The Holiday Season Presents Big Opportunities and Risk for eCommerce Companies

The holiday season presents big opportunities for eCommerce companies and retailers alike. The months of November and December represent the biggest spending months of the year and, as a result, many companies place a lot of focus on executing during these months. As they should. A poor holiday season can mean missing your mark on annual KPIs and the revenue generated during a successful holiday season can mean surpassing those marks. For eCommerce companies, a lot is hinging on their holiday marketing strategies.

The festive period has seen increased eCommerce sales, offsetting falling sales in brick-and-mortar retail locations. As consumer spending shifts to favor online shopping during the holiday season, big chain stores are following close behind and shifting their resources toward their eCommerce operations.

The Holiday Season and eCommerce Growth

Online sales are growing with each passing year, and that fact is never more visible than it is during the holidays. Every year, we see significant growth in online holiday spending:


 

Black Friday is the single biggest spending day of the year, with more than $655 billion spent in 2016. The popular post-Thanksgiving shopping holiday became the largest shopping day of the year in U.S. markets in 2003 and has never looked back since. Both Thanksgiving and Black Friday have seen significant sales growth through online each year:

 

eCommerce companies are not only benefiting from increased interest during Black Friday. Cyber Monday has become a behemoth of a spending holiday on its own. Cyber Monday 2016 generated the largest single-day sales figures in the history of eCommerce, with $3.45 billion in total sales.

So, the season is already important and becoming increasingly so. 2017 is predicted to have an extremely strong holiday season. Adobe estimates that total holiday eCommerce shopping will surpass $107 billion in 2017.

However, not all companies share equally in the reward of growth. Smaller retailers see disproportionately smaller bumps during the holiday season due to shoppers increasingly relying on Amazon and other large retailers for their online shopping. So, while all eCommerce companies must make plans and execute them effectively during the holiday season, it is in their best interest to keep their primary focus in the long-term.

While it’s tempting to spend all your time focusing on the peak season, an equal amount of time should be spent making sure the rest of your year is as profitable as possible.

One key element of this lies in shifting your focus from ROAS to Customer Life Value (CTV). Although it’s a relatively well-known concept at this point, older eCommerce companies may be reluctant to adopt it (in favor of more traditional metrics).

However, our research shows that when advertisers focus on long-term revenue goals, they make about 5 percent more revenue in the first year than when they focus on short-term goals like ROAS.

Falling Retail Revenues Increases Online Competition

While holiday eCommerce is booming, physical retail stores are starting to see falling holiday revenues as more customers move their shopping and research toward online channels. According to the retail data analytics firm RetailNext, total sales fell by over 5 percent, while total transactions dipped 7.9 percent during Thanksgiving and Black Friday. During Black Friday alone, retail brick-and-mortar chains saw their Black Friday sales dip 10.4 percent.

There are multiple reasons for the declining retail holiday sales, the most prominent of which is the rise in eCommerce shopping. While retail sales dipped, online sales jumped over 3 percent during the 2016 holiday season. Along with this, more retail stores have started offering huge sales earlier in the month of November to attract early shoppers. Black Friday has always been seen as the official kickoff day of the holiday shopping season, but with declining sales, retailers are coming up with creative ways to attract shoppers before and after the holiday.

While this should come as good news for eCommerce companies, it also comes with its own drawbacks. With retail sales declining, big box stores are increasing their focus on holiday eCommerce efforts. This means large increases in advertising competition during the holidays. The benefits of increased online shopping for eCommerce companies could be rendered useless by the increase in competition.

Despite this competition, Black Friday and Cyber Monday still bring a windfall of extra traffic to your site— but with this can come inflated data points, skewing your bid calculations.

The right tools can give you an advantage. At Crealytics, we allow you to exclude any extreme traffic outliers, so that your Google Shopping bid optimizations stay at the right level for the rest of the year. As a result, automatic bid optimization runs safely…even during exceptionally busy times.

The Problem With Holiday Marketing in eCommerce

Holiday marketing simultaneously presents a huge opportunity and a dangerous trap for smaller eCommerce companies. A well-executed holiday strategy can pay dividends in a big way, but placing too many resources into your holiday marketing and coming up short can have a negative effect on the rest of your year.

A common mistake that many eCommerce businesses make is beginning their holiday push too early. By putting their resources into holiday planning from September onward, the entire last quarter of the year can easily be spent making arrangements for the holiday season, neglecting other areas of your marketing strategy and ultimately hamstringing your holiday success. If the holiday season were to come up short of expectations, they have then lost valuable time that could otherwise be spent making long-term improvements.

Many marketers overlook the fact that maintaining focus on long-term marketing efforts lends itself well to the holiday season. Improving your KPIs in the months leading up to the holiday season will make the season more fruitful. Focusing on holiday-centric campaigns is important, but devoting too many resources to them can actually hamper your growth. A well-rounded marketing effort that simply makes shoppers aware of sales and discounts can often be enough to attract shoppers during the holiday season.

Basic marketing campaigns mixed with a solid long-term focus can provide the biggest return to eCommerce companies. A healthy balance of the two is the safest and often, the most effective strategy.

It’s more than possible to capitalize on this busy period without blowing your budget. Adjusting budgets early, amending messaging (slightly) and knowing your merchandise are all things you can do to optimize Christmas campaigns.

Fundamentals First

The holidays are undeniably an important time for retail and eCommerce companies. But with a rapidly changing shopping landscape, this time of year is becoming increasingly volatile for companies of all sizes. With declining brick-and-mortar sales and increases in online competition, it is more important than ever for companies to focus on their fundamentals and move away from gimmicks and holiday deal-chasing.

A sharp focus on fundamental marketing and advertising concepts will not only make you more effective when it does come time to run holiday promotions, but it will also make you less reliant on the holiday season to hit your goals.

With substantial eCommerce growth during the holidays, it is still important to ensure that you are well-prepared without putting all of your eggs in one basket. While all eCommerce companies should shift some resources to ensure that their holiday season is successful, they should also make sure not to lose sight of the bigger picture.

 

ABOUT THE AUTHOR


Luke Metcalfe

Luke is a content marketer at Crealytics