Recessions are inevitable. In fact, there have been an estimated 47 recessions since the 19th century in the United States; roughly one every three years.
And with a recession comes a minimum two-month downturn in the economy, affecting Gross Domestic Product (GDP), real income, employment, industrial production, and wholesale-retail sales.
As a business owner, if you aren’t prepared for these common events, you could watch your business implode overnight.
Certainly, having enough cash in the bank to cover expenses during a downturn will help. But, the best way to protect yourself and your Amazon business against a recession is by becoming a recession proof business offering “recession-proof” products*.
*We’ll be clear that of course no product or business is 100% “anything-proof” as there are innumerable factors that affect the health of your business. But there are historically validated approaches to arming a business against the impacts of recession, so that’s what we’ll focus on.
Understanding the hierarchy of needs
The easiest way to understand which categories and products perform well during a recession is to understand what consumers need. Consumers are people, so considering their basic needs is critical to serving them.
Let’s look at Maslow’s Hierarchy of Needs pyramid. This psychological model prioritizes human motivators, starting with our most basic needs at the bottom of the pyramid (they include air, water, food, shelter, sleep, clothing, and reproduction).
We must meet our fundamental needs first (those at the foundational bottom level) in order to move up the pyramid, where our needs become more complex. (In a sense, the top three layers of Maslow’s model are “luxury” items.)
Countries with strong economies, like the United States, are usually able to meet their bottom-of-the-pyramid needs fairly easily, so in recent years, their majority populations have been motivated by the needs of the three upper layers of Maslow’s model. .
On the other hand, citizens of countries with struggling economies may have difficulty getting even their most basic physiological needs met. Therefore, far fewer people in those countries will find self-actualization and esteem motivating.
So, when a strong economy declines as it does during a recession, and people have less money to spend, it’s not surprising that the need for self-actualization, esteem, and a sense of belonging declines as well.
Instead, because a recession can threaten an individual’s ability to provide for themselves (and their families), safety and survival become the new motivators for many.
Data collected during the last major recession proves this is the case.
What products and companies thrive during recessions?
The Great Recession of 2007 to 2009 was one of the largest downturns in U.S. history.
During that time, the GDP dropped by 4.3% and unemployment rose to 10% (Wikipedia, Great Recession). Yet, some companies continued to thrive.
Investopedia lists the following companies as “winners” of the Great Recession.
|Company Name (Ticker)||1-Year Total Return||Industry|
|Dollar Tree Inc. (DLTR)||60.8%||Discount Stores|
|Vertex Phamaceuticals Inc. (VRTX)||30.8%||Biotechnology|
|H&R Block Inc. (HRB)||25.8%||Personal Services|
|Amgen Inc. (AMGN)||24.3%||Drug Manufacturers-General|
|Old Dominion Freight Lines Inc. (ODFL)||23.2%||Trucking|
|Walmart Inc. (WMT)||20.0%||Discount Stores|
|Edwards Lifesciences Corp. (EW)||19.5%||Medical Devices|
|Ross Stores Inc. (ROST)||17.6%||Apparel Retail|
|Alaska Air Group Inc. (ALK)||17.0%||Airlines|
|Hasbro Inc. (HAS)||16.8%||Leisure|
What can we learn from these companies?
These companies give you a sense of where people are spending their money during tough times. And it’s clear those dollars are going towards essentials.
- Dollar Tree and Wal-mart thrive because they offer discounted products, usually necessities. You can create similarly discounted products.
- The sale of medical devices and pharmaceuticals tells us that health needs are constant. Although you can’t create drugs, you can sell medical-related products such as silicone gloves, protective masks, and first aid kits.
- Trucking and airlines still operate during a recession. As an Amazon seller, you can create travel-friendly products, like neck pillows.
- Hasbro is known for its toys and its games. Because people aren’t going out and spending as much during a recession, you can provide affordable entertainment and learning opportunities. Games, puzzles, toys, and other leisure activities fit the bill.
Of course, not all of these categories are easy to sell in if you’re an Amazon seller.
Do-it-yourself (DIY) products thrive too
According to Investopedia, DIY repairs jumped up during the 2008 recession, too. AutoZone, Sherwin-Williams, and the Tractor Supply, Co. had strong performances.
During the COVID-19 outbreak of 2020, gyms, salons, restaurants, and other service-based businesses closed. This meant people had to perform these tasks themselves.
As such, certain DIY-related products saw increased sales on Amazon:
- Heavy-Duty Picture Hanging Strips
- February, 2020: 26,306 units
- April, 2020: 32,142 units
- Magnetic Screen Door
- February, 2020: 3,951 units
- April, 2020: 21,708 units*
- Instant Yeast
- February, 2020: 7,552 units
- April, 2020: 32,379 units
- Patch & Seal Tape
- February, 2020: 1,017 units
- April, 2020: 6,666 units
- Silicone Sealant
- February, 2020: 1,250 units
- April, 2020: 7,908 units
*Seasonality could be behind some of the uptick in sales experienced by this product.
Keyword search volume for many DIY-related terms has increased over the past 30 days as well.
- “Home projects”: searches up 140%
- “Haircut kit”: searches up 1551%
- “Shower drain clog remover”: searches up 294%
- “Flour for baking”: searches up 8617%
- “Canvas for acrylic painting”: searches up 851%
Additionally, consider looking at products associated with the following goods. These types of items tend to be recession-proof as well:
- Camping gear
- Food storage solutions
- “Sin” items
- DIY solutions (tax prep, auto repair, laundry, lawn, etc.)
As for Amazon’s “essential” categories, they are classified as:
- Health & Household
- Beauty & Personal Care (including personal care appliances)
- Industrial & Scientific
- Pet Supplies
What products and categories do poorly during a recession?
According to CNBC, the following categories were hit hardest during the Great Recession of 2008:
- Building materials & supplies: Construction slows down considerably during a recession, hurting multiple related businesses.
- Home furnishings: With fewer homes and businesses built during a recession, fewer furnishing purchases are made.
- Other motor vehicles (boats, RVs, motorcycles): Luxury purchases naturally take a hit during a recession as motorists turn towards more practical solutions for travel.
- Office supplies: Businesses may start saving money on non-reusable office supplies, and turn instead toward digital resources.
- Travel accommodations: Tourism and non-commercial travel slows down during recessions as consumers take fewer vacations.
Many of these categories reflect heavy spending or needs that are higher up on the hierarchy (ie. self-actualization, esteem).
How can you recession-proof your business?
If you aren’t already selling recession-proof products, this information doesn’t suggest you immediately pivot towards essentials or board games. But, it does suggest that diversification might be key to weathering tough economical storms.
Here are three ways you can protect yourself against a recession:
- Consider diversifying your selection with more fundamental goods related to your non-essentials. For example, if you sell a luxury item like a $75 carbon fiber wallet, you might consider adding a related product such as a carbon fiber multi-tool that your consumers can use to make simple repairs.
- Keep track of your spending. Pay close attention to your business’ cash flow as well as the inventory you have on hand. Having your funds tied up in products can limit your flexibility during a downturn.
- Build your brand. Finally, use a downturn to build your brand, even if you’re not making sales. Focus on building your social media channels and mailing lists. That way, when things go “back to normal,” you can make up for lost time by pitching products to your leads.
Start recession-proofing now!
While everyone wants an economic downturn to end quickly, circumstances surrounding the recession are often unpredictable, making the end date of a depression uncertain too.
So don’t wait. Whether you have both the time and the money to expand your product line, or you only have time to build your social media audience, start creating a recession proof business now.
Discover how Jungle Scout can help you find those recession-proof products: