Lessons from the 2022 Holiday Shopping Season
How was your holiday sales season? For many retailers, the holiday shopping season felt as close to a return to normal as could be hoped for. This does not mean everyone had a great retail season; but some of the disruptive forces from 2020 and 2021 abated, such as supply chain woes and the impact of Covid-19 on in-store shopping. Instead, retailers managed against some of the variable conditions that affect shopping every season, including the state the economy and weather conditions. Here are some major takeaways from the 2022 holiday season:
- Economic uncertainty has influenced spend – but by how much? U.S. retail sales grew 7.6 percent during the holiday shopping season, according to a Mastercard report. This was higher than the 7.1 percent growth that Mastercard had predicted in September but lower than the 8.5 percent growth achieved in 2021. Online sales grew 10.6 percent, slightly less than the 11 percent increase last year. Mastercard attributed the lower rates to consumers’ experiencing economic uncertainty. But given just how much uncertainty is in the air right now – including an ongoing war in Ukraine and a looming recession – the slowdown was really nowhere as bad as it could have been.
- Retailers that offered price deals did especially well. Remember in 2021 when retailers were reluctant to offer discounts and deals because the supply chain crisis had hurt their inventory levels? That’s an example of an unusual problem that abated in 2022. Inventory levels returned to normal in 2022, and retailers even experienced excess inventory – which happens just about every year. So, they offered more discounts. According to Salesforce, the average U.S. discount rate stands at 19 percent, with the global discount rate at 18 percent an increase of 6 percent globally and in the U.S. year over year. Discounts increased two weeks after Cyber Week, rising 11 percent globally year over year and 14 percent in the U.S. as retailers tried to entice last-minute shoppers ahead of the shipping cutoff window.
- Fall sales might have caused a returns problem. In 2022, retailers such as Amazon, Target, and Walmart continued to offer holiday sales in the early fall, continuing a pattern from recent years. Cyber Week was pre-empted by sales such as Amazon’s Prime Days II and Walmart’s Deals for Days. But then returns nearly doubled the week after Cyber Week compared to the previous year and have remained high since then. Salesforce says that the surge in returns could be attributable to people purchasing gifts earlier in the season and then returning them to buy something else on discount. This data underscores how much work retailers still need to do in order to synchronizes pre-Cyber Week sales with consumers’ buying habits and sentiment.
- Social continues to fuel online shopping traffic. After hitting all-time highs during Cyber Week, social traffic referring to retailers’ sites grew 23 percent year over during the holiday shopping season, representing 12 percent of all mobile traffic, according to Salesforce. The U.S. is leading this trend, with social traffic growing 28 percent over the first three weeks of December.
- Online advertising is as important as ever. Consumers surprised analysts by spending more than predicted even during a recession. Businesses that kept their brand names and merchandise visible were best positioned to win. Retailers that scaled back their online ad spending because they feared consumers were going to spend less ended up missing out.
- Social media advertising in particular is essential. Industry watchers have been speculating that social commerce – or the actual purchase of a product on a social app – might be ebbing a bit. But commerce resulting from advertising on social apps appears to be alive and well.
- Retailers need to focus on value, not deals. Consumers will continue to respond to deals amid uncertainty – but retailers need to be careful. Discounted products and lower-priced alternatives to name-brand products attracted consumers. But as noted, overselling deals throughout the holiday season may have backfired on retailers when consumers returned products in their quest to find better deals than they were offered.
- Retailers need to be nimbler with their ad campaigns. As we saw, consumers continued to demonstrate an uncanny knack for surprising retailers, in this case buying more than expected and apparently being aggressive about trading up with holiday deals. We suggest capitalizing on tools such as Google’s demand forecasts on the Insights page. This predicts upcoming trends relevant to your business so that you can adjust your budget and bidding strategy to capture spikes in demand. Additionally, use Performance Planner to understand how these changes to your advertising spend will affect your predicted clicks, conversions, and conversion values. In addition, Product-specific insights are now at your disposal at the account level in the Google Ads products tab. These insights let you spot underperforming offers, identify products with missing feed attributes and compare your bidding strategy with your top competitors’.
Contact True Interactive
True Interactive has deep experience helping clients plan and implement shopping campaigns online during all seasons. We can help you, too. We understand how to create nimble search campaigns and multi-channel ad outreach to target consumers with the right message at the right time. Contact us to learn more.