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Holiday E-Commerce Challenges: Rising CAC & Slow U.S. Online Holiday Spending Growth

By November 11, 2021No Comments

The holidays are upon us. There is a lot of anxiety amongst businesses to see how this holiday season will be. As business owners, marketers, or sales, we need to not only understand what is going on in the digital landscape but if we’re not paying attention to broader economy issues, we’re only looking at one piece of the puzzle to analyze what seems to not only be a challenge on the rising cost side, but an overall slowdown of consumer spending over the last few weeks.

Things are really different as well than the holiday of 2020 where most online retailers saw an incredible boost from the world shopping from their phones and computers. The economy reopening poses a challenge from that being the same case this year.

Let me highlight a few points and summarize this story.

From Pymts.com: Retailers Struggle with Increasing Cost of Customer Acquisition

  • [Referring to the iOS14 privacy change] “…And for retailers, particularly those selling direct-to-consumer (D2C), these changes can be devastating. The Wall Street Journal reported that loose-leaf tea seller Plum Deluxe used to gain a new customer for every $27 spent on Facebook and Instagram ads. That cost is now ten times higher, which has led the company to cut its spending.”

From Reuters.com: Pandemic fallout could slow U.S. online holiday spending growth: report

  • U.S. online holiday spending is expected to grow at its slowest pace in at least eight years, as product shortages, higher prices and lingering pandemic-related uncertainties threaten to put a strain on the shopping season.
  • The 2021 growth, expected to be partly driven by product price hikes, would be the smallest rise since Adobe started tracking holiday spending data in 2014.
  • With companies raising product prices due to skyrocketing commodity and transportation expenses, consumers are expected to pay 9% more between Thanksgiving and Cyber Monday this year, Adobe said.
  • To cope with the potential inventory shortfalls, retailers are offering fewer discounts and looking to spread out the selling season by encouraging shoppers to start their holiday shopping early this year.

The current inflation environment I believe poses a challenge and threat to overall growth numbers for etailers this holiday season. We are in a more price sensitive environment and need to be very aware of that. I feel there is a false sense of a good economic sentiment that’s been going on over the last few months that we may start seeing play out into the holiday season. With labor shortages, the highest inflation rates we’ve seen in decades, and more overall broader economic factors, this holiday season will tell us or show us what we can expect going into 2022.

This is something to be very mindful of. So, we don’t only have POST iOS challenges to deal with, which is a BIG one, but we’re also fighting the economic front for a strong holiday season.

Even PayPal is feeling the pain from a sharp stock decline yesterday, CEO Dan Schulman said during a conference call with analysts that multiple factors are contributing to PayPal’s cautious outlook for the holiday shopping season:

We are seeing the impact of global supply chain shortages in our merchant base. Consumer confidence has weakened with the absence of stimulus payments. And with the economy reopening, more people may be likely to do their holiday shopping in-store as confidence in delivery logistics is depressed from last year.

However, with a challenging path ahead, I’d like to suggest the positive angle which is this is also an opportunity for companies with great brands, products, and marketers behind them to thrive in a challenging environment, as is always the case, the strong survive and figure things out.

Pablo Palatnik

Pablo Palatnik

Pablo Palatnik is an industry veteran in e-commerce & digital marketing with over 20 years experience. He successfully built and sold businesses; he now serves as the VP of Global E-Commerce for cosmetic dermatology brand DS Laboratories. Pablo is the Founder of Etrend.com.

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