For the first time with Q4 holiday data, we’re bringing you Amazon, Walmart and Instacart advertising data and retail business intelligence to help brands make sense of the current trends and respond to shifts in the market.
Summary
eCommerce sales rose 11% this holiday season in the U.S., up 61.4% in 2021 vs. 2019, now making up 21% of total retail sales in the 2021 holiday shopping season. And for the first time with Q4 holiday data, we’re bringing you Amazon, Walmart and Instacart advertising data and retail business intelligence to help brands make sense of the current retail media trends and respond to shifts in the market. This webinar covers:- Quarterly trends around CPC, CPA, and ROI – What’s new in Amazon Advertising- A deep dive into specific category performance – Walmart and Instacart advertising insights and opportunities
Key Takeaways
- Amazon ad spend up 7% year-over-year in Q4
- Amazon ads CPCs reached record highs for both Sponsored Products and Sponsored Brands in November, at $1.41 and $1.65 respectively
- Amazon ads ROAS was low in Q4 across the board, up just 0.9% quarter-over-quarter and down 6.6% year-over-year for Sponsored Products at $4.64
- Holiday decorations and gifts held the top search spots in Q4
- Instacart has added a lot more placements which definitely has had an impact on CTR – we saw this same thing happen with Sponsored Brand on Amazon
- What to look out for in Q1 2022
- Supply chain issues have improved, but still causing problems
- Rising manufacturing and employment costs
- Hiring in eComm remains difficult
Transcript
Melissa Burdick
Alright, Andrea, let’s do it. Happy New Year to the audience. Hello everyone, this is my first webinar of the year. Super excited to be here to talk to everybody about Q4 results, and I’m really excited that Andrea is joining me. I’m gonna introduce Andrea first. So Andrea has been my partner in crime for a long time, recently voted a top Retail Influencer by rethink retail. Andrea, can you introduce yourself a little bit? You have a new gig this year, so tell us what you’re up to.
Andrea Leigh
First, thanks for having me. To echo, Melissa, we’ve been partners in crime in one way or another for a great many years, going all the way back to our time at Amazon, and I am an e-commerce educator, advisor and enthusiast, and I have recently launched a company called the Allume Group. We are an e-commerce education community for e-com professionals, providing different types of learning workshops, hands-on office hours, and community for ecommerce professionals.
Melissa
If people wanna contact you about training or how they can get up to speed, how do they contact you?
Andrea
Yeah, you can go to Allumegroup.com or you can message me on LinkedIn.
Melissa
Awesome, okay, so today we’re gonna talk about what’s new in Amazon advertising land, some key takeaways and Q4 results and insights. So just really quick about Pacvue, I’m sure those of you who are on this webinar probably know what we do, but we are the leading enterprise platform for brand sellers and agencies looking to manage their e-commerce advertising across 30-plus retailers, 18 countries, I think Amazon added another one, but we’ll talk about that in a second, combining holistic performance with recommended actions. Alright, so we’re gonna get into the news and Andrea is gonna give us some key insights of what happened during Q4 and help us know the info… Alright, take it away.
Andrea
Alright, well, I think we can certainly see that holiday retail sales, at least excluding automotive, have seen a significant increase, so 85% year over year, this holiday season, holiday season defined as November 1 through December 24th, and online sales grew 11% compared to the same period last year or so, some pretty healthy growth there as well, online made up about 20… Almost 21% of all retail sales this year in 2021 according to a Mastercard report, versus 2019 at 14.6% of all retail sales. So it’s a nice healthy increase of about six points sales shift to e-commerce. So really exciting there. However, I think we saw some really interesting things as it relates to the Cyber Five, and that was that growth every year was pretty flat. Across the clients that we’ve worked with, this was due to a couple of factors, the first is that we’re still experiencing supply chain challenges as an entire industry of consumer goods, but also we saw demand pulled forward. So as you see, we still saw some healthy growth holiday over holiday, but particularly Cyber Five, really a little bit flatter growth because customers shopped earlier this year.
Melissa
Question for you, Andrea, on this. What do you think is gonna happen this year and what are you tell clients? So for example, Amazon kicked off deals, I think October 4th this year, do you think that in general, we stop having this concentrated five-day period for holiday and it starts just becoming this Q4 thing with deals all the time versus the concentration of five days?
Andrea
I think this year was probably a little bit of an over-correction from previous years where it’s so concentrated in the Cyber Five, and we definitely saw demand pulled forward into October and even in September in some categories for some clients, but I don’t think we’re going to have quite the supply change shortages next year, so I do expect a bit of a shift back to the cyber five, however, I don’t think it will be quite as concentrated as years past.
