Cross-Channel Integrated Planning
Ovative Trends and Performance Update: November 2021
Spending is up for pockets of consumers during the month of November, but not everyone is ready or able to spend this holiday season. Increased media competition resulted in higher costs and lower media performance for some Cyber Week advertisers. Read on to see how you can apply these learnings throughout the remainder of the season and into the new year.
November Macro Trends
Evolving Pandemic Implications
Consumer confidence declined in November, as consumers still feel worried about the overall economy as inflation, labor shortages, and COVID related supply chain impacts continue to fill the news.¹ Individually, though, things are not all bad for consumers. Unemployment is down, and some consumers were ready for a big shopping season after a disappointing last year.
Inflation levels have reached a 31-year high, hitting 6.2% YoY.² Essential product categories like gas and food have seen record increases, with fast food prices rising 7.1% since 2020, and gas prices hitting a 7-year high.² With higher prices, consumers are projected to spend about 10% more YoY from November 1 through December 31.3 Much (though not all) of the increase in holiday spend is from price increases and fewer discounts this season. Much (though not all) of the increase in holiday spend is from price increases and fewer discounts this season.4
Holiday Shopping Trends
Online spend from November 1 through November 29 rose 11.9% YoY, and is set to reach $207B by the end of December. 5 However, concerns about inflation and the availability of goods to purchase led Americans into Cyber Week with mixed emotions – over half of consumers stating they would not shop at all over this core holiday period. 7 During this season, holiday spending varied by income level. Households making less than $50K are expected to spend 22% less than last year, while higher income households making above $100K are expected to spend 15% more than they spent in 2020. 8
Consumers who have suffered financially from the pandemic who are less able to absorb inflation-related price increases are turning to Buy Now, Pay Later (BNPL) services; 43% say they’re more likely to make a large purchase if BNPL was offered.8 However, among shoppers who used BNPL during the 2020 holiday shopping season, 29% have yet to repay debts, highlighting the potential shortfalls of this offering. 8
What Trends Did We Observe Across Ovative Clients Last Month?
- AOV increased across the board during November for our clients, as supply chain concerns continue across many industries. Retailers have had to raise prices and reduce discounts, compared to past years.
- As consumers with higher incomes set out to shop earlier in November than usual, clients that offer high-end goods at elevated price points (like handbags and shoes) saw increased demand for both regular and sale items.
- Despite overall strong performance so far this holiday, there are some consumers who aren’t out shopping due to continued impacts from COVID, labor shortages, and general tight budgets. Retailers that rely on consumers with lower incomes have felt this impact the most.
What Trends Did We Observe on Google and Facebook Last Month?
- Overall, during November we saw untraditional demand patterns as promotional activity was pulled forward to encourage consumers to not wait for deals.
- Paid search saw CPCs spike during Cyber Week due to increases in competition in the marketplace, specifically in the Brand Search tactics.
- Increased costs (present throughout 2021) impacted Paid Social performance, which drove conversion rates and ROAS down vs. LY.
- Our clients saw the greatest returns by intentionally directing consumers to in-stock products to combat supply chain and inventory issues that have been looming this whole season.
How Can You Turn These Insights Into Action?
Navigating Supply Chain and Inflation Concerns
With rising prices and wavering consumer confidence, focusing on long-term creative solutions will be crucial to success as the economy gradually recovers. Despite increased spend driven largely by higher prices and reduced discounts, economic realities like labor shortages and supply chain issues will continue to impact businesses into 2022. Setting expectations for a gradual recovery is imperative. As ecommerce prices have been less impacted by inflation, businesses should monitor ecommerce competitor pricing as this channel’s presence only continues to grow.
Use Holiday Shopping Trends to Influence your Strategy
So far this season, businesses with a higher-income customer base are performing well, but consumers with lower income are less able to absorb price increases and therefore may not be shopping as much. Understanding how much of your customer base has disposable income to spend this season is important in setting performance expectations. And, if possible, meeting consumers where their budgets are by offering services like BNPL or by lowering shipping costs could be crucial to success. 8
Evaluating holiday performance over a longer time horizon as well as by different customer types and purchases methods like BNPL, will be important to truly measure success over this complex shopping season. As we continue through the holiday shopping season and head into the new year among continued pandemic implications, marketers should use these learnings to navigate continually fluctuating consumer trends.
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