Lower CTV CPMs, Amazon Copies TikTok, and Why So Many Returns?

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

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Holiday sales are?expected to grow?between 4% and 6% this year.?Solid growth, but as with everything this year, it's leveling out.???Inflation is expected to change holiday shopping behaviors as consumers look for ways to score deals and minimize expenses. Many shoppers are planning on shopping early to avoid extra fees or increased costs that come with waiting until the last minute, and consumers are more open than ever to buying from new brands that offer discounts.

For brands, this means a few things.??

• Start your holiday planning and holiday sales early. According to Google, 51% of holiday shoppers start shopping early. The unofficial kick-off will be with Amazon Prime Day in October, so consider kicking off your holiday sales around that time as Prime Day is turning into an evergreen shopping day like Black Friday or Cyber Monday.??
• Be sensitive to costs. Even if you are a luxury brand, consider focusing on products at different ends of the price spectrum to capitalize on converting as many customers as possible but not losing out on customers who are not price sensitive.?
• If you are a brand with more pricing flexibility, now is the time to conquest. Salesforce estimates that half of all shoppers will switch to a different brand this holiday season because of cost. Those that can't compete on price should focus on adding value in other ways, like offering same-day fulfillment, in-store pickup options, or creating experiences for your loyal customers.
• Start building demand now. Google reports that 39% of people are already researching gift ideas, with significant increases in non-brand gifting terms. Ensure you have a solid ramp-up strategy focusing on building demand leading up to the holiday (or promo) event. Invest in brand building and non-brand and optimize towards micro-conversion events vs. ROAS.

Now let's pivot to Q4's favorite platform, Amazon. Amazon, which has been squeezing merchants on fees, just?announced?a holiday peak fulfillment fee from October until January of around .35 per item sold through FBA. For brands, it cuts into already slim margins and fuels frustration. Few sellers have jumped ship despite the increased fees because Amazon is where you find customers.?Amazon was ranked number one by customers in Kantar's?Media Reactions?report.?Customers said that the ads on Amazon are more relevant and better quality than ads they get served elsewhere. Not shocking, considering the level of data Amazon has on you. Customers value the relevance and ease of advertising on Amazon, which leads to these same customers buying more products on Amazon.?

Amazon knows how robust its ad platform is and is finally giving DTC brands access to advertising on?Amazon for the first time. This will allow consumers to discover new brands on Amazon through Sponsored Brands ads. Instead of clicking on an ad and buying within Amazon, shoppers can access the brand's website and purchase the product directly from the brand site using Buy With Prime.??Currently, it's a rather complex user journey from ad to brand website, but it does hint at Amazon's ambition to become not just a brand discovery platform for its sellers but DTC brands too. It also provides a solid value prop on why brands should use Buy With Prime. With around half of people starting their product searches on Amazon, this is now an essential discovery tool for new and emerging brands. To make a difference, Amazon will have to cut down on the consumer journey and allow brands to advertise and link directly to their site from an ad vs. the current muli-click ordeal. While I'm hesitant to think Amazon will do anything that takes people away from Amazon, Amazon is turning more into an ad platform, so maybe? This could be interesting to test for DTC merchants who want to use Amazon's reach but want consumers to buy from their website. If you are going to be using Buy With Prime, it does seem like a no-brainer.??

Speaking of trying to keep users on Amazon, Amazon just started?testing?a feature in its app that would allow users to scroll through TikTok style feed of photos or videos posted by other users.?While no one can say if Amazon releases this, they are trying to keep people on their app for as long as possible and increase the discovery of products, brands, and seller's brand stores. They also know the value that TikTok and influencers have had on their overall business, so they are trying to replicate that to drive more discoverability within Amazon.?

Amazon also announced its plan to allow all marketplace sellers to use the?Amazon Customer Engagement Tool, allowing sellers to email their past customers about upcoming product launches or promotions within the Amazon ecosystem. This will be a welcome addition to keep your customer's brand loyal and provide an opportunity to continue to build a relationship with them post-purchase. Considering the size of the email channel for most eCommerce businesses, it's possible this could be a huge sales driver. Add to that how challenging it's become to stand out on Amazon, this is something to jump on, and as with everything, the first movers with this new opportunity will reap the rewards. Amazon is making huge moves to help sellers make their products and brand store more discoverable and allow brands more flexibility in communicating with their customer base. They have been saying that your brand store is like another website, but finally, they are trying to make it so. They are even increasingly investing in SEO to drive search traffic directly to the brand store for major keywords allowing consumers who start their journey on Google to still land on Amazon within a brand's store.?

