Special Edition: How Holiday Shopping Trends Impact 2023 Retail Spending

Our customers are these mass consumer product companies across food, bev, personal care, alcohol, consumer electronics, toys. And what we've seen consistently over this calendar year is that consumers are trading down. So instead of buying the $150 bottle of whiskey, maybe you're gonna buy the $75 bottle of whiskey. So making sure that you have a portfolio that speaks to these different price points right now is super important.

To thrive in a rapidly evolving land, must move at an ever increasing pace. I'm Matt Britton, founder and CEO of Suzy. Join me and key industry leaders as we dive deep into the shifting consumer trends within their industry, why it matters now, and how you can keep up. Welcome to the Speed of Culture. Hey, Speed of Culture listeners, it's Matt here. Today we have a special episode with fellow Adweek co host Rachel Tippograph from the Brave Commerce podcast where we discuss current holiday shopping and retail trends, insights from Black Friday and Cyber Monday, and pred on the retail space overall as we head into 2023. Enjoy. Hello, everyone. This is Matt Britton, founder and CEO of Suzy. I'm joined today by a very special guest, Rachel Tippograph, the founder and CEO of miikmac, who I will introduce herself in a second. But today we are here to talk about the retail and consumer shopping trends that are impacting the current day. It's been another whirlwind of a year. This year that's slowly coming to an end. 2022 really flew by fast and there's been a lot of ups and downs and especially as a marketer, a lot of headwinds to contend with. And today we're going to be really diving in to some of those headwinds and trends and some optimism as well that we're seeing coming out of Cyber Monday that happened yesterday. So, Rachel, first of all, thanks so much for joining. This is always probably my favorite webinar and digital event I do every year just because I really love collaborating with you and I really have so much admiration and respect for your knowledge in the space. So thanks for joining. I'd love to hear a little bit about how your year is going and tell our audience who might not know a lot about mcmac, what Mic Mac actually does.

Yeah, well, thanks for having me, Matt. Always love doing this with you and love the team. @ Suzy McMac. We're an E commerce enablement and analytics company. We work with major consumer product companies. So picture any brand that's available at places like Amazon, Target, Walmart, Drizly, Minibar, Sephora, Ulta. Those are our Customers and we help them understand the end to end customer journey across every major media channel. Meta, TikTok, Snap, Pinterest, Programmatic, your brand website, all the way down to basket level sales data at places like Amazon, Target, Walmart. We like to think that we dispel the black box that a lot of big brands used to live in.

Yeah. And I mean the retail landscape has gotten so much more challenging over the last decade, really where it used to be, you know, if you got a lot of shelf space at Walmart, you know, you were taking your family to Aruba over Christmas. Right. Because you knew that that couple extra inches of shelf space, you were going to move enough product that you're going to have a great year. And while the big box retailers are still incredibly powerful, you know, it's a little bit more complex in terms of an omnichannel approach and we'll unpack what that means over, especially over the holiday season. But I'm sure a lot of the companies that you work with are really confused and really trying to unpack all this.

Yeah, I mean there's more retailers than ever before and there's more media channels than ever before. And as a result there's still the same amount of consumers like population hasn't really changed. And so how you gain those people's attention in such a competitive environment is the major challenge.

Yep. And innovation, as they say, is not evenly distributed across the country. There are some consumers, you look at Gen Z and you know, they're completely different species, so to speak, in the way how they shop and how they consume products versus boomers who are still a huge percentage of the population and especially the spending pool. And you almost have to approach those generations or consumers in different parts of.

The country completely differently, 100%.

So we're going to talk about retail. And retail growth overall has slowed in 2022 as, as people have probably read ad nauseum at this point. We have entered an economic downturn coming out of COVID It has been sort of a slingshot effect as we all know where Covid hit. You know, we were told that we're going to be entering the next Great Depression. Then interest rates went to zero, consumers got flooded with fiscal stimulus from the government, and as a result everyone felt rich. It propped up speculative currencies like cryptocurrency and meme stocks and collectibles and all sorts of things as people had so much cash and nowhere to spend it. And we saw a boom in the stock market and then almost just as quickly as that happened. We saw a little bit of a bust in the stock market in 2022 where the high flying technology stocks and cryptocurrencies all of a sudden came crashing down hard, much to the chagrin of maybe younger consumers who have never lived through a boom bust cycle like older people like I have in 2008 and also one after the 911 crisis. And you know, it's been really so much for brand marketers to figure out how to deal with this because not only has it impacted their business, whether it's the supply chain or pricing, et cetera, but strongly it's impacted their consumer. You know, inflation is still top of mind for so many consumers, especially holiday shoppers right now. Because one of the impacts of that boom bust cycle is during the boom cycle there was so much demand for products that, you know, the supply chain got clogged up and there wasn't enough product to meet the demands of consumers. And anytime there's more demand and supply, obviously that drives up pricing. And inflation has been a huge topic for consumers as well. So, you know, what we're going to talk about today is. Go on Rachel, please.