Melissa
Alright, let’s see what happens.
Andrea
So just running through a few different e-com, amazon and consumer trends in the next few slides, and these come from our E-commerce insider, a quarterly report for Allume Group. A few big e-com trends that we saw in Q4 2021. The first being this concept of ultra fast delivery, and I’ve heard this quote a number of times from a number of sources now, where saying that delivery has become a hero moment, so it’s really interesting is all of the investment dollars that have been funneled to ultra-fast super fast delivery, practically instant, some companies guaranteeing in 15 minutes, but looking at some of the consumer research, that’s not the most important thing to consumers when choosing a grocery delivery provider, there’s a really interesting study by core site research that cites delivery speed is only being the sixth most important thing behind traditional grocery decisions like price, assortment, the size of the delivery fee, so interesting to see what happens in this space, but it’s certainly getting a lot of attention and everyone is chomping at the bit to be the fastest to get the groceries to the consumer.
Second big trend, especially coming out of the Q4 holiday season, is this nightmare around reverse logistics, and I saw the quote, this quote somewhere, the supply chain wasn’t meant to go backwards, and so retailers are often dealing with, in some cases, billions of dollars of return goods and trying to figure out how to jam that back through their warehouses, often a lot of them are using return centers, particularly a big challenge in the soft lines categories. And then last big e-com trend is social commerce and live streaming, so another core site report cited that the social commerce industry is expected to grow to about $12 trillion by 2025, and if you look ahead to China, the size of just their live streaming sales volume, which is just a piece of social commerce, would be equal to the third largest retail e-commerce market in the world, so $300 billion in sales.
We’re certainly not there. There are gonna be some barriers to the US getting there from a consumer perspective, in that we just still have a lot of friction in between the social commerce live streaming and actual checkout, we still have a lot of points of friction, but definitely a trend to watch. And especially as brand manufacturers it is a real opportunity area.
Melissa
Absolutely, especially tiktok, are you a tiktok fan?
Andrea
You can lose hours there…
Melissa
TikTok did make me make a recipe, and it was really good with protein pancakes, so not only do I buy things, but I also make recipes because of it these days.
Andrea
Yeah. I have to take little Instagram breaks because I start to realize that I’m buying too many… There’s too many packages starting to show up at my house. Okay, so a few Amazon trends that we saw in Q4, the first being that they’re now the second largest private employer, so behind Walmart actually, and they’re getting pretty close, they’re approaching a million employees, and this means that Amazon’s under just a lot of scrutiny regarding labor practices, unionization, a lot of their energy and focus, and the media’s energy and focus has been on them as an employer and not necessarily giving as much attention to some of their innovations, they’ve added a ton of warehouse space within the last two years, they’ve doubled their warehouse capacity, some of that space is still coming online, but according to their Q3 earnings call, which is the most recent we have, most of it is online. And their bigger constraint at this point is labor, and going back to the second largest private employer in the global labor shortage that we’re all experiencing, this is gonna continue to be a challenge for them getting products in and out of the warehouses and to consumer homes.
The third big trend is their disruption in the gaming industry, and I always know when there’s an important trend happening in gaming, when my kids start to talk about it, and they’ve all been chomping at the bit to be a part of Amazon’s new subscription service, online gaming platform Luna. And what’s interesting here is, like all subscription gaining, but this one tends to focus on it a little bit more, they’ve removed the barrier of having to have a console, so you don’t need a console, you don’t even need to controller or you can just play games, online, other providers offer this as well, but this is sort of one of their key features, and the livestream platform, Twitch that they acquired a while back is now at 314 million users, so just to give some context, Amazon as a whole is around 300 million users so pretty big. There are no ads yet, but I’m sure it’ll be coming soon, it’ll be an incredible platform for them to reach even more, even more users.
And then lastly a big boom around physical stores. Over the last couple of years, Amazon added 62 stores, that’s not a super impressive number compared to other brick and mortar retailers, but relative to the number of stores that they had before. They had only about 100 non-Whole Food stores, so they’ve doubled their footprint, and I also know this is just going to be a huge area of focus for them in the coming year as e-commerce market penetration is tapping out at around 21% of total commerce, they want the other 80%, the only way they’re gonna be able to get that is through an increased presence at brick and mortar. So next, a few consumer trends, the first is this concept of the attention economy, so it used to be that all the consumer brands are competing for advertising space, and then for our dollars in terms of share of wallet, and I think now it’s share of minutes, it’s competing for this finite amount of attention that consumers have specifically within their digital devices, and this chart is interesting, if you take a closer look at it later, it shows the evolution of some of the different minutes spent in consuming some of the different types of technologies, and no surprise here that broadcast media is way down, and music streaming is way up, and gaming is becoming one of the highest shares of our attention in this most recent year, so exciting things there that help us figure out how we’re gonna develop our advertising strategies and budgets.
