MNTN Research Peeks

Analysis

Three Retail Insights in Uncertain Economic Times

Abstract

  • Following the pandemic, eCommerce is continuing to grow despite still being a much smaller portion of sales compared to its brick-and-mortar counterpart.
  • Unlike previous recessions, people are still shopping; however, they are seeking less expensive items during this time of economic uncertainty
  • This year, Black Friday will be an even more important event for retailers, as shoppers hold out for deals.

After the boom of spending during the pandemic era, it’s been hard to pinpoint precisely where the economy stands. Interest rates have risen and the stock market has seen a downtrend; however, unemployment numbers and consumer spending habits have not reflected the same dips that past recessions have. In fact, within the retail vertical, spending is expected to exceed a trillion dollars, despite the cool down due to the factors discussed above. As Q4 approaches, here are three things retailers should keep in mind.

eCommerce continues to grow, despite brick & mortar’s dominance

As the world locked down during the pandemic, shoppers shifted their habits, taking full advantage of eCommerce to make their purchases from the safety of their own home. eCommerce saw a boom during this time based on necessity. Despite this shift over the past few years, brick-and-mortar commerce still reigns supreme, making up 85% of all retail according to eMarketer. That being said, this varies drastically industry-by-industry. Entertainment, for example, is eCommerce dominant, as most people sign up for streaming services, purchase their music (or music-service subscriptions) and order their books directly from their phones. In fact, foot traffic was down in bookstores by 8% in Q2 2022 according to a study done by Gravy Analytics.

Still other services, like beauty and food, have been a largely brick-and-mortar dominant trend but are starting to see the shift toward eCommerce. Online grocery shopping was an essential service during pandemic and it seems many have permanently adopted the behavior. Brands like Target are tracking this shift and starting to invest heavily into these areas.

People are still spending, but they are scaling back to less expensive items

While retail growth is still increasing during this time of uncertainty, shoppers are looking to be more careful with how they spend their money. Unlike previous recessions, shoppers are not yet putting away their credit cards quite yet. Instead, they are shifting to purchasing lower-priced items rather than stopping their spending altogether.

Advertisers are taking notice and shifting their strategies to follow suit. According to an analysis of advertising spend done by Pacvue, top items from 2022 Amazon Prime Day included: detergent, trash bags, and Frito-Lay chips, thanks to the 30% discount. During the much-hyped sale day, shoppers were looking to save on everyday household items rather than splurge on marked-down luxury items. When asked about these trends, Melissa Burdick, co-founder and president at Pacvue said “I think that there’s going to be more of a focus on less luxury items, maybe more cost-effective or efficient items, grocery will probably be another star as well.”

Black Friday is a way to win big

Consumers are still ready to spend, despite being more aware of prices and as Q4 looms, Black Friday is a huge opportunity for advertisers. According to a survey done by LoyaltyLion, 69% of shoppers are waiting for the discounts offered during this key shopping time to make their purchases. Price-conscious shoppers are waiting patiently to stretch their dollar with the expected deals of the season.

Advertisers can take advantage of these survey results by offering discounts or deals to customers and launching their Black Friday deals early. 80% of the survey respondents said that early sales would motivate them to buy and 48% of shoppers feel that the long Black Friday season can lead to boredom and ad fatigue. The brands that will win shoppers’ carefully-spent dollars during the holiday season are those that go in with their best offers upfront and start early.

eCommerce brands are using Connected TV to reach their customers


It’s not just retail that’s gone digital. As people have shifted to purchasing online, eCommerce retailers are investing in digital advertising, including Connected TV. According to predictions by eMarketer, eCommerce is expected to double in size by 2026 and account for one-fifth of all digital ad spending. As the world continues to move online, especially following the pandemic, it stands to reason that people will be hearing about their favorite retail items through CTV ads and other digital platforms–and then completing their purchase online.

Retailers and Connected TV platforms aren’t sitting idly by, either. They are looking at ways to make it easier for shoppers to go from seeing an ad on their favorite show, to adding the items to their virtual cart. Walmart has been among the first-movers in this space, recently unveiling a partnership with Roku to allow streamers to shop from the TV screen using their Roku remotes. They have committed further to the digital space, announcing additional partnerships with platforms, including Snap and TikTok, to allow advertisers to experiment with reaching their audience directly within these channels.

Conclusion

Economic uncertainty is shifting the shopping landscape, but people are still ready to spend for the right deal. Shoppers have continued to shift their habits towards eCommerce, especially after two years of staying home during the pandemic. Advertisers are making note of these behaviors, shifting their advertising to incentivize the price-sensitive eCommerce shoppers with the best offers, especially during notable sales like Amazon Prime Day and Black Friday.

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