To compete with Amazon, Walmart is attempting to bolster its offering to consumers.?Walmart?has launched Walmart Rewards as a new benefit to its Walmart+ membership.?Now shoppers and earn and redeem rewards both in-store and online. Walmart hopes the increased interest in savings will help break the habit of using Amazon as consumers' default product search engine. In addition to expanding their shopper base, the other focus is to increase the number of sellers and advertisers on their platform. To do so, they are getting rid of almost any approval process to join the??Walmart?marketplace. They are hoping that more merchants mean more merchants willing to spend on their new ad platform. While this could make sense, one of Amazon's challenges was quality control, and once they lost that, it took them a long time to get back. If Walmart has the same issue, it may lose consumer trust quickly.?Finally, Walmart is adding a new?suite of ad tools?allowing Search Brand Amplifier, which is an ad placement that boosts your product to the top of the search results page to become a self-serve feature. This highly sought-after search ad placement was previously limited to managed buys with significant budgets. Any brand can now access this placement with more reasonable budgets and control. The search ad placements tend to be the most relevant and provide the best return. Access to these new self-serve ad placements will help drive more dollars to Walmart, increasing their potential to capture ad spend.

In other retail media news,?Kroger?Precision Marketing (the retail media arm of Kroger) has expanded into CTV and video, allowing brands using Krogers retail media network to access sales data to target relevant households via CTV. As retail media gets increasingly saturated, this new value proposition could secure Kroger's spot and move extra dollars their way. For CPG brands Kroger is a great option allowing brands to reach households and target as granularly as lapsed or infrequent brand buyers and measure the direct sales impact of those ads.??

Shopify is trying to make it easier for its merchants to jump on the influencer bandwagon and has?launched?a new shoppable content feature called Shopify Collabs which will connect creators with the brands that use Shopify.?This will allow creators to establish direct partnerships with brands that align with their interests. The goal is to enable creators to quickly identify and partner with brands and power the influencer's independent businesses. While the new offering positions itself as an excellent tool for creators, the real goal is to continue to offer merchants value ads and new channels to drive revenue only through Shopify. For Shopify merchants, Collabs is a new way to find potential customers at a time when it's never been more difficult or expensive. Creating opportunities unique to Shopify that allow merchants to find new customers is a way Shopify continues to differentiate itself against its competitors.?Speaking of which, Shopify has started?warning?merchants that when implementing Buy With Prime, you forfeit Shopify's ability to protect you against fraudulent orders that could lead to stolen customer data. While this could deter some merchants from using Buy With Prime depending on the adoption rate, Shopify may make ever more aggressive moves against Buy With Prime in the future.

TikTok has its sights set on a big Q4 and has?launched?a commerce solution that simplifies the process for eCommerce marketers and makes it easier to discover new products through Shopping ads, which include three new ad formats.??

• Video Shopping ads that place a shop now banner at the bottom of a post. Video shopping ads can be product-focused to reach a high purchase intent audience. Considering the increased focus on DR initiatives, product-focused ads should be in high demand.?
• Catalog listing ads allow brands to link to an entire catalog. With no additional assets needed for this, it could be a great fit for marketers strapped for resources, aka all of us.??
• Live Shopping ads direct people browsing TikTok's For You page to live shopping events. Live shopping has been growing for TikTok but has not taken off as quickly as they hoped, so the Live Shopping Ads could be a way to get that initiative even more attention.

