A return to health for retail

2023 is the year for reset

The start of 2023 looks vastly different than the beginning of 2022. For the first time in three years, retailers are entering the new year with more predictable conditions consistent with the ebbs and flows of regular economic cycles. Without the burden of latent inventory upsetting the shelves, and forcing aggressive discounting to stay afloat, retailers will shift their strategies to drive full price.

2023 is a reset year to get back to 2019 profitability levels. Brand and retail strategies will focus on holding onto margin gains. As such, we expect that many advertisers will be more circumspect with their budgets, spending through avenues that can drive sales while preserving profit margin. Here are three considerations affecting plans this year:

Black Friday and Cyber days delivered big impact. The economic challenges of 2022 drove one of the most competitive and promotional holiday seasons we’ve seen. Brands maximized their performance and market share by strategically pulsing cash back in the days leading up to the tentpoles and elevating cash back during the actual events. This strategy drove significant lifts in performance. Brands that participated in Cyber Days 2022 saw a +92% lift in sales compared to non-participation. Brands that didn’t participate in our Cyber Days events saw a –34% decline in sales.

Overall, Rakuten’s 2022 Cyber Days events drove the following lifts for brands:

+18% sales
+9% trips
+10% orders
+14% new buyers

Lighter Inventory for spring. Retailers have adjusted their plans, taking guidance from the inventory burn of last year, so spring inventory will be a bit lighter this year compared 2022. This free up means retailers can move away from aggressive discounting strategies to move surplus, and instead focus on driving full price with new products.

Pull forward of advertising spend proved successful. Many brands wrapped Q4 with their margins met. In January they’ll focus on holding those gains in preparation for February (Q1). As such, we expect a redirect of spend to reengage holiday shoppers and drive frequency and loyalty. The goal is to manage budgets to extract the greatest value from the existing shopper base while balancing investments in new acquisition.

Now is not the time to go quiet, it’s the time to turn it up. Smart brands will take advantage of this comparatively quieter time period to maintain share of voice by continuing to invest in tactics that support strategic initiatives and margin health. Staying top of mind with audiences is the key to January and Q1 success.

Use January as a primer for spring newness

January is the opportunity to maintain the market share you acquired during Black Friday and Cyber Days and prepare your re-engagement strategy for spring.

Rakuten shoppers are loyalty shoppers. We have a 70% retention rate, the highest we’ve seen in 5 years. January is the sharpest part of our retention curve where we see one-third of our shoppers come back to make a purchase.

Pro-tip: Stay top of mind with all Rakuten shoppers in preparation for spring shopping. They’ll be looking for new products and you’ll be looking to drive that newness at full price.

Pro-tip: Invest in targeted cash back strategies to drive 2nd and 3rd purchases and solidify holiday shoppers as loyalists.

Cash Back as a lever to drive full price

Last year was a challenging time for margins. Retail was forced to lean into heavy discounting strategies to help move inventory that was late, out of date, and misaligned with business and customer wants. 2023 is the year of brand reset. For retail, this means driving more sales and a return to profitability. Cash Back is a proven lever to drive full price and sales at a time when you aren’t discounting. As your partner, we can craft the right plan to meet near and long-term goals from mass reach to targeted and personalized initiatives.

Your playbook

• Use January as a primer for spring newness. Take advantage of this comparatively quieter time period to maintain market share by continuing to invest in tactics that support strategic initiatives and margin health.
• Evaluate your marketing mix. Work with partners like Rakuten who can drive profitability efficiently.
• Replace discounting with Cash Back. Use Rakuten as a lever to drive full price and fuel promotional plans onsite and thru Rakuten. Work with your Rakuten rep to plan your dynamic cash back strategy for impact and efficiency.

Are you ready? Contact your Rakuten representative today.