Entrepreneurs

3 Market Sectors That May Be (Mostly) Recession-Proof

Everywhere you look online, you’re bound to see articles related to the looming recession and its economic ripple effects. These effects, including job cuts and anticipated elevated default rates, would logically imply that consumers were cutting back spending in all places. But logic and recessions don’t necessarily go hand-in-hand.

Despite dire warnings and dour markets, people aren’t tightening their belts evenly. Instead, they’re tightening here and loosening there. In fact, they’re willing to be surprisingly generous with their cash when they feel they’re getting serious value in return. This is good news for aspiring entrepreneurs open to identifying and filling niches.

Currently, three big sectors are performing well despite inflation. Founders willing to enter these sectors could find themselves in a surprisingly good place. Below are the sectors, what’s happening in them, and how dreamers can fill gaps.

1. Travel, tourism, and food

According to a recent Bloomberg report, consumers aren’t skimping on the simple pleasures in life just because Wall Street is in a tizzy. Even as grocery costs go up, travelers and diners are prioritizing adventures and meals. As economist Tim Quinlan of Wells Fargo explains, the phenomenon is holding out even though it might seem counterintuitive. He notes: “While consumers aren’t happy about prices, they’re sort of willing to pay it to have those experiences for a while.”

Why are consumers digging their heels in the sand when it comes to not giving up on flights and fast cooking? One answer is that this is the result of the pandemic lockdowns, which caused many people to reassess what matters most to them. Travel and food represent freedom and fun. Those are the last things anyone wants to give up again.

Remember: When the world opened up, people didn’t hesitate to start exploring again. Whether they went to familiar or exotic settings, they elevated travel as a must-do activity. Now, restrictions have been lifted in most parts of the world. This is causing even more jet-setting among those craving something exciting and new after nearly three years locked down.

Entrepreneurs entering this big space can’t just jump in and expect miracles, of course. Finding success isn’t impossible; it just takes a desire to disrupt. Airbnb launched in 2008—not a great year for most people or companies—and rose to the top of the the lodging industry fairly fast.

2. Cosmetics, skincare, and beauty

Americans want to look good no matter what their 401ks are doing. As a coping mechanism, splurging on beauty and cosmetics makes sense. When you look better, you feel more confident. And confidence is what most consumers want, especially as long-term economic uncertainty seems to be altogether too certain.

Warren Becker, CEO at premier private-label skincare manufacturing company Cosmetic Solutions, explains that self-care rituals normally rise when the dollar’s strength falls. “When times are tough and consumers are forced to tighten their belts, affordable luxuries like beauty are generally not the first areas to cut, if at all,” he says. “We saw a similar situation in 2008, and while growth slowed, the overall market did not decline, and normalized very quickly compared to other sectors.”

Again, the secret to penetrating the cosmetics and skincare market is to figure out the white space and how to step in. Environmentally friendlier skincare lines are gaining steam, as are those that promise anti-aging capabilities. Even with beauty being somewhat of a “red ocean” in terms of entry points, it’s not without its openings for savvy creators.

Some of the biggest shake-ups happening in the cosmetics world per CBInsights include hyper-personalization, male-oriented (or gender-neutral) products, and items packaged using sustainable methods. The good news is that one look at history shows that the definition of beauty is always changing. Imaginative entrepreneurs who make in-roads with followers can literally change how society feels about a certain look.

3. Second-hand marketplaces

Second-hand shopping and thrifting were already getting a boost from the Gen Z crowd before taking off in 2021 and 2022. A recent OfferUp report shows around 82% of American shoppers are now excited about buying or selling second-hand.

How can entrepreneurs gain traction in the area of upcycling and recycling clothing, furniture, and more? If you take a look at companies that sell products second-hand, you will begin to notice that they are all essentially doing the same thing, but each company serves a niche market.

For example, Nuuly is a clothing site that allows users to rent or buy thrifted clothing, which may seem like many other sites you know, but Nuuly has focused on listening to customers and providing offerings to coincide with changing seasons and trends. If you plan on tapping into the second-hand market, take the time to go granular with your target market and incorporate your value proposition into all your branding.

In other words, nothing is out of reach for founders willing to help consumers think outside the box when it comes to what to buy (and how to buy it). The trick is in finding ways to repurpose and profit simultaneously.

Plenty of businesses will survive the coming recession. A few select ones will even thrive. By watching the market closely, entrepreneurs can structure their businesses to end up in the latter group.

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