TikTok's focus on shopping is not surprising, considering the data points to consumers using TikTok as a product discovery tool. They just released a new?report?about how shoppers convert on TikTok. They found that shoppers turn to online shopping for its simple and immediate gratification and online shoppers are more likely than in-store shoppers to make a purchase the same day.?If people are looking to buy on TikTok for instant gratification, is that fueling some of the massive return rates that retailers are dealing with??According to?The Economist, online retailers see record return rates. The National Retail Federation claims that 21% of online orders were returned in 2021.?The total value of those returns is $218 billion! And in the clothing and shoe markets, they stated returns percentages could reach levels around 40%. Return rates are a massive issue for many retailers. As brands move more and more to DR tactics, I'm wondering, do any of them also look at the LTV of the customers they acquire via those channels and tactics? It could be that after taking into account the return rate of some of these emerging channels (influencer/TikTok etc.), the ROI is way worse than expected. For all brands, it is time we get away from only optimizing towards ROAS and look at optimizing towards business health and long-term profitability.??

TikTok's other big initiative is going?local?with a new "Nearby" video feed in addition to the For You and Following tabs.?This will allow you to find content posted by users in your location. Considering that 40% of Gen Z now uses TikTok as a search platform, allowing them to search for things "near me" could be very powerful and steal market share away from Google. You may know that Google is big in the "near me" search space. A near me tab would give you access to an engaged group of users in a specific location seemingly perfect for advertising.??

With BeReal on the?rise, it was only a matter of time before everyone started copying them. I mean, remember Clubhouse??Both Meta and Snap are testing similar functions within their app, hoping that BeReal can be more of a feature than an app considering its basic nature and lack of algorithm. However, isn't that the point? It's the anti-Facebook, the anti-Instagram. People don't need an algorithm. They want to see an unfiltered view of what their friends are doing. I think if each app can put its unique spin on it, it could work, but no one feels that Meta is interested in authenticity. BeReal still does not have ads, but brands, including PacSun and?Chipotle, are experimenting with how to use it. While I'm not entirely sure you will be acquiring net new customers from BeReal, I do think it's interesting to connect further with your already loyal fan base. Considering how few brands are present now, it could be an excellent place to stand out if you can create an authentic presence.??

As I've already discussed, Apple is now looking to build a robust ad business and has added a few new ad units to its search ads lineup.??CNBC reported?that Apple notified developers about new search placements arriving on its app marketplace in the next few months. While they didn't elaborate on what the new placements would be, it's been clear that Apple is building its ad business. If you are an app company - keep this top of mind as brands who act on new placements usually see some of the cheapest inventory and best results. For others, just know that Apple is building and trying to break into the Facebook, Amazon, and Google advertising Triopoly.??

As it seems like Amazon is taking over product discovery and TikTok is taking over the near-me search, where does this leave Google? Well, it looks like they are eyeing media expansion. Google's?Display & Video 360?digital campaign management platform added a digital out-of-home component.?Digital OOH ads are now available to all Display & Video 360 users and provide access to screens in airports, bus stops, elevators, shopping centers, stadiums, and taxis, with brands able to tailor their message based on the location of the ad. Marketers can now activate, pause and optimize digital out-of-home campaigns in real-time. One of the reasons for the focus on OOH is that it's become a more significant focus for advertisers.?U.S. out-of-home ad spending?totaled $2.62 billion in the second quarter and has fully recovered from the COVID-19 ad recession. Allowing brands to manage and optimize another ad unit within DV360 is a huge win and will increase the demand and ability for many brands to activate OOH ads.??

Some information is?finally?out about Netflix's ad-supported offering that will launch on November 1st.?Ad load is about the standard compared to the competitive set at 4 minutes per hour, and perhaps because of some of the lighter ad loads, CPMs are no joke at around $65! While there are advertisers dying to have ads alongside Netflix content, a $65 CPM with untested inventory during a time when advertisers are being more cautious with their spending is a bit aggressive. According to Advertising perceptions data, spending on upper funnel channels, including TV, declined by about 19%. According to the survey, 47% of marketers suspended connected TV (and CTV), 44% halted digital video, and 42% paused linear TV, which tracks?Roku's?report of advertising slow down. Additionally, CTV inventory is growing fast, causing?lower CPMs?across CTV.?

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Megan Conahan is a 17-year veteran of the digital marketing industry. Over the last 17 years, she’s consulted with fortune 1000 brands on how to best negotiate the ever-changing digital marketplace demands and create unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency.?