by Karel Schindler, CEO at ROI Hunter
Consumer confidence plunged in Q4 2022 as more people took steps to shore up their personal finances in the cost-of-living crisis and looming recession, according to the GfK’s UK Consumer Confidence Index.
As a result, retailers have been cancelling and deferring orders from suppliers, and supply chain issues such as reduced stock availability are also leaving online fashion leaders such as ASOS fighting for competitive advantage. With a perfect storm gathering, how can online retailers overcome supply problems and continue to appeal to the right demographics in the age of consumer hesitation?
Taking back control of the supply chain
While retailers can’t control how consumers behave, they can take steps to shore up their supply chain operations to pivot effectively in times of crises. Those who have fully mapped their supply chains will be best placed for more transparent contact with suppliers, enabling any issues to be more easily ironed out.
Retailers also need to understand which of their products are actually good for their overall margin and which are bad, so they can focus their efforts on securing supply of the right items. This is where product performance data comes in. By leveraging a product performance management (PPM) platform, commercial teams can use marketing spend and performance to make more informed pricing, discounting, and purchasing decisions, helping retailers to optimise their inventory for evolving market conditions. There’s little value in continuing to purchase stock from suppliers that consumers simply aren’t interested in.
Winning back consumer confidence
While consumer confidence is taking a dip, e-commerce is continuing to grow following an uptick during the pandemic. In fact, global e-commerce retail sales worldwide will breach 8.1 trillion U.S. dollars by 2026, up from 3.3 trillion in 2019. To raise confidence among consumers and tap into digital opportunities, retailers must start thinking beyond using customer data to drive performance.
Nearly every retailer is using smart algorithms and sophisticated tools to achieve customer segmentation, but far too few are leveraging their product performance data to ensure budgets are put behind the right products.
With the current economy and a looming recession, retailers must ensure their marketing budget is returning as much on ad spend as possible. With the right tools, marketers can identify which products are right for their current business priorities based on true cost, taking all factors, such as product level adspend, margin, return rates or ROAS into consideration. From there they can communicate these products to ad networks like Meta and Google in real-time.
For example, if a retailer was looking to scale, they could find all their best-selling products by filtering their catalogue to find the products with the highest revenue/transactions. This sort of focus is ideal for scaling with a lookalike audience, as it’s likely that the target audience will show interest in the same products the existing customer base did.
It’s undoubtedly a tricky time for online retailers when it comes to consumer engagement, but the nature of the current economic environment places even more importance on leveraging product performance data to promote the right products for company margin. Companies must ensure their budgets are placed behind the best possible products, and that their commercial teams have the insights they need to price, purchase, and discount effectively.