While we’ve seen a steady deceleration of inflation this year, we’re not out of the woods just yet. Core inflation, which is sitting at 4.3%, is driving up the costs of essential expenses like shelter, energy, and transportation. Coming into the holiday season, the pressures of higher prices and interest rates, credit card and student loan debt are building on consumers.
Retail is bracing for a down, hyper-competitive Q4
People are feeling significant financial pressure that will ultimately drive a new demand for discounts this season. Brand loyalty will be put on the chopping block as consumers shift their budgets to prioritize needs over wants. As such, retail is bracing for a down, hyper-competitive holiday shopping season. Here’s how this is playing out:
- Retailers are ordering less inventory – In preparation for consumer pullbacks, and the need to introduce discounts and freebies to incentive purchase, as well as response to recent supply chain hurdles.
- They’re focused on middle price point items – 77% of Q4 inventory will be middle priced items, followed by promotional items to drive purchase.
- Consumers will demand discounts – Roughly two-thirds of retailers surveyed by CNBC expect consumers to look for discounts.
- 71% of retailers are concerned about less spending – To win shoppers, they’ll focus on using bloated inventory to pull people in and pushing incentives to increase basket size.
- Margin and profitability will take a hit – The Q4 focus will be on mass reach and frequency to move inventory and build baskets. Balance is the key.
Your Q4 Playbook
To overcome the anticipated humdrum holiday season, here’s how brands and retailers should prepare:
- Prime the Pump in Q3 – Drive new-to-file in advance of peak holiday shopping to have the largest active CRM base during this competitive time. It’s vital to grow your CRM base as much as possible ahead of the busy holiday season. The more shoppers you can get your brand and offers in front of, the more revenue opportunities for the business.
- Start in October – To capture early holiday demand. Consumers are kicking off their holiday shopping earlier than ever, taking advantage of early seasonal sales to stock up on gifts. If spend is finite and consumers are searching, those that capture early will win. 78% of Rakuten Q4 buyers make a purchase before Black Friday.
- Pulse Cash Back – To meet consumer demand and expectations around deal seeking. Fluctuations in Cash Back can be used as a lever to move product efficiently for the business, while sustaining a consistent promo calendar. Brands that fluctuated cash back rates saw 29% more spend per member and 27% higher conversion than stores that either maintained one rate or lowered their rate. Stores that didn’t fluctuate cash back saw a -5% decline in Q4 sales.
- Bookend the Tentpole Moments – Strategically participate in promotions before and after the Cyber Days to win shoppers, drive 2nd and 3rd purchases, and build loyalty. Stores that participated in promotions before and after each tentpole saw 82% more sales and 30% more trips in both Q4’22 and Q1’23 compared to stores that only participated in tentpole moments.
- Deliver a Connected Experience – Your customers don’t think of shopping in-store or online as an either/ or choice. Lean into services like Rakuten In Store to deliver a seamless shopping experience and support buy-online pickup in-store strategies.
Rakuten helps brands win
Winning this competitive season means retaining your current customers while getting new, long-term, high-value ones. Rakuten is uniquely positioned to help address these challenges with solutions that bridge the tactics across the funnel.
- Personalized Rewards – Our most flexible tool, Personalized Rewards gives brands the power to target audiences with planned Cash Back rates across engagement points. Marketers can engage new shoppers by targeting members on Rakuten who have never bought from them. Similarly, they can reengage customers who already know their brand but haven’t shopped in a while, using Cash Back as lever to get them to shop again. This capability effectively fosters the ever-changing consumer lifecycle at every stage to ensure we’re not only getting shoppers to shop that first time but also using Cash Back as a lever to earn their long-term loyalty.
- Retail Events – At Rakuten, we pace with the holiday calendar AND the Rakuten specific moments that bring our shoppers back throughout the season. This keeps brands in front of shopping-engaged consumers looking for their holiday retail moment.
- Cash Back Strategies – Cash back drives results at a lower margin outlay, allowing brands to grow topline with less discounting. Investment in Cash Back to sell regular price will protect margins while giving consumers the value they’re looking for.
Sleigh the 2023 holiday season
As eager shoppers’ prep for the biggest spending of the year, they’ll be looking for ways to get what they want at the best possible price. Deals are table stakes on the major shopping days. This year, deal-seeking will become an always-on mindset that extends well beyond the Cyber 5. For brands, this means a longer opportunity to connect with engaged, savvy shoppers.
Reach out to plan your Q4 on Rakuten!