Over the last few months, our monthly sales updates have highlighted overall trends, including mild single digit growth in apparel ecommerce sales and soft results in home. When we dissect the data, however, the swings in performance are more extreme, with some brands doing much better than average, and vice versa. These swings in performance beg the question- who is doing well and why?
As we look at the data in detail, we are looking for consistencies in performance. Could it be that high ticket female apparel is just doing better than average? No, when we look at the details, some brands are doing much better than others. Could it be that the shift back to physical stores is impacting ecommerce only brands without stores more than brands with stores? Not necessarily. Is one category or consumer group holding up better than most? No. Here is our take on what is driving YOY performance.
Here is our take on what is driving YOY performance:
- Change in marketing spend YOY– In general, we’ve seen cuts in marketing spend while marketing has become more expensive. On the heels of the pandemic marketing boom, softer sales results have led to marketing cuts to preserve cash flow and improve profitability. Spending pullbacks have resulted in declines in the active customer file, driving softness for many brands. The first standout is that the brands that have continued to invest in marketing consistently across channels are doing better now than the brands that cut spending..
- Level of promotional activity– When we look at monthly sales performance, the results by day and week show a different story. In reality, the modest growth for apparel is much spikier, often showing YOY sales declines except for peak promotional moments like President’s Day or Memorial Day weekends. Even the most affluent consumers have cut their spending, and we are hearing from a lot of clients that they can’t get the consumer to buy full price. For companies that were already very promotional last year, they may be seeing some response fatigue, while brands that have pulled back on promos to focus on profit are having a hard time getting her to buy full price. Brands willing to give the shopper what she wants (value in the form of promotions) are competing more successfully.
- How well they did last year– Brands who did well last year leaned into marketing and continued to see growth in their customer file. For those same businesses, this meant a larger, healthier customer file coming into 2024, which has helped to shore up any softness coming from new customer acquisition (which has been a consistent, industry wide challenge post pandemic). For brands facing a second year of soft results, having fewer 0-12M active customers on file to market to means less stability this year and more reliance on new customer acquisition, which comes at an investment.
- Number of activated channels– Brands with full marketing channel activation (in roll-out mode) across digital and print are faring better. Likewise, companies that have leaned into a diverse channel distribution strategy (.com, marketplaces, owned stores, and wholesale) are also faring better. At the top of the peer group, those brands that have taken it one step further to align spending on CRM vs. Acquisition in each channel (to make sure they are spending enough on each segment to meet their goals) are also outperforming those who, at first glance, are spending plenty in each channel but just not in the right way (i.e. spending too much on CRM on Meta).
- Have something new to talk about– Another consistency for brands in growth mode is a growing assortment across categories and price points. Having something new to talk about is critical to combatting response rate fatigue. We’re also seeing this take shape with new brand partnerships and collaborations, and we’re seeing strong brands move to a more frequent product launch cadence, introducing new product to customers every few weeks rather than in just a few seasonal drops.
Based on these trends, here are a few easy ways to help check these boxes to drive revenue growth:
- Spend at least 70% of your Meta budget on new customer acquisition (and suppress your customer list to make sure this is happening).
- Schedule your product launches as a roll-out rather than a “drop.” This helps to keep customers clicking through emails and SMS to see what’s new vs. trying to sell them on the same product for months on end.
- Look for easy ways to expand your assortment, such as adding new colorways in core product (Yes, it will drive additional revenue!).
- Consider the strategic use of promotions to drive response rates for consumers who are only shopping for value right now (this includes even the most affluent consumers). This does not have to be site wide promotions. For example, for a female fashion brand, it might be a dress event or a tops event. For a home brand, it might be a soft goods or décor event.
- Activate Swift direct mail to reach your most qualified web browsers and improve your conversion rates.
As always, we are here to help so if you’d like to discuss any of these approaches, please just let us know.
