30 second recap:
- Retailers should use a data-driven approach to develop their marketing strategies to succeed in today’s volatile economy
- The current tumultuous economic conditions are disrupting the retail landscape forcing stores to close and predicting bankruptcies
- Marketing intelligence for pricing, advertising, and promotions is critical to gaining an edge over your competitors
- GrowByData CEO Prasanna Dhungel Shares 2023 Ecommerce Strategy Tips to Attract, Convert & Retain Customers
The economy in 2020 was in a volatile state, mainly due to the pandemic. In November 2020, despite the increase in Covid cases, retailers were providing SALE offers on 13% of ads and special promotions on only 7% of ads. On the other hand, consumption growth was recorded at 9%.
Fast forward to 2021 – The economy was recovering from COVID which was evident in consumer spending growth of 13.5%. With a slightly loosened supply chain and better economic conditions, the November holidays in 2021 saw a 14% growth in specials, which had grown by double compared to 2020. Additionally, SALE deals were seen on 12% of listings, slightly lower than last year.
However, in 2022, the Russia-Ukraine war coupled with the unfathomable rise of COVID in a manufacturing nation like China impacted economic indicators yet again. As inflation rose, consumer spending fell sharply to a mere 6%-8% growth rate. For the November holidays this year, 60% of consumers mentioned discounts and promotions playing a huge role in their purchasing decisions.
Surprisingly, in November 2022, there was a decline with only 8% focused on special promotional announcements. However, the SALE bid was increasing visible in 15% of the ads.
A similar trend was seen in average prices in Google Shopping ads, i.e. the turbulent economy was reflected in a lower average price in 2020 and 2022 compared to 2021 when the economy was thriving.
Towards a deeper recession in 2023
As we enter 2023, we expect to continue to enter a recession.
According to a monthly poll conducted by Bloomberg, the probability of a US recession in 2023 has jumped to a whopping 70%, as a series of interest hikes from the Federal Reserve stoked fears of a stagnant economy. To make matters worse, a rise in US unemployment throughout the year is also expected to cause more problems in the labor market.
Conversely, to remain competitive in the market, the gross margin in retail should decrease. In this paradigm, the pressure on spending such as advertising will increase. Consumers will start looking for cheaper products, causing retailers and advertisers to supply lower priced products to gain market share. Therefore, the road ahead for retailers will be bumpy. According to UBS’s analyst report, 50,000 stores are expected to close in the US over the next 5 years. Reports have emerged of mega-stores like Bed Bath & Beyond potentially going bankrupt.
Based on our economic analysis of 2020 and 2022, retailers will most likely have unsold inventory to liquidate during the November 2023 holiday season. That said, consumers will see more SALE ads than special promotions, as well as notice a drop in price average in Shopping ads.
Ecommerce Strategies Tips 2023
Consumer spending, which has been declining for the past 3 years, will most likely also decline in 2023. Discounts, promotions, and cheaper prices are the only ways to entice customers to stretch their wallets.
Despite the bleak outlook, retailers that use marketing intelligence for their pricing, advertising and promotions will most likely survive and gain an edge in 2023. Here are some tips for retailers and advertisers to be successful in 2023:
1. Optimize ecommerce trust factors to increase conversion
Trust plays a vital role in business conversion. To ensure a high conversion rate, building a customer’s trust in your ecommerce ecosystem is imperative. It is fair to say that online shoppers are often reluctant to make a purchase due to uncertainty about an unfamiliar channel, brand or product. For an e-commerce business, gaining trust is crucial as customers are unable to physically see the product. Businesses need to focus on optimizing reliability as it will have a huge impact on conversion. That said, trust is a psychological state that can be easily influenced.
Here are ways to optimize the trustworthiness of your ecommerce.
