As reopening plans in the US remain in an uncertain environment, brands faced heightened challenges in two other areas in Q3 2021. Supply chain disruptions and inventory issues continue to cause headaches, both in terms of shipping times and the increased cost associated with logistics. And increased commodity prices are diminishing profit margins. As a result, we saw many brands conserve their budgets in Q3 as a short-term measure.
The biggest headwinds facing all Pacvue clients are these global supply chain issues, and it looks like the challenge is going to remain for a little while longer. Supply chain and inventory issues are expected to remain throughout the holiday season and into next year. We expect shipping delays and stocking delays across many verticals in our industry. Clogged ports, a stressed trucking industry, labor shortages, higher demand and higher shipping costs are all impacting shipments of toys, electronics, apparel and more.
“The American consumer’s buying strength is so strong and epic that we can’t absorb all this cargo into the domestic supply chain,” says Gene Seroka, director of the Port of Los Angeles.
Pacvue has some solutions to help brands navigate all these supply chain issues going forward. “Pacvue Commerce is our new product focusing on the supply chain logistics and operational side of the eCommerce business. Working with that inventory data, Pacvue Commerce will help you optimize these pieces of the business but also connect it to our existing retail media platform and bridge those gaps, and make some insightful, innovative optimizations using both halves of those data sets together.” said Jack Lindberg, Customer Success Manager at Pacvue. Additionally, Pacvue has also announced Amazon Marketing Cloud integration, an open data base that “allows you to track an individual consumer’s journey through all of your Amazon marketing efforts, so starting with DSP or OTT all the way down to purchase via Sponsored Products. And that allows for really interesting data which can drive much more holistically important and valuable decisions.”
What’s New with Amazon Advertising
During Q3, Amazon launched Sponsored ads and stores in Sweden, one year after launching the marketplace.
And there are a few new updates to Sponsored Display:
- Creative editing now available in Pacvue through the Amazon Advertising API.
- Audience campaigns are eligible to serve on the Twitch Browse and Discovery pages.
- Sponsored Display now available in Brazil and Mexico.
- New-to-brand metrics available for product targeting and audiences.
Q3 Report Deep Dive
Some key takeaways that we’ve observed with Amazon Sponsored Products ads are that we didn’t see any major spikes or declines in daily spend, although Sponsored Products has increased slightly more while Sponsored Brands has seen a minor decline in spend year-over-year. And after leaving the top 10 for the first time in over a year in Q2, “face masks” quickly rose to the most top searched item as the delta variant took hold throughout the US. Cleaning supplies and some of the traditional pandemic supplies are no longer in the top 20 most searched items. “Pop its” also remains as one of the most searched items quarter after quarter.
- Sponsored Products Ad Spend is now up 41.8% year-over-year.
- Average Daily Ad Spend and Cost-per-Click remained relatively flat quarter-over-quarter.
- The term “disposable face masks” reached the top of Amazon search queries in August 2021, after falling off the top 12 in Q2.
- Face masks, pop it, desk, and earbuds also held the top search spots in Q3.
When budgets are tight, we typically see branding budgets pull back first, while search remains a strategic investment to maintain sales. It’s no surprise that we saw advertisers increase their daily average ad spend budgets for Sponsored Products campaigns in Q3, while we also saw a significant decrease in daily average ad spend for Sponsored Brands across the board. The result is that CPCs in Q3 2021 for both Sponsored Products and Sponsored Brands have remained steady quarter-over-quarter. We do expect to see growth in ad spend and costs again in Q4, and we’ll be watching supply chains closely for signs of normal operations.
- Conversion Rate for Sponsored Products ads increased 16.1% while Sponsored Brands ads CVR decreased 3.9% year-over-year.
- Return on Ad Spend for Sponsored Brands ads decreased 12.8% while Sponsored Products ads decreased 6.1% year-over-year.
- The Electronics category is seeing dramatic increases in CPC and daily average ad spend in response to consumer demand.
What to Look Out for in Q4
Prepare a backup plan now in case you run into inventory issues – Sales are expected to be strong this year, but supply chain issues are expected to remain throughout the holiday season. Here are a few things we’re recommending to our clients:
- Create inventory rules to automatically pause products that have low inventory or based on “weeks of inventory on hand” so you are not promoting items out of stock.
- Create bidding rules to lower bids on keywords advertising products that have low inventory.
- Create email alerts on items that have low inventory.
Holiday and seasonal events are starting earlier and earlier – Consider pulling your campaigns forward, as Amazon has already started its holiday shopping deals.
Retail media continues to grow across all sectors, Lowe’s is the latest – Retail media continues to grow, if you want to win top spots across retailers now is a good time to start testing.
The data provided by the Q3 2021 CPC Report is sourced from Pacvue’s proprietary Amazon keyword tracking database. This database compiles KPIs from hundreds of advertisers across all company sizes and product categories. In addition to the quarterly data provided, we have also included a monthly breakdown of key performance metrics and a closer look at several unique product categories. Download a copy and see how your performance stacked up against the benchmarks today!