A majority of Australians are worried about the economy: How can technology help businesses adapt?
Published on 20/06/2023 by Ojasvini
As a small to mid-sized business owner in Australia, you can use various tools to attract more clients in an uncertain economy. Our survey article discusses the most pressing economic worries, changing spending habits, and how you can use tech to your advantage.
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Australia's chances of dipping into a recession now stand at 45%, says a report by Forbes. In addition, keeping in mind that the inflation rate has risen to 6.8% annually —which is higher than the 6.3% annual rise reported in March 2023— are Australian companies ready to deal with changing economic realities?
To that end, businesses should ideally find potential solutions to stay competitive. For instance, they can use financial management software to manage their finances better and support their ongoing operations. Such tools can help businesses get accurate, up-to-date, and comprehensible financial information, do strategic budget analyses, improve compliance rates with local regulations, and ideally control expenses.
To help small and mid-sized enterprises (SMEs) prepare for an economic downturn and gather more insights into how technology can help, we surveyed 1,007 Australians. These respondents are at least partially in charge of managing household purchases and expenses and were asked a few questions to learn about their changing spending behaviour and current worries.
This article will refer to terms such as ‘economic situation/crisis’, which can be taken to mean a combination of factors including inflation and a possible economic recession. The full methodology can be found at the end of this article.
82% of respondents are worried about a possible economic recession
Australia may have avoided the adverse effects of the recession for a long time —however— this year, the country may fall into one, as per a report by 9news. Unsurprisingly, our survey-takers also share the same worries.
When asked to rate their level of worriedness due to a possible economic recession from 1 to 4, with ‘1’ amounting to being very worried and ‘4’ being not worried at all:
- A combined total of 82% of respondents showed signs of worry, including 49% saying they are ‘somewhat worried’ (choosing '2') and 33% stating that they’re ‘very worried’ (choosing '1')
- In contrast, only a combined total of 18% of respondents are either ‘not very worried’ (those who chose '3') or ‘not worried at all’ (those who chose '4') regarding a possible economic recession
‘Consumer stress rises as cost-of-living pressures continue to bite’, says National Australia Bank Limited (NAB) report. In the same vein, our survey results also revealed that a combined total of 79% of respondents are anxious due to the rise in prices and costs. Organisations should ideally prepare themselves for a more cost-conscious consumer base while dealing with likely rising manufacturing costs. We will address possible solutions to this in the sections below.
74% feel they won’t be able to afford household bills
In the first part of this survey, we found that 88% of the respondents have noticed an increase in the price of products and/or services, and among them, the majority saw a surge in the price of household bills. These concerns about affordability are not surprising, considering prices are likely increasing industry-wide. Our respondents also showed their concerns about being unable to afford certain products/services due to the current economic crisis.
In our question to them, we asked respondents which types of products and services they regularly buy that they’re worried they won't be able to afford due to the current economic situation. We included various types of products/services, such as groceries, clothing, electronics, education, beauty products, and more. However, out of all, ‘household bills’ is the category for which participants showed the most signs of worry. In terms of data:
- A combined total of 74% said they won’t be able to afford to pay household bills
- 67% indicated their worries about paying for groceries, and
- 66% cited worries about meeting health-related expenses (doctor/specialist visits, medical insurance, etc.)
How can businesses better position their products/services to consumers who are worried about an economic recession?
During a recession, it becomes more important for businesses to consider how they’re strategising when it comes to growing sales or client retention. A few things that can potentially help businesses could include the following:
- Consider offering discounts or other attractive deals to tempt a price-sensitive audience. For instance, businesses can consider launching loyalty programs —including gift cards, reward points, and shopping incentives— or seasonal discounts on certain products.
- They can use social media management tools to expand their social and online presence to talk about the value their products and services offer and publish, update, and track the performance of their content on various social media outlets.
- Above all, being transparent and honest about changes in prices or service scope with the customers and personalising the consumer communication approach might work well for businesses during an economic crisis.
The ever-increasing cost of living might have also prompted Australian customers to alter their spending habits. With incomes likely getting squeezed due to rising costs, consumers may pay closer attention to how and where they purchase their everyday items. This is something we discuss in the next section. We will also discuss tips on how to navigate this situation using technology further in the article.
Nearly 8 out of 10 respondents have changed their spending habits
How consumers perceive prices can often be as important as the price itself. However, in the course of a rise in the selling price, consumers might either purchase less or get trapped in the inflation cycle. This would mean they might walk away with fewer items for the same amount. So our next question is: have our survey-takers changed their spending behaviour?
In the next section, we discuss exactly how consumers have modified their spending habits and some insights for businesses.
Consumers are buying cheaper products and delaying big purchases to adapt
Some Australian consumers can be seen buying cheaper products to save money. In addition, they’re leaning more towards buying second-hand products to reduce the amount of money they’re spending, says an article by the Australian Broadcasting Corporation (ABC).
Similarly, we questioned a specific subset of respondents who stated they have changed their spending behaviour in terms of which changes they’ve made to save money, and these are the results we got:
Moreover, we also learned how much less the same subset of survey-takers is purchasing certain items compared to before the current economic situation. In terms of changed behaviour:
- 66% of respondents are purchasing fewer groceries than before due to the economic situation
- 62% are buying less clothing
- 58% are spending less on entertainment and cultural events (such as streaming services, cinemas, theatres, and museums)
- 56% of them are spending less at bars and restaurants
- 53% of surveyed respondents are buying fewer beauty and sanitary products (such as make-up, soaps, shampoos, etc.)