You know, with inflation, we've also seen certain brands benefit from it. So you look at the luxury market or consumer electronics and they've actually been able to lean in to inflation during these times. So depending on the customer segment that you're going after, there's a very different outcome.

How have they been able to lean into it?

By raising prices.

So they're taking advantage of and stretching.

Their margins 100% for the high income customer, they're actually spending more than ever before.

Right.

And they're willing to do it.

Right. And they have, they have the ability to do it. You know, we talk a lot about people are hoping for a V shaped recovery. And you know, what we saw out of COVID and what we might be see coming out of 2022, economic issues, is more of a K shaped recovery. Right. Where you have certain sectors of the economy, you know, and socioeconomic classes really faring much differently coming out of this than maybe others where, you know, there's a big swath of America where if bread and butter and cheese are a couple bucks more, it really impacts what they can afford every month. And there's other consumers that, you know, they don't even look at that. And for them, you know, they still have made so much money out of the last decade that, you know, they're really leaning in. I guess the luxury sector would be the biggest indication of that. So Today we're going to talk about, you know, the recession and the impact, some of which we just touched on product availability and sort of the byproduct of what we're seeing in terms of demand outstripping supply and how that may have eased up, how the media world is impacting the retail landscape and how certain merchandisers are looking at different retail opportunities to impart into their manufacturers, to basically drive eyeballs, drive awareness through new channels that are popping up, as well as most recently Black Friday and Cyber Monday, which is of course, yesterday. What was the data that we saw coming out of that and what are the implications for 2023? So first we talked about the recession. There's been news of an impending recession for months. In some ways, the tail's been wagging the dog in that. People read the headlines in the USA Today or they watch Today show, whatever it may be, mass media, and they think, oh, wow, something's coming. I'm going to let the headlines drive my decision versus maybe what I'm seeing in my wallet or what I'm seeing happen with pricing. But over time, consumers also have been hit with pricing. We are seeing signs of a slowdown and we don't really know how long it's going to last. Over the course of this year, the Federal Reserve has consistently raised interest rates, and that's impacted things like credit card interest rates for consumers right now. And we'll talk about it. Consumers have record credit card debt in the US Debt for credit cards have never been as high as it is today. And a year ago, maybe a little over a year, savings were never as high as they were today. So it's quite a shift. Are your brands you're working with seeing the impact of that just in terms of the debt load that consumers have right now? Rachel?

100%. I mean, the thing that I'm paying attention to is not the stock market, it's the interest rates. If you talk to different economists, some are more optimistic, but they feel like by June of this upcoming year, interest rates might level around two and a half percent, but then they actually believe that they'll go way back up again. And so you're planning for 2023. A lot of folks think that there's going to be a window and it's.

Essentially going to be a double dip almost, so to speak.

Yeah, like April to June, we're going to all think that, like the economy's been bouncing back and it's going to feel like the gold rush again. And then it's going to Go back to maybe more normalization. When you talk about credit card debt, I mean, there's a big elephant in the room. One of the major causes of this, especially amongst millennials and Gen Z, are the buy now, pay later companies everyone was heralding. Like, look at these insane E commerce conversion rates that we're getting on our site now that we've installed afterpay. But if you look at just California, 75% of the credit card debt that's occurring is because of the buy now, pay later companies. This artificial sense that you have money.

And that's disproportionately with younger consumers where they'll go on arrow pastel, right? And they'll say, oh, I'm going to buy one pair of jeans. And instead they can end up buying seven for what is essentially the same cost that day. But what they don't realize is then the bills are going to be coming for the next several years and, you know, then multiply that by five or ten other shopping experiences. And all of a sudden consumers have debt loads that have added up and it's going to impact their ability to do other things.

