Shifts in Holiday Buying Behavior Fuel Changes in Ad Spending Patterns
by Kathleen Booth, on Jan 26, 2021 9:00:00 AM
U.S. consumers threw budgets to the wind and shopped ‘til they dropped during the 2020 holiday buying season. Forecasters estimated a $755.3B spend, averaging at about $850 per person. Deloitte envisioned a 25-35% increase in ecommerce sales, which represents a 14.7% increase from 2019. And consumers did not disappoint.
Bottom line? Even with the uncertainty of a pandemic and record-breaking unemployment numbers, people went shopping, and they did it largely online.
This reality, fueled in part by COVID, changed the ad landscape this past year in a major way. A few standout dynamics are worth mentioning.
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COVID-19 and Holiday Retail
Both brick and mortar and online platforms had laser-focused strategies to boost sales during the 2020 holiday season. Even as various states upheld some form of stay-at-home restrictions or social distancing standards, in-person shopping wasn’t totally off-limits for many areas.
Historically, retailers' marketing goals for the holidays centered around strategies to optimize specific shopping days such as Black Friday and Cyber Monday.
Traditionally, retailers have built up excitement for their sales on these days through ad campaigns designed to educate buyers in advance about the deals that would be available with the goal of driving massive in-store foot traffic along with online purchasing during the day the sale goes live.
With COVID limiting the amount of foot traffic retailers could allow in stores, 2020 upended this tradition by forcing retailers to spread sales out over multiple days, offering pick-up options and expanding store hours. This in turn spread out brand advertiser spending over a longer period of time, driving sustained increases in CPMs through the latter half of the year (a trend further fueled by election-related ad spending).
The approach worked. RetailNext reports a 48% decrease in Black Friday (in-person) shopping, but a surprising 36.3% increase in spend per customer. This means that, even though fewer people got out to stores, the ones that did were willing to spend more.
Even retailers that see the bulk of their revenue from in-person transactions took advantage of growing online audiences and the holiday season saw increased offers of ecommerce deals from brands like BestBuy, Target and Walmart.
And everyone got a piece of the Monday-after-Black-Friday action. Cyber Monday, the largest online shopping day in the U.S., saw a 15.1% increase from last year, delivering $10.8B in sales.
The COVID-19 pandemic accelerated many brands—big and small—into the digital marketplace and multichannel retailing is probably here to stay.
Ecommerce: Holiday 2020 Mind Games
A shift away from single day sales and the related smoothing out of holiday ad spending isn’t the only shift worth noting. Many retailers use lightning deals and limited time offers—ad strategies that literally make people afraid of missing out in order to generate more impulse buys and add-ons. And they work by capitalizing on some basic psychology.
For example, Amazon readily leverages sales psychology with its annual Prime Day. The concepts of scarcity and exclusivity are behind Amazon's use of limited time, “can’t-miss bargains” during the company's 48-hour Prime Day each year.
The success of sales events like Prime Day has spurred steep competition and inspired other retailers to piggy back on the surge of online shopper interest by launching parallel campaigns.
This too spreads ad spending over a larger period as brand advertisers run campaigns in advance of their sales to showcase deals before they launch and create hype in anticipation of sales events.
It furthers the trend we discussed above where ad dollars are spread over a longer period around discounts rather than in a direct spike right before on the day of a promotion. The effect of all of this is sustained higher CPMs throughout the holiday season as opposed to the trend seen in previous years where CPMs spiked dramatically around Black Friday and Cyber Monday.
What’s Next: Ecomm and Ads in 2021
Heading into 2021, experts are predicting some interesting ecommerce trends that promise to have an effect on ad spend in the coming year. Here is some of what they anticipate:
- DTC brands are seeing increasing success with automated shipping and fulfillment
- “Humanizing” brands and marketing is informing ad strategies/content
- More than ever, consumers are buying items like groceries and home essentials online
- Consumers want convenience and immediacy
- Offline-online innovations—including buying from anywhere and augmented reality—are increasingly preferred by online shoppers
- 66% of buyers pick a retailer because of convenience
- 47% of buyers pick a retailer because of price or value
- 54% of online shoppers who are exposed to ad say it reminded them to buy something they needed or gave them an idea to buy something they want
- 49% of online buyers will scroll past page one of search results to find what they’re looking for
- 59% of online buyers are aware of social commerce
- Ecomm is projected to reach $4.5T worldwide in 2021
- 22% of global purchases will be digital by the year 2023
- Brand and discovery channels are an increasingly important part of conversion
- Omni-channel marketing is crucial, especially as it addresses digital spending and crosses online-to-offline divides
- Search engines and social media are the two most important channels for ecommerce retailers
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