Kate Box, Director Retail, Global Business Group at Meta ANZ
Several economic indicators suggest that this Holiday Season will present challenges for the retail sector. This year will feel very different from the ‘Revenge Christmas’ of 2022 when consumers had cash burning a hole in their pockets and a desire to ‘go big’. The sector entered a recession in March, following two consecutive quarterly declines in shopping activity. We are experiencing the highest inflation in 30 years and the top cash rate in a decade, leading to decreased purchasing power among many Australians.
The current economic climate is affecting how consumers behave in many ways. Based on the most recent Meta Seasonal Holidays research, we expect consumers to focus on value and look for the best prices.
Unsurprisingly we expect a massive spike in activity during seasonal sales events, with more than 50% of the consumers using these moments to find bargains and anticipate holiday shopping.
The survey also suggests something that feels new this year. Consumers won’t be proactively looking for ways to spend as they have in recent times. This means businesses will need to rely on supercharging discovery more than ever. Put simply, if your customers won’t be coming to you, you need to find ways to get your product to them. If you think you can rely on your loyal customers, think again, as we will also see even less brand loyalty in 2023 as consumers look to trade down and stretch their dollars further.
According to the Meta Seasonal Holidays, customers will be using in-store (-4%), search (-17%), and store websites (-16%) less frequently as discovery channels during the upcoming holiday season.
What retailers can do?
With few signs of an improvement in the economic situation before year-end, retailers' marketing teams cannot rely on external factors to enhance their performance. They must act now.
Initiating early planning is a good starting point. Early planning helps marketers offer customers value and remain competitive in a tight market. It also helps to prepare for seasonal sales, which will be even more critical this year.
Brands can also use data, AI and Machine Learning to increase their relevant offers to consumers so they can discover shopping opportunities early and anticipate purchases when they find the right product. Put simply, AI enables brands to be proactive in a softer market and use smart analysis to minimise risk and increase the chances of success.
We like to refer to this as ‘Discovery Commerce’, when retailers surprise and delight customers by intuitively serving up products they love - even before they'd even considered them. Research backs this up, with 64% of Aussie shoppers agreeing that they enjoy discovering items they weren't actively looking for.
Businesses can use AI to automate campaigns or analyse performance and compare what works best, including comparing automated ads versus manual work to determine the more effective use of resources.
Artificial intelligence can also generate high-quality ad text quickly and inexpensively while also allowing for the customisation and repurposing of assets. Meta already has tools for advertisers that utilise these AI capabilities.
Data analysis and AI can help segment customers effectively, including evaluating their financial situation. Not all Australians are impacted similarly by the crisis, and some consumers benefit from high-interest rates. AI enables marketers to deliver personalised content, offers, and recommendations that are more likely to convert. Additionally, it helps identify and target new customers potentially interested in a product or service.
Companies can rely more heavily on AI chatbots to provide instant customer support, guide users in purchasing decisions, and even upsell or cross-sell products. This can result in an improved customer experience and increased sales too.
During the upcoming holiday season, brands have the opportunity to connect with consumers and boost sales by bringing the holiday spirit right to their homes. By utilising AI technology, retailers can not only avoid a decrease in sales but also achieve greater levels of success.