And you asked, how's that showing up for our customers? You know, our customers are these mass consumer product companies across food, bev, personal care, alcohol, consumer electronics, toys. And what we've seen consistently over this calendar year is that consumers are trading down. So instead of buying the $150 bottle of whiskey, maybe you're going to buy the $75 bottle of whiskey.

Right.

So making sure that you have a portfolio that's speaks to these different price points right now is super important.

Very interesting. And you know, as we mentioned, you know, nearly three quarters of consumers are concerned about a potential recession. And, you know, you mentioned trading down, Rachel, and some of the research we saw is that, you know, electronics and clothing are two of the areas that consumers are most likely to scale back on. Can you elaborate on that?

Yeah, I mean, we've certainly seen the data with consumer electronics. So a really telling moment was, you know, Amazon Prime. They had two big prime days this year.

Both occurred, which is new. Right. They usually only have one July and October.

And typically during those moments, that's where you see electronics pop, like rise to the top. We didn't see that. We saw household staples pop. And so it was a very, very telling moment that right now people are being way more cautious with their spending.

And I think one reason why I was speaking to an exec of a major consumer electronics retailer who was saying, you know, our TVs are stacking up against the ceiling. And the reason they say why is that during the pandemic, people bought a TV for every room in their house and every bathroom in their house. Right. And they bought every Sonos speaker, et cetera. So they just don't need things anymore. Everyone has bought everything electronic wise for the home that needs to be purchased.

Well, Matt, you just touched upon something that's so important and significantly impacts the economy. People can't buy houses right now because of mortgage rates. People are staying put.

Right.

Typically, changing homes is a huge buying.

Moment for furniture, for electronics, for all sorts of different products. Yep.

And then a lot of different services. Right. You switch doctors, cities, all these things.

Sure.

And then the other part of it is now what we're seeing in big tech. Right. People's jobs are being challenged right now. And that that was the upper middle class.

Yep.

And so all of this is going to significantly impact the economy going into 2023.

Yeah. You mentioned this earlier, but shoppers have prioritized in the October deal days of Amazon and Target because Target has their own version of Prime Day now. You know, shoppers prioritize the essentials over these big ticket items. So is that a shift overall? So just looking at, you know, Target, you know, in July it was groceries and then toys and electronics, and then in October it was grocery store number one. But then health and personal care. So shifting to necessities, is that sort of a general trend you're seeing really.

Across all retailers consistently? Absolutely. And when we get later into the presentation and we break down product subcategories by retailer, you will see that the retailers that win are the ones that have the SKUs within grocery, household items and alcohol.

Right. So the everyday basics, you know, if nothing else, it gets them in the store. And if they're going to sell other higher ticket or discretionary items, they're in the consideration set because they have those core products.

Absolutely.

So, you know, we've seen this the last couple years because Prime Day, correct me if I'm wrong, but then in Prime Day used to be in November. It was closer to the Black Friday Cyber Monday period and it got moved up. I think post pandemic was in July, wasn't it? Wasn't that super early?

The last few fiscals it's been in.

July, but I remember that was, that was early. I think before that it was in October.

Yeah, you're probably right. My memory is jogging. But ever since like 2019, it's really been this Christmas, you know, in July moment Right.

And is that a trend you see to continue? And why are, why are these big retailers doing that?

Oh, yeah. I mean, the thing about retail is about training people to shop. So, for example, at ncmac, what we consistently see in our data is before any big holiday, Valentine's Day, Cinco de Mayo Memorial Day weekend, people start shopping for that holiday two weeks in advance. We've essentially trained consumers through promotional messaging, advertising. Like, you gotta start planning or things are gonna sell out.

Halloween candy, whatever it may be.

Exactly.

Yeah.

So fast forward Amazon events this holiday, Prime Day, and then Walmart joins in and Target joins in, and Sephora and Ulta. And now it's this huge shopping moment that America has gotten behind. So that shopping moment is absolutely here to stay, especially in tough economic times. And, you know, we'll get to this, but people will show up for the deals.

Right, That's. It's really interesting because it's kind of like the definition of consumerism, creating a holiday around shopping. And I'm a victim of this. I mean, I bought on Amazon on Prime Day things that I really didn't need. It was just, oh, this is a deal. I should get it. And I'm sure that that's really what they're feeding into.

Yeah, of course. Like, who doesn't want to brag about the great deals you got?

