The COVID-19 pandemic affected the entire world for most of 2020. The eCommerce industry was no exception. While many brands struggled as consumer spending shifted, online spending as a whole saw massive growth. While brick-and-mortar retail declined this year, US consumers will spend an estimated $709.78 billion online in 2020.
Seeing 5-10 years of eCommerce growth in six months is enough to keep advertisers busy, but that wasn’t the only effect of COVID-19. Sudden spikes in spending, inventory and supply chain issues, and increased competition all led to a very volatile year.
The year isn’t over yet, and we’re still in the middle of an unconventional holiday shopping season that has brought its own challenges. But with the new year right around the corner, it’s time to start planning for next year’s strategy.
What can the changes brought about by COVID-19 teach us? How should brands be planning for their 2021 ad strategies?
Lesson #1: Prepare for More Agile Advertising
As advertisers, we strive to do the best possible job based on our current understanding of the eCommerce environment. At the beginning of the year or quarter, we spend time planning budget, inventory, and promotions to give us a good idea of what we want to invest in, what we want to test, and how much we want to allocate to different ad types.
Nobody was able to plan for the disruptions of COVID-19. The big lesson from this year is that there is so much out of our control that there's really no point in trying to set a rigid marketing strategy. You can’t expect to sit down at the beginning of the year and decide how much budget to allocate to Sponsored Product versus Sponsor Brand ads or branded terms versus category or competitor terms.
When the pandemic first started affecting ad performance, we saw many legacy brands with more structure, processes, and teams in place lose share of voice to smaller, more agile companies. To continue to win, those larger teams need to become more informal and find ways to make changes quickly. This requires empowering employees at every level to make decisions based on new data.
It has become exceedingly clear in 2020 that having brands and teams that are empowered to make those decisions and to do what they do best is going to be really, really important in helping to keep stay ahead of the competition. Brands of all sizes need to become extremely agile in order to pivot quickly and learn quickly.
Lesson 2: Take Advantage of Sudden Opportunities
Tomorrow is never promised in this realm. The rapid upswings and downswings in sales that many brands have seen due to COVID-19 is evidence of that.
Unfortunately, when those massive, sudden surges in consumer searches occurred, many brands didn’t change their advertising strategies in response. On the flip side, those that did were able to ride the Q2 wave and capture a larger share of voice from their competitors. Moving into 2021, the key lesson is to look at things more dynamically and aim to recognize and capitalize on opportunities when they appear.
Creating more budget fluidity and agility will also allow you to move up a portion of your budget from future months or quarters when there is an opportunity. Since tomorrow is never promised, don’t hold back budget for future sales when there is an opportunity to capture sales today.
Make sure that you're allocating a bigger percentage of your ad budget next year than you were this year for testing for spikes in demand if something unexpected happens. We usually recommend 5-10% of your budget as a test budget. In 2021, consider upping this to 15-20% on top of your normal budget as a test budget for next year. Worst case, you can funnel those dollars into your existing channels. But best case, you have a flexible budget allocated and approved by your leadership and you're ready to go as soon as those changes happen.
Lesson #3: Expect Continued eCommerce Growth in 2021
The fact that we saw such a large amount of eCommerce growth condensed into such a short period of time makes it difficult for advertising budgets to keep up. While online shopping grew 129% this year, it will be difficult to negotiate such a significant shift in your overall advertising budget.
No matter what the numbers are, it's very clear that there's been a seismic shift in the industry towards eCommerce. It's brought a lot of new customers online who may not have been comfortable with it in the past that are now going to be repeat, ongoing eCommerce customers. Even compared to this year’s off-the-chart numbers, we’re still going to see growth next year. We're still going to see new shoppers joining these platforms.
This means eCommerce advertisers should push to have an even healthier budget as a percentage of sales next year. Within that larger, healthier budget overall, advertisers should plan to remain flexible and ready to reallocate their budget as new growth opportunities arise.
While using 2020 benchmarks to inform your 2021 ad strategy is difficult, there is still a lot to learn from the past year to apply to next year. COVID-19 and its effects on the eCommerce industry aren’t over, but with some foresight, you can be more prepared for the unexpected in 2021.