Online sellers are not immune to the disruption caused by the coronavirus pandemic. Teikametrics, a service that helps Amazon sellers and brands “algorithmically” optimize their advertising on the marketplace, identified three trends that will impact retail and ecommerce for some time.
John Shea, Teikametrics’ Chief Growth Officer, said the company has been offering advice their Amazon seller clients especially with regard to advertising spend.
“We suggest that in order to make informed decisions about advertising, it helps to first get a clear picture of your current ad performance and fulfillment timeline at the product level. If you’re seeing your advertising performance change, consider strategically adjusting your advertising spend until performance returns to normal.”
For example, if some products are showing normal delivery times and others are showing 30-day delivery estimates, merchants should adjust their ad strategy separately for products with different delivery estimates.
In early April, Shea said that in general there had been a massive shift to online shopping as everyone was confined at home. Businesses doing enormously well were those selling more essential goods and who had diversified supply chains and continued to fuel advertising and promotional activity. “They will give back some of the share they have gained when the dust settles, but not all of it,” he predicted.
Teikametrics had advised sellers to consider reallocating advertising spend to focus on spring seasonal products and products people may particularly want while sheltering at home, such as toys, cooking supplies, and health and fitness items.
By May, Teikametrics saw that across the over 1,500 sellers studied, performance changes from prior months on a per-seller basis were weighted much more toward both negative and positive extremes, as opposed to demonstrating a more bell-type distribution. Why? “Performance differences have split primarily along category lines.”
Looking ahead to September 2020, Shea foresees a significant increase in ecommerce as a percentage of total retail, while also seeing contraction in total consumer retail spending.
He identified three trends: behavioral change; retail disruption; and reductions in consumer spending.
1) Behavioral Trends
“The pandemic is driving an accelerated shift to ecommerce. Millions of people are downloading The Walmart, Amazon and Instacart mobile apps and buying goods in ways they haven’t before. When we come out of this thing, some of this shift will become permanent.
“Walmart.com will be a clear winner here although it’s noteworthy that this will represent a channel shift more than incremental gains in retail share as Walmart already has a huge share of grocery sales and middle America wallets.
Amazon will also be a big winner and Amazon’s gains will be incremental. and Instacart might be the biggest winner.”
2) Retail Disruption
“Many department stores and local retail establishments were hurting before the pandemic arrived and while we can expect a temporary spike in physical retail shopping when the country re-opens – many many stores will go under. This will create opportunity for nimble DTC brands if they can invest in growth responsibly – but will primarily fuel more growth for the giants Amazon, Walmart, Costco and Target.”
3) Consumer Spending
“Overnight, America has lost 16 million jobs and the markets have lost ~$6trillion in value. Even with aggressive stimulus plans, we are going to see a significant reduction in consumer spending as we come out of this.
“This will benefit channels that appeal to price-sensitive shoppers. So we will see Costco, Walmart, Amazon and Wish.com do very well here.”
The bottom line for merchants who advertise online is that they should adjust ad spend by current ad performance; by delivery performance; and by consumer demand.
Sellers interested in learning more can find a new report available at no charge on the Teikametrics website titled, “Initial Impact of COVID-19 on Amazon Sellers.”
This is the third segment in our Coping with COVID series.