Next big consumer trend is sustainability and fairness, so this is interesting, and it’s a continually evolving trend in terms of sustainability, but I think now we’re starting to see that consumers are certainly concerned about their environmental impact, they’re making changes when it’s convenient for them, the 52% believe that the burden of responsibility should be on the manufacturers and the large corporations, and that’s a big shift from previous years where I think consumers were more interested or more concerned with monitoring their own behavior, they’re shifting now some of that responsibility to the brand manufacturers and corporations. So something to keep in mind there. And then lastly, I’m calling this the great life refresh. So after spending two years in a pandemic and looking back and wondering what we have to show for it, all kinds of self-actualization and self-improvement, and the great resignation and all of these things, really evaluating where we are in our lives and where we wanna be and how we’re going to get there.
Melissa
That reminds me, I forgot to ask you if you have any new year’s resolutions this year that you’ve already started.
Andrea
Well, so every January, I do yoga every day, that always helps me stave off some of the winter depression and I started another one, which is No yoga pants to work. So it’s like wear real pants every day, and I’m amazed at how much more alert and part of the world I feel just wearing jeans, I don’t know, it’s just… I can’t explain it.
Melissa
I feel like that would help the diet a lot too, maybe I should try that. Mine is dry January, but my version of it is you can drink on weekends, so… No drinking during the week. I can’t… Yeah, so no, no wine during the week, which has been the case for the last few years, so… So far, I’m pretty good.
Andrea
I think everyone has to have their version of a reset, especially after the holidays.
Melissa
That’s right. Alright, so now we’re gonna dive into advertising stuff, and I will try to make this not as dry as it can sometimes be, but let’s talk a little bit about what’s new in Amazon advertising… First of all, I feel like there’s so much happening in the API and just constant updates that we are seeing, but these are kind of the key things that happen in Q4, which is Amazon launched Brand Metrics, and this enables advertisers to track how their brands are performing within a certain category, KPIs like engagement, separate customer conversion rate, percent of net brand sales, this is all shopping data, so it’s not just limited to advertising, and I will say it’s maybe early days of this, in terms of kind of things that I’ve been seeing with the data, but more to come on this brand metric stuff, Andrea mentioned twitch, Twitch has been just a really great platform, especially for CPGs for advertising, they’ve been really engaged in that platform, so it is no surprise that they’re launching more ad types on Twitch, so sponsored display ads have launched last summer, and they added more placements on Twitch livestream. And then sponsored ads are now available in Poland, so Amazon advertising is live to 18 countries.
Next is about what’s new with the Amazon DSP, so this is kind of interesting, you can now target people for Amazon DSP based off of what they bought in store at Whole Foods. So the look back window is up to one year, and of course as shoppers are more omni-present shopping in store, you can target them online, so that’s pretty cool, and then of course, there’s more expansion of audiences and inventory and more countries, this thing around responsive ecommerce creative. So what that means, it’s just a dynamically pulls in information, and we’ve noticed that this responsive creative actually has better performance than other creative, so it’s no surprise that Amazon is providing more features and functionality and value can bring in customer reviews and advertisers can add their own images to support placements, and you can edit the product title in the ad copy, so just a lot more coming to this ad type, which we’ve seen really great performance in.
So each quarter we do a deep dive report, you can download this, we’ll pass it around after this webinar so you can download it again, but on our website, you can find it, but basically the way that I look at these reports each quarter, they’re like benchmarks, and it’s kind of like the S&P 500 and how your stock portfolio is responding to them, so hopefully it’s not as depressing as the S&P 500 is right now with all the red that I’ve been seeing lately, especially the tech stocks.
Hopefully the ad benchmarks are less depressing, I’m not sure maybe you would disagree, but that’s kind of how I see the world of these CPC reports, kind of think of it as a benchmark to your own performance, so key takeaways are ad spend was up 7% year over year in Q4. CPCs reached record highs for both sponsored products and sponsored brands in November. ROAS was low in Q4 across the board, just a pretty flat quarter-over-quarter and down 6.6% year-over-year for sponsored products. And then holiday decorations and gifts held the top search spots in Q4.