Evidently, these stats point to the effects of inflation and how people are being very cautious of their spending/savings. In such times, companies can perhaps focus more on offering greater customer value. For instance:
- If you're a grocery store owner, try and advertise more store-brand products and offer discounts for returning customers
- If you offer luxury goods, then try and offer extra value add items such as promotional packages with free gift items
- Businesses can also consider offering extended returns or longer guarantees on products in order to retain customers
Importance of discounts for Australian shoppers
Who doesn’t like discounts, right? Even a Business Queensland report says that ‘short-term price discounts motivate potential customers to make an immediate purchase decision’. Not to our surprise, the same subset of respondents also seem to seek out discounts as a priority. Here’s what our data says:
Additionally, we specifically questioned those respondents who said that they use discount/coupons/deals finding platforms and/or loyalty program platforms/apps about their choice of platform for checking discounts and noticed the following:
- More than half (58%) of our survey-takers check online marketplaces for discounts.
- Other preferred online platforms included vendor websites (40%), email newsletters (39%), social media accounts of stores (39%), brand-specific mobile apps (36%), and deal/coupon-finding websites (33%).
Keeping this in mind, perhaps SMEs can focus on advertising their discounts/deals on a variety of platforms —including local platforms— for better reach. Having said that, we also asked those respondents who said that they don’t use any discount/coupon platforms but are willing/interested about what other actions they’re willing to take to get discounts and learned the following:
- The majority of consumers (66%) are ready to download a brand’s mobile application to get discounts and save money, which can help SMEs that have their own mobile apps increase their number of downloads.
- In addition to this, to get more discounts, respondents are prepared to follow brands on social media (51%), followed by responding to brand surveys (44%), and subscribing to newsletters (42%). These stats indicate an opportunity for businesses to offer discounts in exchange for increasing their social media presence, building their subscriber base, and ensuring feedback on their brand surveys.
Tips for SMEs:
Consumers may want businesses to advertise discounts and strive to offer more in the sense of strong brand values, rewarding loyalty programs, and transparent communication. Some things that SMEs can do when it comes to attracting and retaining customers can include the following:
- Conduct flash sales and other deals such as location-based offers, seasonal discounts, referral discounts, and more
- Offer attractive deals such as buy-one-get-one, buy one get another off for 50%, and other similar offers
- Have coupon and voucher policies in place, such as first-purchase coupons, birthday vouchers, anniversary discounts, and third-party discounts, to attract and retain new and existing customers
- Offer free shipping and add-ons for specific high-value products/services
How can technology help mitigate the impact of an economic crisis?
If used properly, technology can help businesses set reasonable limits on spending and offer insights on how to best handle their finances. In fact, Gartner believes that ‘investing in the right digital initiatives at the right cost can blunt the negative effects of economic pressures in the short term and build long-term competitive advantage’.
In order to better serve customers and cater to their needs, businesses should adopt appropriate technology tools. To that end, businesses can do the following things:
- They can use software such as accounting software, business performance management software, and financial reporting software to take care of their overall financial business health
- The use of AI tools and machine learning platforms can also help reduce costs and simultaneously aid in optimising expenses to adapt to a changing economic environment. Such tools can help in automating repetitive tasks, analysing data, and identifying new trends and opportunities.
- As businesses may have less to spend for marketing purposes, they can consider investing in more cost-effective methods of digital marketing, such as free or affordable versions of software such as email marketing (for automating email communication with customers), search engine optimisation (for strategising the best keywords to use to increase organic traffic), and graphic design creation tools for better visual assets.
- For data storage purposes, utilising cloud-based applications instead of the traditional methods of having a physical data centre could be helpful and more cost-effective
- Many digital solutions, such as enterprise resource planning (ERP) and workflow management systems, can help optimise workflow and improve productivity
Next steps for SMEs to sustain growth in the current economic climate
It may be important for businesses to help their customers combat the adverse effects of an economic crisis and simultaneously protect the company’s reputation and growth during a possible recession. Ideally, SMEs should build a response plan with action items such as:
- Making more equitable price-setting and financial management decisions in order to be more competitive in their chosen industry. They should also aim to conduct thorough target market research in order to understand changing market needs.
- Using tools such as supply chain management software can help in organisation-wide order processing, transportation, warehouse management, planning, and forecasting. In addition, such tools can help predict when the inflated price and lack of needed inputs will decrease by synchronising the key data across multiple locations and throughout an enterprise.
- Aim to increase the overall market potential by strategically advertising and marketing their business online.
- Automating time-consuming tasks to focus on more essential business functions via automation tools. For instance, using marketing automation software to automate tasks such as campaign creation, response analysis, and market segmentation.
- Communicating consistently with customers to maintain a positive relationship during difficult economic times.
To collect data for this statistical report, Software Advice conducted an online survey from 31 March 2023 to 11 April 2023, gathering the participation of 1,007 Australian respondents. The selection criteria for the participants is mentioned below:
- Australian residents aged 18 to 65 years old
- Those who are in charge of paying home expenses and goods (either alone or along with their partner or the people they live with)
Note: This article is intended to inform our readers about business-related concerns in Australia. It is in no way intended to provide financial advice or to endorse a specific course of action. For advice on your specific situation, consult your accountant or financial consultant.
This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.