Digital Brands Headed For Another Messy Holiday Season


Digital Brands Headed For Another Messy Holiday Season




by , Op-Ed Contributor, November 3, 2021

About this time last year, retailers collectively took a deep breath, crossed their fingers, and hoped for the best. After a year of being battered by the pandemic, a holiday season like no other was upon us. But if we could just make it through that holiday season, 2021 would surely be a much more normal year.


It’s almost cute how naïve we were.  As holiday 2021 comes into full focus, it’s clear this year’s holiday season won’t be any easier than 2020, and will provide a new set of unique challenges that will affect nearly every sector of retail. 


Perhaps the biggest challenge is the mismatch between demand and availability. Consumer demand is at levels many of us have never seen before – with some industry organizations expecting consumer demand to grow nearly 20% year over year. Unfortunately, supply chain issues have led to thin inventories and retailers can’t meet consumer demand – which is leading to holiday predictions of only about 7% growth (similarly, Coresight Research predicts 6.9% growth).  


The gap between the demand opportunity and the inventory constraints presents yet another holiday season that we will do our best to avoid calling “unprecedented.” On the positive side, it should allow for better sell-through, more full-priced selling, and healthier balance sheets. But on the negative side – and from the consumer perspective – that gap represents holiday disappointment; disappointment in the form of not being able to buy what they wanted, in the time they wanted, at the price they wanted. And if your customers can’t get what they want, they look to competitors or other categories altogether – which hurts the longer-term health of retailers’ businesses. 


Which leads me to the second challenge: the changing customer. Not only has the makeup of the customer changed significantly – the 60+ age group is now the fastest growing group of digital shoppers – but what they want has changed too. According to consumer research we recently coauthored with Coresight Research, customer experience was by far consumers’ top priority, including faster delivery, BOPIS (buy online pickup in store) offerings, as well as free and easy returns. The customer experience far outranked even discounting and promotions, which didn’t crack the top five most important factors. This furthers the point above ­­– consumers have the demand and are willing to pay for it. 


Across all age groups in the research with Coresight, we found health and wellness is the number-one category for expected holiday spending this year, as consumers continue to deprioritize apparel and focus on wellbeing. And just one more change: virtual gifts, ranging from digital gift cards to NFTs to video game skins/prize packs, are all slated to have record years. While none of this may sound shocking, keep in mind that the majority of these factors were in their infancy or an afterthought just 24 months ago. 


As the customer has changed, how retailers and brands market to consumers has made an incredible shift as well. This is the third challenge: digital media costs are rising sharply, and effectiveness is being challenged. Consumers have flocked to digital mediums and, as such, brands have flocked to digital advertising as their key avenue for delivering their products and brand experience. Digital now makes up about 53% of all advertising spend – jumping from $283 billion in 2018 to an estimated $526 billion in 2024. While that increased spend is great for Google and Facebook, it makes advertising significantly more expensive for brands.


The industry as a whole is seeing costs increase in the 20% to 50% range, depending on channel and vertical, and Facebook recently reported YoY CPM increases of about 30%. And the cherry on top? Changes to privacy standards are leading to lower-quality ad targeting, and performance standards that previously held true are being challenged. To sum all this up: there are more customers on digital than ever before, but digital has gotten exponentially more expensive while also potentially becoming less effective. Good times. 


It’s not hard to look at the above and immediately begin to panic sweat. But the truth is, it’s all doable. When executed correctly, this holiday season can mean full-price sales and healthier bottom lines earlier in the holiday season (forget Black Friday – how about Black October?). It can mean reaching customers in new and ways other than just the same old search and social. It means elevating health and wellbeing as a primary influencer of purchases. It means opportunity for change – and change almost always leads to growth. 


If I can offer one final piece of advice to brands and retailers this year, it is to be prepared with not one plan, but three. In times of uncertainty and quick change, rigidity almost always leads to failure. By coming to the table with multiple options that are flexible and quick to adapt, you allow yourself the best chance for success. And there is absolutely nothing naïve about that. 

MediaPost.com: Search & Performance Marketing Daily

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