Right? Right. So, you know, obviously, you know, we're entering the holiday season, and one trend we saw entering this, and we had talked about this in the prep for today, Rachel, is that we are seeing shoppers taking fewer trips to retailers. However, their basket sizes are increasing. Does that have to do with rising gas prices? You know, why would consumers be putting more in their car versus less in the wake of an economic downturn?

Yeah. So this data right here is very, very important. This is data that Mi' Kmaq has seen throughout 2022. And so when news headlines were predicting doom and gloom holiday season, that consumers weren't going to come out to shop, we didn't feel that way. We actually said, hey, consumers are going to come out. They're going to come out for the deals and they're going to drive bigger baskets. Because that's what we've consistently seen in our data over the calendar year. Fast forward, if all of you have been seeing the headlines, that's exactly the outcome that happened. And so what's happened essentially over the last two years, especially in the US Is that people now see E Commerce as a vehicle to drive bigger baskets, drive convenience, so they don't have to shop as often average American pre pandemic was going to the grocery store 1 1/2 times per week. Now they can have the same outcome with three trips. So they've essentially reduced their shopping by 30% by driving bigger baskets and having convenience at home. And then when you see what people are putting in their carts, because we get basket level sales data at Mic Mac, you see right here it's essentials and baby formula number 10. Given the crisis that's happened across the US from baby formula.

So is what's driving it? Because obviously there was this habit that ensued during the pandemic where people were sort of stockpiling essentials. Do you think that was one of the things that kind of kicked this became a catalyst for this type of behavior?

Well, stockpiling will always happen in times of distress. You'll be a snowstorm happening, a hurricane. But this is what we're seeing right now is more sign of the times, which is with the money that I have, I'm going to buy the necessities for my family. And then the hair removal cream I also think is sign of the times, which is I'm not going to go to my local nail salon to get.

Or nail care serum. Right.

I'm going to do it. Exactly.

And that's another thing again we started to see during the pandemic is people couldn't go to the salon, they couldn't get their pet groomed. Right. They couldn't go get their oil changed because there was so much shutdown. So they learned how to do a lot of these things on their own. Exactly.

And something that we'll get to in a bit. But what you'll see here is like hair removal cream, nail care serum. This is happening in the same cart where potato chips are happening.

Right.

What this means is that the big box retailers are now starting to steal market share from specialty retailers.

Very interesting. So you know, we saw so many, I don't call concerning, but so many headwinds with the consumer earlier on. The question is, is that going to, was that an arbiter of what was the comment? Well, obviously get to what we saw. Black Friday, Cyber Monday, because as I mentioned earlier, it wasn't as much doom and gloom as what we thought, which at least to me came as a surprise. I was thinking that things were not going to be as rosy as they were. But we'll get into that in a little bit. Product availability is obviously a huge thing in retail. Maybe slightly less so in the E commerce world. But does E commerce ultimately, I guess Use that as an advantage for them because they don't really have the same shelf space issues. And how is that sort of manifested?

Oh, product availability is, I want to say, as important as it is in E Comm. What we've consistently seen in our data is that if the brand SKU is not available, the consumer is willing to put a competitive skew in the cart because it's about needs, not wants. And then the challenge, E Comm. Is that the user behavior is replenish, replenish, replenish. So if your product moves out of the basket because it wasn't available, it becomes infinitely harder to regain that opportunity.

You're saying. So you'll go to previously purchased items or whatever it may be. Once it's in that commerce flow, you're kind of good. But the first time it's out to get back in, you're almost at the top of the funnel all over again.

Absolutely. And you know, there was this a lot of the.

Is that different than physical retail? Rachel, Sorry to interrupt it. I mean, I guess physical retail, if you're going into a store, it's a slightly different dynamic. I guess the habitual I'm going to grab this brand exists, but it's not actually in a cart when you log in, it's a little different.

Physical retail, it's more in your face. Oh, my favorite thing is available versus just replenish the cart. The flip side of this is that early in the pandemic when a lot of major brands were out of stock, that's when Challenger brands were able to try to gain some market share because they were fulfilling a need. But now they're being hit really hard with supply chain issues because the big brands are always the first ones out of the factory.

Yeah. Let's talk a little bit about private label because, you know, obviously private label has been and will always be in times of economic hardship, a growing category. Because some consumers will say, you know what, you know, the premium brand soda or shampoo is great and all, but if I'm trying to make ends meet, I'll just get the store brand and, you know, I won't know the difference anyway. How much have we seen that as a trend this year during you know what, what we've all encountered?

