How to navigate uncertainty to maximize holiday profits
Holiday sales surpassed all expectations in 2021.
The National Retail Federation reported that overall sales from 2020 to 2021 increased 14.1 percent to $886.7 billion. Other estimates have 2021 totals over $1 trillion.
For their part, eCommerce sales totaled $9 billion on Black Friday in 2021, followed swiftly by $10.9 billion in sales on Cyber Monday, according to eMarketer. This marked an increase of 25 percentage points since the start of the Covid-19 pandemic.
This year, while there are both optimistic and pessimistic outlooks, it’s not hard to see that macroeconomic situations are likely to soften consumer demand at least somewhat. Conflict rages around the world – inflation in the U.S. was 8.5 percent in August of 2022, and supply chain issues relating to events like the rail strikes in the UK and United States continue to persist.
Despite the current climate, eMarketer predicts 16 percent growth in eCommerce sales this year. They also report that 42 percent more shoppers worldwide plan to start buying gifts earlier in the year for the 2022 holiday season compared to the 2021 season.
With these silver linings predicted for the eCommerce industry, there must be a way for brands to leverage the positive pieces of the economic outlook, while minimizing the negative impact.
Ease the pressure
Black Friday and Cyber Monday typically mark the time of the year businesses become profitable. At Brightflow AI, our data is showing increased sales and reduced ad spend across both Shopify and Amazon in the months leading up to this year’s holiday peak season, which is a great sign that eCommerce brands are improving their efficiency across the two largest platforms.
Industry experts recommend leveraging sales on days other than (or in addition to) Black Friday and Cyber Monday. One recent example of this is Amazon’s ”Early Access Sale” on October 11 and 12. Promoting sales earlier and more often allows you to spread out the increase in demand over multiple days and helps you avoid some of the peak pricing that comes with advertising, selling, and shipping at the most expensive and congested times for eCommerce brands worldwide.
Increase average order value
Data from Brightflow AI is showing increased average order value (AOV) across all industries. Similarly, eCommerce platform ChannelSight noted an increase in AOV in a recent webinar, while also reporting a reduced number of baskets (overall fewer people shopping online).
While it is certainly a positive indicator, Brightflow AI financial analysts caution that an increase in AOV could simply be the result of pricing increases that have become more common as the rate of inflation continues to rise – not necessarily a sign of increased demand. Andrew Youderian of eCommerce Fuel also reports widespread price increases in 2022 and encourages brands to further raise their prices, when appropriate, in order to add to their bottom line.
Industry leaders offer strategies for further increasing AOV to offset any reductions in the number of people shopping online this holiday season. Raising prices, offering shipping deals for larger orders, implementing a loyalty program, and bundling products for a discounted (yet still higher overall) price, are a few effective strategies you still have time to implement to increase AOV during the 2022 holiday season.
Use the forecast
With 57 percent of shoppers reporting they plan to shop online for the 2022 holiday season, there is ample opportunity to maximize profits. Brightflow AI founder and CEO Robbie Bhathal recommends using your cash flow forecast to make informed, data-driven decisions about everything from last-minute inventory purchases to when you should pay your bills.
While holiday months are peak season, brands should be sure they see the expected seasonal bump in their data before over-investing in marketing. The last two holiday seasons have been extremely unique, and it’s not guaranteed we will see the same spikes we’ve seen in years prior.
As a result, Brightflow AI financial analysts suggest monitoring ad spend very closely until you see that seasonal bump in your data. They also recommend using the final weeks before Black Friday and Cyber Monday to focus on downside protection, optimizing cash flow, increasing margins and reducing cash burn.
Brightflow AI encourages you to take control of your cash flow, both at the holidays and beyond. If you don’t have a source for a reliable cash flow forecast, please reach out to see how Brightflow AI can help.
Here’s to another record-breaking online holiday season!