The holiday shopping season is nearly upon us. It’s that time of year when every article you read for the next few weeks will give you the same advice offered every year:
You. Need. To. Plan. Ahead.
But this year isn’t like previous years.
This year we’re facing challenges that most of us have never experienced before. Things are different—for retailers, for shoppers, for the world.
This article will help you understand the current state of retail and ecommerce, the challenges and opportunities you’ll face as a result of COVID-19, and the tactics you need to start putting into motion now to not just win the few months that make up the upcoming holiday shopping season—but all of next year too.
You don’t need me to tell you that Q4 is a hugely important time of year for any business that sells physical products to consumers. The holiday shopping season has, for some time, been a big opportunity for both brick and mortar and ecommerce retailers.
For many retailers, the last few months of the year can account for as much as 40% of annual sales.
In previous years, those sales have been coming increasingly from online shoppers. During the 2019 shopping season (November 1 - Christmas Eve) for example, ecommerce sales made up 14.6% of total retail and rose 18.8% from the 2018 period.
Unsurprisingly, experts forecasted that online shopping behavior and online sales would rise steadily again during the 2020 shopping season.
Then came COVID-19 and with it, an unsurprising but staggering increase in online shopping behavior.
According to retail figures shared by the Commerce Department, “during the height of the COVID-19 pandemic, consumers spent $200.72 billion online with U.S. retailers, up 44.4% from $138.96 billion for the same quarter the prior year.”
Digital Commerce 360 commented on the data reported by the Commerce Department by adding, “Q2 2020 marked the highest year-over-year growth for any recorded second quarter and the second-highest rate of any quarter or year overall going back to when the agency first started breaking out ecommerce data in Q4 1999.”
As we enter into the holiday shopping season, retailers can only expect consumer demand and online shopping orders to increase dramatically as the desire to venture out into brick and mortar stores remains low and the fear of worsening the spread of COVID-10 remains high.
For retailers, this means there will be more opportunities and more challenges this year than ever before.
The next few months will undoubtedly look different for retailers, but one thing will remain the same: you really only have one chance to get it right. Those who prepare will win, and those who don’t will wish they had.
It’s not hard to do a Google search and find a slew of blogs all claiming to have the best content on how to help you prepare for Black Friday, Cyber Monday, and the Christmas shopping season.
The question you have to ask yourself is, how actionable is the content you’re getting when you click on a search result and land on the page? Does it pass the smell test, or does it just look the part? In other words, is it written from a source you can trust? From a company or person that has real experience and data they can pull from when offering recommendations and providing actionable insights that can help shape your go-forward strategy?
If you look for those articles, you’ll find that a lot of “experts” are all saying the same things:
My goal with this article is to help you approach this year’s holiday shopping season differently because it is different.
I want to help you prepare for the next few months, but I also want to provide you with ideas, tactics, and recommendations that I know will work more than just one or two days out of the year, because that’s what you need in order to build a profitable, sustainable online retail business.
Before we get into the challenges and opportunities that COVID-19 is creating for retailers this year, I want to talk first about something I think a lot of retailers struggle with during the holiday shopping season.
It all comes down to the difference between focusing on revenue vs focusing on profitability.
It’s tempting to focus on doing whatever you can to drive top-line revenue during Q4. After all, consumers spend more money during Q4 than any other time of the year. In fact, according to WordStream, the average consumer spends a little over $1,200 on holiday gifts per year. That number doubles for consumers or households with incomes north of $100K.
There is a lot of money up for grabs during this time of year, plain and simple.
For retailers, it’s a big opportunity to move a lot of inventory and make a lot of money. The desire to show big numbers for Q4 leads many retailers to invest in tactics and strategies that focus on revenue but ignore profitability.
Here are some strategies that might allow you to maximize revenue and make a lot of money from a top line perspective, but don’t allow you to effectively manage profitability.