No private private label is tough. There's a lot of conversations that are at the FTC level around the efficacy around some of these speculations. But if you.

Meaning what? Meaning that they say it's just as good as the. As a premium brand, but it's not.

If you listen to Andy, you know, the CEO of Amazon and he had a recent interview with Kara Swisher, you know, a lot of folks are saying, hey, you know, your algorithm is favoring Amazon private label brands. Meanwhile you're forcing us to pay all these dollars to beat them in the algorithm. You're making money every which way. So the like lobbying level, you're going to start to see more and more discussion happen around private label as you see consumers switch to these brands. So it's a really, really tough spot for brand manufacturers just because basically the.

Retailers control the rails. So they control the rails. So you know they're, they're going to push their own products because they obviously have higher margins there than pushing the.

Name brand products 100%. And so the question is whether government is going to help break up big business to change this.

Right? And really Amazon is the one that has a disproportionate advantage because of the amount of data that they have.

Well, I mean all the big retailers. So I think one of the big headlines that happened was two years ago when Target published their earnings. It was summer of 2020, I'll never forget. But it was the first time that they highlighted the revenue of good and gathered, which is their private label grocery line, which they've done a phenomenal job with. It did a billion dollars in revenue. That was 2020. So that was the moment where a lot of folks were like, oh, this is going to create a huge ripple effect in the industry. And so I would say, you know, folks like Amazon, Target, Walmart have a lot of strength in this environment.

And what are some of the categories where disproportionately consumers are flocking towards private label as of late?

It's necessities, it's household items, it's even food. Given what the success that Target has had with good and gather where you see it, less is more in consumer electronics as you've seen it here. And Amazon's actually and Target's done a pretty strong job with apparel. So folks for a long time thought that would never happen and it successfully has happened.

So if you're a brand and you're a brand manager of a packaged good, multi brand, 100 million or billion dollar packaged goods brand and you wanted to become private label proof, so to speak, and make sure that your brand was so alluring that no matter how, you know, appetizing it might be for a consumer to switch, they're going to stick with your brand, what are some of the things that you see? I guess Consistent across the brands that have kind of been able to weather the private label storm.

Well, we have a perfect example. Liquid Death.

Okay. Yep.

It's water in a can. It's water. Right.

We're $700 million now. Right. New category. Right.

And they market water the way that you market beer. So that's a perfect case study of being ruthless about investing in brand and executing flawlessly.

So it's about brand and brand trust ultimately, in a world where a lot of companies are really focused on performance. And we'll talk about the shifts in media, it really speaks to the fact that brand still matters. Right.

And then you saw this. This is a totally different category, but in Airbnb's earnings, they've pulled so much of their bottom of the funnel spend and they're right now only investing in upper funnel media.

Now they've become a verb, to be fair. So, you know, not every brand has that luxury.

No, but like it's. These are stories about investing in brand.

Yeah, absolutely. But no, to your point, liquid death isn't the verb. They're a startup that is a couple years old. So if, if they're able to gain the benefits of brand with them private label, it just shows the power of it.

The founder of Liquid Death, what was his job before he was a creative director at ad agency. That's it.

Yep.

He was never in cpg, works in advertising.

And ultimately they're selling water, which is basically as commoditized as it gets in terms of consumer packaged goods. You know, there's one ingredient in it. So if there's any way where you can truly see the power of the brand and the storytelling and the packaging, it's in the bottled water space or in their, in their instance, the canned water space. But I think it's a great insight for sure. So we're obviously also seeing shifts. You talked about this a little bit in terms of where consumers are shopping differently this year versus last and who some of the winners are in 2022. Can you talk about on a category basis where you're starting to see consumers gravitate towards this year? Yeah.

I think the big thing to take away from this slide is Walmart. Walmart is gaining real market share.

Right. I mean, look at 2021. I mean, beauty was Ulta last year and. And then you had grocery was Instacart, and now you have grocery with Walmart, and now you have beauty as Walmart as well as personal care. So you see the data from 2021, 2022, how much share Walmart's gaining which is crazy because their stock has not had a good year. Right. That they've had trouble earning misses on over inventory, et cetera.

So it's, you know we cannot use the stock market as an indication of business success rate.

