The study, from ecommerce social advertising agency Nest Performance, forecasts that the
entrance of wholesale brands to the ecommerce market, oversupply of stock, and increased dependence on online channels will contribute to record-high advertising costs on Facebook and other social channels.
Nest Performance also predicts that the average value of consumers’ orders will drop more than any previous year, as the UK plunges into its worst ever recession and consumer confidence takes a blow. The downward pressure on average order values is compounded by retailers looking to the holiday sale period as an opportunity to sell excess stock they built up during lockdown at reduced prices.
These predictions come from a report Nest Performance released today to investigate the conditions ecommerce advertisers face this Black Friday and Christmas.
The average 33% lift in Facebook CPMs (cost per thousand ad impressions) Nest Performance saw across its portfolio for the four-day Black Friday Cyber Monday (BFCM) period in 2019 will be significantly inflated, the social advertising agency found.
Additionally, between 2018 and 2019, Nest Performance identified average order values dropped 10%, a trend that the conditions leading to the 2020 holiday period are set to greatly exacerbate.
However, despite higher advertising costs and reduced consumer spending, social advertising remains an appealing channel for many retailers as the pandemic makes other sales channels ineffective.
While Black Friday sales increased by an average 17% between 2014 and 2018, Nest Performance predicts that this trend will be greatly accelerated in Q4 as record numbers of ecommerce advertisers turn to social channels.
The report also examines how social advertisers should prepare for multiple scenarios, as the UK either returns to lockdown or its current rate of recovery continues.
Will Ashton, CEO at Nest Performance commented, “Many months in the planning, Q4 – with its blockbuster mega sales events and the Christmas shopping period – can make or break an entire year in just six weeks.
“The need to prepare for both scenarios means ecommerce businesses must start working now to ensure their approach to performance marketing is rigorously set up.”
Ashton continued, “Ecommerce advertisers that have optimised their strategies for the challenges posed by COVID-19 will do well, while those who aren’t will have a disastrous selling period as their biggest sales channel becomes prohibitively expensive.
“This year’s holiday season is set to be the most competitive we’ve ever seen. Larger companies and ecommerce companies at the cutting edge of Facebook advertising will be able to ride out this period. But SMEs that are less able to shoulder increased costs, or less advanced advertisers that are not set up to effectively manage Facebook advertising, are likely to fare much worse.”
To prepare for an uncertain holiday season, Ashton advised, “Ecommerce advertisers should test and learn as much as possible in Q3, simplify their Facebook account structures to encourage rapid growth, and launch in new markets to keep their CPMs down.”