It’s the most wonderful time of the retail year: Back-to-School season is well underway, and retailers are now gearing up for the all-important holiday season.
Heading into peak shopping season, strong forces are working both for and against retailers. In good news, inflation is steadily declining. Over the past year, inflation in the United States has cooled from 9% down to 3.2%, easing some of the price pressures that have gripped consumers the last two years. In July, consumer confidence rose to the highest level in two years, according to the Conference Board Consumer Confidence Index.
On the other hand, the pace of consumer spending growth is beginning to slow after a resilient first half. Pandemic savings have waned, and due to high inflation, the typical household spent $709 more in July than they did two years ago to buy the same goods and services. Adding to the pressures, the Federal Reserve raised interest rates to their highest level in 22 years at the end of July in an effort to reduce inflation. In two months’ time, 43 million Americans will resume student loan payments with their average payment totaling $200-$299 a month.
Increased pressures will drive savvy shopping behavior
Consumers are feeling the pinch from ongoing economic obstacles, and many are adapting their buying behaviors as a result. In its most recent Monthly Economic Review, the National Retail Federation reported that, “consumers are still spending but are under financial pressure and have been adjusting how much they buy while also shifting from goods to services.” Consumers want to lessen the hit to their wallets, meaning they’re shifting budgets to prioritize needs over wants, hunting down deals and discounts, and getting a head start on their holiday shopping.
Marketers must bring their A-game
Converting budget-conscious shoppers is going to be more challenging than ever due to declining discretionary spend, higher competition, and emerging channels and purchasing options. While consumers look for value, retailers’ margins will be under pressure. For marketers, the Q4 focus will be on mass reach and frequency to move inventory.
Strategies like Dynamic Cash Back allow brands and retailers to meet consumer demand and their expectations around deal seeking; and can become a lever to drive full price efficiently for the business. This is a critical point-of-focus given many retailers still have surpluses of inventory to move by year-end.
To maintain attention and drive sustained spend throughout the remainder of Q3 and Q4, consider the following tactics when planning your second half cash back strategy with Rakuten.
- Participate in tentpole events: Our quarterly tentpole events align to big moments in retail, media, and culture. Tentpole participation gives brands the opportunity to sweeten the pot of offers to drive excitement and increased transactions. Historically, Rakuten tentpole events deliver higher than average AOV for brands.
- Layer in additional promotions to build loyalty and stay top of mind: By planning and participating in promotions consistently, there is a fluctuation of Cash Back rates. This leads to a high average Cash Back rate for the brand, which keeps shoppers engaged and your brand top of mind. On Rakuten, brands that strategically pulse cash back in the weeks before and after tentpoles see 67% lift in sales per members.
- Run Personalized Rewards campaigns: Personalized Rewards enables brands to leverage dynamic commissioning strategies to attain different business objectives from acquisition to loyalty. Combining Rakuten’s first-party insights with your CRM data, brands can target and engage the right in-market audience and effectively influence their purchase through a personalized offer.
- Use media to amplify performance: You wouldn’t throw a party without sending out invitations. How would people know when and where to go? Media is your invitation to the cash back party. Use media to increase conversion and nurture loyalty with active and valuable shoppers. Our media solutions offer various opportunities for your brand to stay with shoppers and build loyalty from the onset of their first purchase. On Rakuten, leveraging media increases advertiser sales by an average of 3.5x versus promotions alone.
- Deliver a connected experience: To meet consumer demand for a convenient shopping experience, supplement your existing program with Rakuten Card-Linked Offers and engage and reward your customers in even more ways. In Store rewards increases total Rakuten sales by 10-20%.
Maximize your Rakuten performance in 2023
Leveraging the right mix of these tactics for the business, brands can optimize their strategy now to maximize success in Q4. Your Rakuten representative will offer expert consultation to build an effective program to meet your objectives.
Not working with Rakuten? Reach out to us to discuss how Rakuten can work with you to customize your program to maximize results and efficiency.