So I told Andrea I was gonna give her a quick quiz and she was like, uh oh, what if I don’t know the answer? I’m like, no it’s not like that. So I don’t know if chat is enabled in this, but you guys can play along in the audience if you know the answer to this or guess it, but… Andrea, do you know what the top clicked on title for the search term, “holiday movie” was this year?
Andrea
Oh gosh. Elf? Or I suppose there’s an argument about Die Hard.
Melissa
Yeah you got it, it was Elf. Good job.
Andrea
I kind of cheated because I also looked at this search report last year, and it was Elf last year.
Melissa
That was my next question do you know the topic on title from last year. And it was Elf.
Andrea
If you haven’t seen Noel. Anna Kendrick is hilarious and kinda does a female version of Elf, but in any case…
Melissa
No. Okay, so I’ll have to watch that one. But that was my next question, which you already answered, so the holiday movie was Elf this year, it was Elf last year. Let’s see if we can come up with something new next year, but holiday shopping dominated the top search terms in Q4, holiday decoration, Halloween costumes, the ps5, which my son told me he wanted and I was like, No way, not happening. Maybe next year, you can’t find it.
Andrea
You just do subscription gaming with Amazon Luna, you don’t need any sort of console for that.
Melissa
There you go. He does enough gaming, he doesn’t need anymore games. So holiday items are back on top. So in July, August, September, there were still some “pop it”s some “desks”, but now we’re heading into Q4, so people are getting into the holiday spirit with Halloween costumes, Christmas decoration, so we can see the search trend behavior there, if we look at this year versus last year, so we’re more in the mood for holidays this year than we were last year, pandemic buying, like toilet paper, was still going on, face masks and all that kind of stuff. I posted it on LinkedIn, I think late last night, I looked at last week’s search term behavior, and then the year over year prior, and it was super depressing because last week, 7 out of the top 10 search terms were all face mask related, N95. And then last year, it was more like air friers and desks and a lot more fun stuff, so a little bit depressing to me that we’re back in it with face masks, 7 out of 10 search terms, but we’ll see what happens next month when there’s hopefully, this wave, the pandemic is behind us, we’ll see.
Again, like I said, the way that I look at this benchmark data is really kind of like how’s your stock portfolio performing against the S&P. Spend was up for sponsor products down for sponsored brands. Click-through rates declined 10% for sponsored products, but interestingly increased for sponsored brands. CPCs were up across the board, conversion rates were pretty flat for sponsored products, up for sponsored brands. ROAS was flat for sponsor products and down for sponsored brand. So to dig into… And again, this is all coming out of our CPC report, so let’s dig into some of these kind of trends, so ad spend was up across the board year over year for sponsor products and then for sponsor brand, it was slightly down year over year. I’m gonna kind of speed through these to not bore the audience too much with some insights that we have a sponsor product click-through rate was down quarter-over-quarter, but up 17% for the year. While sponsored brand CTR was up 20% quarter over quarter after dipping for three and then 29% for the year, CPCs were up across the board for both sponsor products and sponsor brand, this is obviously expected as Amazon’s platform matures.
Of course, what’s most interesting is to compare how your CPCs are performing over the quarter over the year, we see some interesting things, advertisers kind of… Especially during out-of-stock timeframe, during this kind of Q2, Q3 time frame, there are a lot less people advertising, so CPCs did drop, but this shows that we’re back up again as people are back in stock and their advertising and things like that. Conversion rates reach new highs in Q4, although pretty flat from last year, and CPA Cost Per Acquisition hit new highs, which makes sense because CPCs were climbing. Sponsored brand hit a $10 mark, and then ROAS, again, the maturation of the Amazon platform, they are kind of declining, as you can see, their continuous slide down with sponsored product relatively flat over the quarter, we’re gonna talk about Instacart Walmart in a second, that’s some data I forgot to mention at the beginning of the webinar that we have. That’s gonna be interesting to look at and continue to compare the performance of these platforms against each other. Now we have some categories so Andrea you were gonna hop in here.
Andrea
I think it’s really interesting to look at the winners and losers, and these were, I guess you could call them winners because the CPCs went up significantly more than some of the other categories. So first is electronics, and there are a few reasons that it could be behind climbing CPCs like this, we could be recovering from a long period of manufacturer out of stocks, so maybe electronics was hit a bit harder, although it would be a very long period. More likely in this scenario is the increased competition in the category for the advertising inventory that’s available, maybe also just a little bit of inflation. Baby products were seeing more of what looks like a recovery, and so in this case, probably a little bit more of an out of stocks problem, plaguing the March through August timeframe, and then some recovery there.