Everyone will try to tell you that you need to launch aggressive discounts on Black Friday and Cyber Monday, and it’s true—you should. Competition for dollars during this time of year is fierce and you have to do everything you can to cut through the noise and connect with shoppers...but you shouldn’t do so at the cost of profitability.
Some people will tell you that you should use discounts and deals to acquire customers even if it's at a loss because if you can get them in now, you can nurture them again and again throughout the following year.
The problem with this strategy is that you’re not just losing out on money, you’re also creating bad habits and bad expectations with your buyers.
A study from Playbook Media found that across ecommerce clients, customers acquired during Black Friday were 70% less likely to purchase at full price within the next 12 months as compared to customers who first purchased at full price.
Discounts help drive urgency and action yes, but they also can influence long-term shopping behavior in negative ways. Research shows that 64% of online consumers wait to buy things until they go on sale.
Although you might be able to use discounts in ways that allow you to capitalize on a small moment in time, you could be actually hurting your ability to grow and maintain profitability in the long run by convincing shoppers that they shouldn’t buy from you again until the next discount becomes available.
So how can you offer discounts in a way that allows you to grow while maintaining profitability? I’ll share some actionable ideas later on in the article.
Another mistake retailers make is they spend enormous amounts of money on ad costs by relying on channels that use auction dynamics, like Facebook and Google.
Relying on auction dynamics can get really expensive, especially when you’re not very familiar with how to manage ad spend on these channels.
On Facebook, for example, you can choose to run ads with automatic bidding or cost cap bidding.
With automatic bidding, also known as lowest cost bidding, Facebook tries to get you the lowest possible cost per optimization event while also spending your entire budget by the end of the day. This is a poor way of maintaining profitability especially in high demand time periods like Black Friday. If for example you need to maintain a maximum CAC of $20 to hit profitability targets and set a budget of $25K for Black Friday, Lowest Cost Bidding will guarantee that you spend the entire $25K, but may go well over your upper end CAC threshold of $20. As you can see this is a huge risk for profitability.
A better option is cost cap bidding. With cost cap bidding, Facebook works to deliver the maximum number of conversions as they can within the CAC limit that you have set. This will allow your campaign to spend up to your $25K budget while maximizing the number of profitable conversions possible within that budget.
Without a clear understanding of how these channels work and what your goals are, it’s difficult to acquire customers and drive sales while keeping things profitable.
Click this link to learn more about how Playbook Media helps businesses efficiently grow through expert media buying strategies.
Some retailers are tempted to drive up revenue by getting rid of their entire inventory during the Q4 shopping season. This strategy is primarily utilized by seasonal companies and it’s something we advise against doing at Playbook Media.
If you are a seasonal ecommerce brand, you’re better off selling as much as you can while maintaining profitability targets and planning for higher margin sales at much lower volume until you restock with Spring styles. The key is to avoid having 2-3 months of low or no inventory.
Inventory management is an important element to get right as a business. If you need help building your strategy, dig into this helpful resource from Shopify. It covers a multitude of techniques that you can use to ensure you’re managing inventory and profitability effectively.
As if the standard challenges mentioned in the previous section weren’t enough to deal with this year, we also have an entirely different beast to fight: COVID-19.
COVID-19 has changed the ecommerce game forever. In fact, many experts say that it has pushed the industry forward as much as 4-6 years.
This unfamiliar territory is creating new challenges for retailers that will impact how you operate and prepare for the 2020 Q4 shopping season.
Here are the biggest known challenges you need to plan for and overcome:
Your ability to understand and plan for these challenges and others ahead of time will make it much easier for you to keep customer happiness, brand reputation, and profitability intact throughout the rest of the year.
COVID-19 has been devastating for people and businesses everywhere. There’s no doubt about it. It has, however, also created some new opportunities for retailers going into the holiday shopping season.
Here are some of the biggest opportunities retailers have this year:
The opportunity to grow and grow profitably this year is clearly big—it all comes down to your ability to plan and execute.