- Showcase customer reviews and ratings, use trust badges and seals, offer secure payment options, display contact information prominently, maintain a strong social media presence – all these attributes earn your customers trust. Also, adopt good shipping and return policies and improve the user experience of your website. This will reassure the transparency of your company and guarantee customer satisfaction. All of this should lead to an increase in customer loyalty and sales. For example, Google awards the “Trusted Store” badge to stores that offer fast shipping, good return policies, a high-quality website, and good ratings—all of which indicate a good customer experience.
- Shopping ad extensions are another great way to improve the trust and effectiveness of your Shopping ads. Ad extensions allow you to provide additional information about your product/business in your ad, which will help increase the credibility of your ad and the likelihood that users will click on it. For example, you can use the “product review and ratings” extension to view the average rating your business has received from customers. This can help potential customers feel more confident throughout their buying journey.
- Offer competitive shipping and return policies to add a level of trust and credibility to your brand. Customers generally prefer to shop with brands that offer free shipping or expedited shipping options. A hassle-free returns policy will not only help build trust with customers but will also build a good brand image as you have taken that extra step to ensure customer satisfaction. For example: If you offer a 10-day return policy while your competitor offers a 3-day return, customers are more likely to choose your product than your competition. Also, having a local presence in the market is also a plus point. Customers will know you exist in their market. Offer 24/7 customer support and chat so your customers feel like they can easily reach you.
- If you are a brand, you should have a MAP policy in the US and Canada. Having a channel map and policy helps ensure the price and channel consistency of your brand’s product on digital shelves. You must clearly communicate your MAP policy to your resellers and partners and provide them with the guidelines needed to sell your products. Setting up a MAP policy and ensuring it is enforced helps the brand maintain its value and ultimately improves trust and credibility among retailers and ultimately buyers.
2. Optimize your return on ad spend by reducing your advertising costs
Here are six ways to achieve this:
- Pursue a holistic search strategy to mobilize the budget through SEO and SEM to dominate the Google SERP. In 2022, our largest car dealer client increased revenue by 20% by driving ad spend from keywords where they were doing well in organic.
- Improve yours keyword quality score to increase impressions and CTR with a lower CPC. We have noticed that retailers are not using special offers during this adverse period. We humbly disagree with this strategy as it is imperative to offer discounts through special offers versus falling prices. This simple tactic can improve ad quality and lower your CPC.
- Optimize your pproduct experience focusing on product title, price, quality, color, description, promotions, reviews, etc. Not only will this increase your chances of converting, but it will also help improve your keyword’s Quality Score.
- Guarantee affiliate compliance to reduce revenue churn and better partner with your loyal affiliates.
- Monitor violations in the term of your trademark that are inflating your CPC.
- Enforce MAP compliance to avoid price wars that reduce margins and brand value.
3. Dynamic pricing optimization to maximize margin
To be on top, retailers need to have insight into current market prices to ensure optimal pricing to beat competitors. The approach dynamic pricing strategies take to penetrate by maximizing margin from the market will be critical to growth.
4. Strategic promotional planning to attract consumers
Consumers will always be on the lookout for promotions. In this adverse economic situation, a strategic promotion plan will help optimize your advertising and conversions.
As the pandemic filled period comes to an end, innovation becomes a key factor for survival in today’s volatile market. Additionally, with a shift in the retail landscape, consumer expectations and demands will be a driving force in 2023.
Retailers and advertisers must remain flexible, adaptable and affordable to gain an edge over competitors and maximize their market share. They should use a unified marketing intelligence solution that showcases them against the competition in the eyes of buyers on digital shelves. We recommend retailers use a data-driven approach to develop their marketing strategies to improve their chances of success in 2023.
Prasanna Dhungel co-founded and runs GrowByData, which powers performance marketing for leading brands like Crocs and major agencies like Merkle. GrowByData offers marketing insights for product research, market and management to drive new revenue, increase marketing performance and manage brand compliance.
Prasanna also advises executives, boards and investors on data, growth and product strategy. You have assisted leading companies such as Melinda & Bill Gates Foundation, Athena Health and Apellis Pharma.
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