Push Forward Until You Get Sharla
The early hours of Xenoblade Chronicles can be extremely punishing, especially since your starting characters have virtually no healing abilities at all. Aside from Shulk’s Light Heal, you have no other way of restoring health in battle and it can be a struggle to even get through regular enemy encounters.
There are tons of side quests to pick up here, and while it is a good idea to grab as many as you can, you should also try to make a beeline for chapter 3. That’s when you’ll get your next proper party member, Sharla, and the good news is that she comes with tons of healing and support abilities for the party.
With her recruited, you’ll have Shulk as your DPS character, Reyn as your tank, and Sharla as the healer, and your party will be in much better shape going forward.