Melissa
Yeah, and what’s interesting about this baby category, especially with these big names like Huggies and Pampers, they’re super competitive and have a lot of money to spend in this category, so if they pulled out, it makes total sense that they drop CPCs and now they’re kind of back in the game. So just super interesting to see. That just tells you when you’re in a category, and we’re talking to clients about, how much should I spend? It’s like, Well, is Johnson and Johnson in your category? So there’s just a lot of questions around how competitive is your category, are there big spenders in your category
Andrea
It also presents an opportunity in the trough when those big manufacturers aren’t able to spend or experiencing out of stock problems, and I know that’s when a lot of emerging brands, were able to really gain some traction. So that’s pretty exciting. And then lastly, clothing, shoes and jewelry ad spend, here, we’re just seeing a recovery of these categories in general from a consumer perspective, so no surprise that we’re seeing the CPCs continued to increase there as well.
Melissa
Awesome, alright, so as promised, we’re gonna talk a little Walmart in a little Instacart. So Walmart Q4 benchmarks. So here’s the big story on Walmart. In Q2 last year, they merged Walmart.com and pick up and delivery into one, and that’s where we saw a lot of improvement in performance, so this opened up a lot more ad placement inventory and improve campaign performance for brands we can see quite a decline and cost per clicks during this time frame and an improvement in ROAS, and it really is the big story here, is just this kind of merging of those platforms that they did together. Here you can see ad spend increased just a little quarter over quarter, and then CTR really climbed again, this has to do with some interesting things around merging the platforms. So that’s good news for Walmart advertisers.
Now, let’s talk about Instacart. Instacart just has been such a fun platform to work with, and so here you can see CPCs increased 13% quarter over quarter and then similarly ROAS declined 9%. So one of the things that’s happening with Instacart is back here in Q4. So Instacart is a very new platform, when they first launched, they had very few placements. This kinda reminds me of Amazon. Very few placements, above the fold and then kind of top slot they’ve added a lot more placements over time, and so CPCs have dropped, because they’re not so concentrated, there’s more placements to be had. We’re gonna see in the next slide click-through rates have declined a ton. And so this makes a lot of sense. When Amazon launched sponsored brand ads, it was right underneath the tool bar and that was it, so it kinda got expensive, but when they added more placements in, especially below the fold, that’s when metrics really changed a lot, so just really interesting stuff happening with all of these platforms, again, it’s really why I think the value prop of Pacvue is very strong because we bring all the data into one place. You can see Amazon, Instacart, Walmart, Target, like you name it, one place, all your metrics, ROAS, spend, etcetera, and everything’s changing super fast right now, so it’s a great place, to be able to see everything and then optimize everything. Alright, so as we close out, let’s talk about what to look out for ahead. What do you think, Andrea?
Andrea
Well, we’re still seeing significant impact to the supply chain, I think a lot of us have hoped that all of our manufacturing and global labor disruptions would be cleared at this point, but they’re certainly not, and we’re seeing ripple effects right now with one of the biggest blockages being container ships in Asia waiting to load and not enough people to load the container ship, so I think we’re still gonna continue to see problems there, and then also just with inflation and then the labor shortage, increased costs of manufacturing and employment, and more specifically in e-com talent, I think we’ve all felt the pain of this in that everyone is looking to hire e-commerce talent right now, and there’s just certainly a shortage of skilled folks, so a few things to look for going forward.
Melissa
So one of the questions from the audience is, What are we seeing for January? I know, for example, on Instacart, I know this is probably more of an Amazon question, but I know Instacart has picked up significantly because of so much covid, how aggressive covid has been, people are really back to ordering Instacart a ton. Anything else you wanna add about Q1 January, Andrea, that you’ve been seeing?
Andrea
I think from a supply chain perspective, we’re starting to see certain products and categories get back into stock very quickly and recover and others not, so it’s just… It’s very lumpy and it’s inconsistent across the manufacturer base, so I guess my advice to consumer brands would be to be making sure you’re paying really close attention to what’s happening with the competitors in your category, because if they’re out of stock and you’re not… There’s a real opportunity from an advertising perspective to gain just a little bit of the share of shelf or the share of search results.
Melissa
And I can’t resist, I have to say, maybe we’ll see Jeff Bezos in some more tight shirts during this quarter too. Alright, that’s it. I promise my last snarky comment, but please download a report, go to Pacvue.com/Discover/reports. Contact Andrea if you have any interest in education and training, I personally believe that’s gonna be a huge thing this year because it’s really impossible to hire anybody, so… Anyways, thanks everyone for your time. Really appreciate it. Contact us at Pacvue if you’re interested in learning more. And have a great rest of the week.
Andrea
Bye everyone, thank you.