You know the challenges and opportunities. Now the question is, how do you build a strategy that helps you capitalize on Q4 and build a stronger online business next year?
Here are nine actionable tips and strategies that can help you shape the right strategy for your business:
One of the best ways to reduce your costs to acquire customers during Q4 is to build and nurture your email list before you need it. Online shoppers are going to be inundated with email campaigns and paid ads on Black Friday and Cyber Monday. You can cut through the noise by capturing customer emails now and engaging with them regularly leading up to the busiest part of the holiday shopping season.
Here are some creative ways to start growing your email list:
For more tips and ideas on how to build and grow your email list from scratch, take a look at this helpful resource from Omnisend.
It’s important that you remain conscious about how you’re discounting during Q4. A lot of people will tell you that it’s OK to acquire customers at a loss during this time of year because it means you can nurture them again and again over the next 12 months, but as I mentioned earlier, I don’t agree with this strategy.
Over-discounting can be expensive and it can also create the wrong expectations with your customers over time. Consumers who buy on steep discounts are trained to only buy when there are steep discounts. They aren’t brand loyal.
Here’s how to build a discounting strategy that actually helps you:
For more help building out an effective discounting strategy for Q4 and beyond, read through this guide from BigCommerce.
You will be tempted to want to manually pull levers to improve the ads you launch on Black Friday and Cyber Monday, but that's a mistake.
The temptation to do so is particularly high when:
Don't try to make the decisions manually. It might look like the system is not making the right decision, but it is. Trust the machine learning. Don't try to manage your ads on a day-to-day basis. Set up the constraints you want to have ahead of time. Be absolutely clear that everything in your ads is correct and working before you launch them. You will lose efficiency as soon as you make changes because your ads will go back into the learning phase.
Lean into machine learning and the optimizations of the systems created by Facebook and Google to put your ads into the right places for the right people at the right time. It will work.
For more help creating the right ad strategy on Facebook this year, explore their 2020 Holiday guide.
This is the year to test out-of-the-box ideas. You have more time and your customers are more open to engaging with you in new and different ways.
Here are some ideas worth considering:
Expect that there are going to be more challenges this year given the current state of the world. Work proactively to address and solve these problems by being more transparent. Here are some ways you can build trust and confidence with people:
Don’t put all your eggs in the Black Friday basket. Don’t focus on one day alone. Make your window bigger. Black Friday is only important because retailers and the media say it is. You should be nurturing customers and investing in ways to drive growth profitably throughout the year to maximize value.
Think about it this way: you could drive $500K in incremental sales during Black Friday week at a 15% margin, or you could drive $300K in incremental sales over a 4 week period at a 30% margin. Which would you prefer? The latter is much more valuable for your business.
It’s tempting to want to get lost in the hype of one or two days out of the year, but don’t let all the buzz fool you—build a bigger window for yourself and invest in strategies you can repurpose throughout the year.
Your ability to respond quickly and effectively to inquiries from customers is going to be crucial this year. Make sure you are prepared for an increase in activity by taking the following steps:
A big part of whether or not your marketing and advertising campaigns hit the mark with your target audience comes down to the creative you develop and use. If you don’t have solid creative prepared for the holiday shopping season, you need to start now. That might mean creating new messaging for your products, taking new photography, and coming up with new, creative concepts that will cut through the clutter and persuade your prospective customer to act.
If that sounds like a lot to do and figure out, let our team do the heavy lifting for you. We’re seasoned professionals who can help you quickly develop and design the right creative strategy and components for your holiday shopping campaigns.
Don’t go into Q4 with the goal of driving more one-time purchases. Go in with the goal of creating loyal customers who will purchase products from you again and again throughout the year.
Here are some actionable ideas that can help you build loyalty with your customers:
Contact Playbook Media to discuss your 2020 Holiday Marketing Plans.