Especially those that focus on giving back.

Criezis explains.

Buy Small Brands

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

Four out of 10 shoppers also associate these choices with environmentally friendly actions and sustainability.

“For some shoppers, that will still matter, even amid a recession,” he adds.

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

“During these times it becomes more important than ever to understand and research your shoppers,” he says. “Small brands need to dig in and understand how their shoppers are buying products to save money.”

Smaller packaging might be one answer. Maybe business owners need to look at retailer own brands. And of course they need to look for new buyers. The Brand Balancing Act study found that there are 41% of shoppers out there that are “agnostic” when it comes to brand preference.

Criezis suggests how to corral those people in.

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

Digital Marketing

Smaller brands also need to use digital marketing and other online tools to full advantage. Shoppers like to buy these brands inside local, independent and smaller stores. But businesses still need to think about growth given a possible recession.

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

Traditional Values

The Brand Balancing Act also underscored some traditional values. For example, 90% of the shoppers responding said affordability is most important. But there is a deeper layer 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 the quality of the product. Shoppers tend to say they buy the lowest priced item available. But the product has to be good, meaningful, and deliver on its promises.”

Putting together a successful brand strategy to buck the headwinds of a recession might sound difficult. But Criezis supplies some closing suggestions based on America’s favorite pastime.

“The four basesPreference, Performance, Trend-cycle and Differentiation – are important guideposts for small brands to lean into and execute a winning brand strategy,” he says. “The goal is to round all four bases and touch ‘em all.”

Image: Depositphotos

Rob Starr Rob Starr is a staff writer for Small Business Trends and has been a member of the team for 7 years. He is a graduate of Ryerson University in Toronto with a Bachelor of Journalism degree. His print credentials include employment with various Toronto area newspapers and three works of fiction: The Apple Lady (2004), Creekwater (2006) and Sophistry By Degrees (2008) published by Stonegarden Press In California.