By David Lockwood, Co-founder and Director, Analytics, The Tapestry Agency
The pandemic has shaped our economy for several years now and continues to do so, with China’s zero-Covid policy impacting production and shipping from the Far East. But nearer to home, multi-channel businesses face a wave of economic and geopolitical challenges prolonging this uncertainty. So what are these challenges, and what can ecommerce companies do to inject an element of certainty into their businesses?
With inflation at 9% – and set to rise – there’s a generation of consumers who’ve never experienced this before. And linked to this is the cost of living increase, bringing the looming spectre of stagflation and some commentators warning the crisis could be pushing us towards recession. Both these factors impact consumer confidence, and we’re waiting to see the full extent of the consumer reaction on spending and the implications going forward.
War in mainland Europe and NATO expansion are heightening tensions, with implications for cross-border trade, while Brexit continues to serve up unresolved tensions between the UK and Europe. Alongside the potential of ongoing trading difficulties, there’s even talk of a UK – EU trade war.
And while possibly overhyped, the continuing ‘great resignation’ means finding and retaining talent remains difficult, forcing salaries up and adding more cost-base pressures on companies.
Facing up to the marketing challenges
And while the environment retailers operate in is fraught with unknowns, there’s a wealth of challenges making marketing more difficult and expensive.
With demand outstripping supply for online advertising, the result is PPC and CPM inflation, where we’re seeing double-digit price rises. At the same time, iOS 14 updates and subsequent others are impacting campaign visibility. With ongoing implications for targeting, lead generation and measurement, especially on Facebook, marketing investment decisions are more difficult as outcomes are harder to track.
Paper inflation and shortages have also hampered direct mail for some time. With paper needing to be purchased six to seven months in advance, forecasting requirements so far ahead at a time of future economic uncertainties is complex.
And dealing with Covid cohorts – those customers recruited during the pandemic who are now shifting to pre-Covid behaviours and reacting differently to your main customer base – is becoming a challenge. Businesses are struggling to identify them and determine what tactics and strategies to use to market to them, so they continue to buy alongside their traditional customers.
Going into the unknown – again
As multi-channel retailers wrestle with all these challenges, they also face unknown unknowns that make forecasting and measurement difficult.
At its peak during lockdown, nearly 38% of all retail demand was generated online, significantly above the 20-25% growth trend. January 2021 alone saw 68% more online demand as a percentage of retail than under trended assumptions. So while retail generally was down 10%, any multi-channel company not up 51% last January compared to the previous year was losing market share.
But as the markets adjust closer to the anticipated trends, what exactly is the trend? Today, the idea of year-on-year comparisons arguably doesn’t exist. You must go back to 2019 to get like-for-like figures. But today’s businesses are drastically different in terms of product offering, customers, channels and how they operate, making future planning based on past performance continually problematic.
Consumer mindsets are changing
The changing nature of how consumers see today’s world also has business implications.
Now they want values, not just value, from the brands they interact with. While a few years ago having a net-zero stance was a differentiator, today it’s table stakes, forcing all businesses to develop net-zero and sustainability policies.
Consumers are also trading up from low-quality, throw-away items to higher value and well-made ones offering greater longevity. But as they shift from volume to quality, this impacts not only on materials and processes for multi-channel retailers but also sales and replacement cycles.
Bringing some certainty into your business
But in this cocktail of uncertainties and challenges, multi-channel retailers can introduce an element of certainty by focusing on five areas.
- Tap into what your customers are saying: Your customers are constantly ‘talking’ to you, whether it’s through what they buy, how they buy it, how they reach your website and interact with it, or via reviews, customer service feedback, social interactions and even what they’re returning and why. Make sure you’re set up to listen and react to your changing customer signals.But don’t just wait for them. Encourage dialogue through focus groups, forums, net promoter scores and post-purchase surveys to help you understand how you should be changing. The mantra ‘listen, react, respond’ holds true, especially in today’s uncertain environment.
- Build agility into your operations: We can all be sure there’ll be more uncertainty, so build in the agility and flexibility needed to tackle change, rather than trying to embed certainty into your inputs. Look at how to accelerate those marketing tactics that work and how to create more supply chain agility. Work out how can you pull back activity when the economic environment is more difficult. Understand how agile your tech development is as well as your product offering. Can you move quickly from one offering to another based on changes in customer demand? Identify how you can reimagine and realign your business – then do it.
- Be your brand: Certainty comes from understanding and living your customers’ experiences; this must be all-encompassing. It includes all your business communications – from your advertising, emails website, catalogues and social posts to job adverts, and dispatch notes. It’s also your packaging, product quality and value, delivery speed and service, as well as how you deal with returns and refunds. Immerse yourself in your customer’s brand experience, and you’ll find out what needs changing.
- Put measurement at the heart of what you do: Measurement is critical, and the customer must be at the heart of your measurement. Understand where you excel and do more of it. Understand where you’re challenged and find opportunities to address them. If you’re not doing this, you’ll always be missing out.
- Focus: Never lose sight of what’s important. Avoid a scattergun approach by concentrating on what needs to change in your business. Are you focusing on recruiting, or retaining or both? Are you looking for efficiency, or growth, or growth with efficiency? And which channels will this be achieved through and how will you measure it? Always consider the big picture to ensure everything you do supports it. Focus is key to delivering a better understanding of where your business is going and driving better results which all build the certainty you need.
If you’re seeking to bring certainty to your marketing during these uncertain times, get in touch with us at [email protected], and we’ll be happy to chat with you.