2020 Marketplace eCommerce Insights: Looking Back and Moving Forward

So we've made it through the majority of the year and it appears the worst of what 2020 has to offer the Marketplace eCommerce industry is behind us (or so we hope!) As we prepare for Q4, we're taking a look back at how the brands that we work with have fared this year, share what we've learned during the COVID 19 Coronavirus pandemic,  and offer our perspective on what to expect for the rest of the year and beyond. 

Keep in mind: The data used in this study is intended to represent the experience of our brands. In no way are they intended to represent, speak for or tell the story of any entire categories. This would be hard to do with everything going on with inventory levels and what Amazon was willing to accept into their warehouses and ship out  to customers in a timely manner.

What industries/categories seem to be doing the best?

While we only have insights into particular categories, the Sports & Outdoor category has done very well due to the at-home fitness equipment craze.  With gyms being closed across the country, people have put those saved gym funds into building their own at-home gyms in order to stay active. 

Source: https://trends.google.com/trends/explore?geo=US&q=fitness%20equipment

What industries/categories seem to be doing the worst? 

Categories such as Health & Beauty have taken a hit, moreso on the beauty side.  With people staying at home and not having to go into the office, hair and makeup products have become an afterthought.  The same goes for the Clothing & Footwear category, particularly on dress clothes for the office, and nice clothes to wear to an event such as prom and weddings.

Source: https://trends.google.com/trends/explore?geo=US&q=dress%20shoes

Source: https://trends.google.com/trends/explore?geo=US&q=curling%20irons

How has COVID contributed to these circumstances?

When Amazon began prioritizing shipments to customers that were essential items,  normal 1- and 2-day Prime  shipping was no longer an option for most products.  Shoppers would click on an ad for a product, see that the delivery date was 2 weeks out, and then hit the "Back" button and click on another product, wasting ad dollars for many advertisers. 

The long shipping times caused conversion rates to plummet, as customers were not buying items at the same rate they once were.  ACoS started to rise dramatically as the ad clicks kept coming, but the sales did not.  Fast-acting advertisers began lowering their bids significantly in response to the low conversion rates, or sometimes outright pausing their advertising.  This caused CPCs to decline across the board, not only due to the lowered bids, but less competition in the ad auctions in general.

Another big issue was the fact that Amazon was not accepting non-essential items into their FBA warehouses.  If a brand sold through their inventory in FBA , then it left them with few options to get their stock replenished to keep the sales coming in from Amazon.  The more profitable move was to significantly lower advertising bids, or outright pause ads, and just let the sales come through organically for the low stock that was left.

Additionally, factories in China that were shut down for months were slow to get ramped back up again, causing a huge backlog of manufacturing orders, and thus additional inventory headaches for those brands who get their items from China.

What other circumstances may be impacting the results we are seeing now?

With 17.8 million Americans unemployed per a 7/2/20 report from the Bureau of Labor Statistics, many people are tightening their wallets and are reluctant to spend money on non-essential items until they are back to work and can rely on a consistent income.

In light of what we have seen the first half of the year, how do we suspect the rest of the year will look for these different categories?

Barring another shutdown in the Fall, if there happens to be another COVID-19 outbreak, the signs are pointing to a slow but steady recovery in jobs and purchasing.  It will likely not return to normal in the second half of the year, but the trend of buying behavior is on the upswing, and brands should be positioning for a positive outcome month by month instead of holding back their growth plans.

Categories like home fitness equipment, which saw a jump in buying activity during the shutdown, will likely not see that same success moving forward.  If a brand had the stock levels to capitalize on the buying frenzy, they should consider themselves lucky to have moved a lot of inventory during this (hopefully) one-time event.

Any specific recommendations for brands based on our assumptions/speculations of what the rest of the year looks like, especially as it relates to ACoS, CPC and conversion rates?

There is a very real risk of a second shutdown in the second half of the year.  If you’re of the belief that there is a strong chance that a second shutdown will happen, then look for a repeat of these same issues that were experienced in March and April.  Brands should look to be well-stocked to avoid any inventory stock-out issues. 

If you believe that there is little risk of a shutdown, then expect a slow and steady recovery of buying behavior.  It will likely take much longer than 6 months to get back to “normal” levels.  The ad auction is an efficient and self-correcting market, so we should have already seen the bottom in terms of CPCs and paused competition.  Expect that competition will continue to heat up for those coveted ad spots through the end of the year as Amazon begins accepting FBA shipments into their warehouses and returns to their Prime promise of delivery in 2 days or less.

At Retail Bloom, our skilled experts take pride in helping our eCommerce brands navigate these uncertain times. If your brand needs assistance preparing for Q4 and beyond, now is a great time to request a consultation.