Consulting Insights

Ovative Outlook

The media landscape is ever-changing. Each month, Ovative reports on the essential considerations for today’s marketers, and what action they can take to unlock success.

Consumer Trends

Trend: Consumers remain cautious about the economy

  • In May, the economy showed signs of improvement as the labor market continued to grow – U.S. employers added 340K jobs, an increase from April, and unemployment remained low at 3.7%1 Ovative retail clients’ total revenue was about flat YoY in May (only down 1%), which suggests demand is stabilizing slightly. 2
  • However, survey data suggests consumers continue to feel uncertain about the economy. Contributing factors include inflation — which is slowing but still high at 4.9% — and fears of the U.S. defaulting on its debt, which was finally resolved in early June 3 4 5 6

Trend: Consumers are lowering discretionary spend, but intending to splurge on travel

  • Consumers are still trading down and pulling back, spending the most on groceries and household essentials. Trends of splurging continued to grow with big purchases on apparel, beauty, and particularly travel as concerns about COVID plummeted. Travel spending overtook Apparel as the third largest category for splurge purchases after Restaurants and Groceries 7 9
  • This is supported by Ovative retail clients’ conversion rate, which was down 29% YoY as customers continue to shop purposefully. However, conversion rate was up 6% from April, suggesting some recovery and a potential bump from Memorial Day sales 10
  • Consumers are also shopping around key moments which is also evidenced by higher Average order value (AOV) which was up 14% among Ovative clients. Higher AOV is a consistent trend in 2022 and 2023.1

36% of consumers report they intend to “splurge” on travel, up 5 percentage points from February

Action

  1. Expect customers to shop less frequently and make intentional purchases as they prepare for big moments like travel.
  2. As consumers are no longer constantly browsing, use brand awareness to strengthen your products’ value as they plan to shop in the future.
  3. Generate hype around key moments to stimulate big “splurge” purchases

Channel Fast Facts:

Here are the channel trends Ovative is seeing across retail clients 12
  • Paid Search: Search prices are rising as advertisers look to secure lower-funnel conversions from shoppers
  • Paid Social: Meta remains lower priced
  • Upper-Funnel Media (The Trade Desk): remains expensive as video inventory is in high demand

Platform Updates

Trend: Ad platforms are diversifying their products amid slow advertiser demand

  • TikTok launched Pulse Premiere which allows advertisers to place their ads directly after top publisher content on TikTok’s For You feed. This auction-based ad format allows advertisers to choose where their ads are placed which enables them to tap into highly sought after trends.13 14
  • Google is launching Product Studio; a generative AI tool that can edit and customize product images. The tool quickly changes a product listings blank background to a colorful, creative scene 15 16 Read more of our takeaways from Google Marketing Live

TikTok’s new ad product creates expanded opportunities for brands to tap into trends and drive awareness by placing ads directly after top-performing publisher content

Trend: Retail Media continues to surge

  • Meta entered the retail media space by introducing Managed Partner Ads (MPA) Lite, a tool allowing to share their first-party audience data with advertisers through Meta’s to activate across platform. The also recently introduced Local Product Ads (LIA), which serve product ads dynamically based on their availability in nearby stores 17 18
  • Kroger and Walgreens are enabling advertisers to increase their presence in the brick-and-mortar shopping experience by introducing digital smart screens.19 20

Action:

  • Teams should test into new formats when aligned to business objectives
  • As platforms continue to expand product portfolios, it will be increasingly important for brands to measure performance across products and channels through MMM and MTA tactics through integrated measurement tools like Marketing Analytics Platform.

Headlines We’re Watching:

  • Apple announced its Vision Pro headset. The virtual reality headset creates immersive experiences across apps and entertainment. The device could transform media, but with its $3500 price tag and reports that the device is heavy, we will have to wait and see if this becomes a consumer staple.
  • Gen-Z social media giant BeReal is introducing new features to attract advertisers. Features include an in-app chat service, a Spotify integration, and an influencer feed 21 22
  • Ad-supported video continues its rapid growth. Netflix’s ad-supported tier has more than doubled in subscribers since early 2023. It is projected that nearly two-thirds of U.S. consumers will use at least one ad-funded service monthly by the end of 2023 – a 5% increase from last year 23 24

Ovative’s Take of the Month:

Many retailers are noticing a shift in shopping behavior: customers are shopping less frequently but making larger purchases (AOV is up but purchases per year are down). Based on the trends we’ve observed with clients and across the industry, we believe consumer shifts in shopping behavior are not exclusively a response to economic uncertainty.

Some of this can be explained by consumers’ uneasiness, but we think there are two other factors at play:

  1. A shift from the constant browsing of the peak-pandemic-era to deliberate shopping focused on specific upcoming experiences
  2. The continued rise of influencers, who add an extra layer of consideration to the customer journey and, by advertising a variety of products, may reduce loyalty to specific retailers.

So, What’s Next?

At Ovative, we are keeping a pulse on what is happening in the marketplace so we can best keep our clients ahead of the curve. Ovative can help your brand understand what’s going on in the media landscape and, more importantly, how to take action to stay impactful with your spend. Connect with us to ensure your marketing is reaching its full potential!

Sources: [1] The New York Times [2] O/g MAP Client Data – pulled for May 1 – 31 [3] UMICH [4] Conference Board [5] U.S. Bureau of Labor Statistics [6] Axios [7] The Wall Street Journal [8] McKinsey [9] The Wall Street Journal [10] O/g Platform Client Data – pulled for May 1 – 31 [11] O/g Platform Client Data – pulled for May 1 – 31 [12] O/g Platform Client Data – pulled for May 1 – 31 [13] The Wall Street Journal [14] TikTok [15] The Verge [16] Google [17] Modern Retail [18] Meta [19] Retail Dive [20] Martech [21] CNBC  [22] Insider Intelligence [23] Insider Intelligence [24] The Wall Street Journal

Leander Cohen

Sr. Analyst, Retail Media

About the Author

Leander Cohen is an Sr. Analyst on the Retail Media team at Ovative.

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