Not even stock market. They basically said they had, they, they over ordered, they had too much inventory. So you know, so. But I guess you're saying that disconnected.

I think every CEO and Matt, I don't know about you but I like to think that we're like minded. I think founders, CEOs, you're always going to be optimistic.

Yeah.

And we all believe that we were going to grow a certain amount in 2022. We knew it wasn't going to be like 2021 and 2020 but we didn't think it was going to be what the year actually ended up being. And so everyone kind of misforecasts in that way. But I think the most important thing about Walmart here is that the investments that they've made in Omnichannel, the investments that they've made in grocery.

Right.

Like the key thing here is grocery is the anchor. We showed you the basket level sales data. People are looking to buy household products. They then obviously have millions of other SKUs that they can cross sell into that customer that's shopping for their family.

Yep.

And then the investments that they made in retail media. It is a perfect storm for Walmart to continue to gain market share. And this is all Micmac first party data. And then if you've seen the news headlines, what did we learn from the news headlines around Black Friday? Walmart was the winner. Right now America prefers Walmart even over things like Amazon.

And so, and it's so interesting because they Walmart was so relatively late to the game digital and there are many that were predicting Walmart's demise because Walmart.com was a shell of what it is today. As recently as maybe five years ago when Amazon started to dominate. I mean have they caught up in digital? Is that really what's happened? Because I know they have their own membership program now as well.

They have made massive strides. They made some really smart hires. They went all in on Omni Channel like they call it Walmart Connect. It's one team. You're meeting with the merchants of brick and mortar and online at once. You're meeting with the media team of brick and mortar and outline at once. And I think that they're making some really aggressive moves to continue to keep this market share for Amazon to change the game Here Amazon actually needs to make way bigger strides in grocery and they're struggling to right now.

Very interesting. It's something that in 2020 you probably didn't think you'd be saying as they kind of dominated. You mentioned also retail media. Last year you were one of the first people that kind of turned me on to the power of retail media. A mutual friend of ours, Mark Edmondson, who's the CMO of Gogo Squeeze, I interviewed him for our Speed of Culture podcast and he was talking about how important and impactful and really how much of a prerequisite that is now becoming for them to be able to play in some of these retailers. So I really want to kind of dive in to retail media. First of all, what is retail media for those who don't know and why has it taken on such great momentum here in 2022?

Yeah, so retail media is retailers like Amazon, Target, Walmart, using their first party consumer data, people are completing purchases. Right. So they know my name, my household address, my credit card, and now building an advertising platform on top of that data. And so all of a sudden retailers competition is not just each other, it's also Meta and Google and the trade desk and anywhere else that you could buy media. And so what's happened is a few things. So if everyone remembers the headlines, and this all started around summer of 2019 when Apple woke up and realized that companies were building billion dollar businesses inside their hardware, meaning like Google and Meta, these huge advertising businesses and Apple wasn't seeing a piece of it. What did Apple decide to do? Take their copy changes to make it increasingly more difficult to retarget consumers through their hardware. Right. So this is all the trends around cookie less Internet.

Yeah.

So all of a sudden advertisers were not seeing the same CPM effectiveness in channels like Meta and Google. And then the CFO was like, wait a second, we're spending all of this money, we're not seeing the same results. Either I'm cutting your budget or you got to come up with new strategies.

And that by the way Rachel, didn't that really impact a lot of the, you know, that huge wave of direct to consumer brands that popped up, whether it's Casper Mattresses or Warby Parker, et cetera, they were all doing incredibly well before these changes took place. And now and then they started to.

See really depleted roi DTC businesses. Everyone was using the same Playbook, which was use Facebook ads or Meta ads to drive customer acquisition on the backbone of Shopify. Playbook no longer works. So this Created a perfect opportunity for retailers to fill the gap. Because what does Amazon, Target, Walmart sit on? They sit on all of the purchase data. So hey, I know who purchased diapers this day last week. They probably need to replenish. Let me go hit them with an app. And so I share this because so much of the rise of retail media happened because of the changes in iOS 14 and cookieless Internet. It started to fill this gap. That was number one. Number two is that retailers have a different advantage over advertisers than traditional digital and social platforms. And that is if a laundry detergent company wants to do business, they have to make the retailers happy. Because without that shelf space, have no business.

Right?

And so I see this because the retailers come from a position of strength and negotiation power. And so if they say, hey, laundry detergent, you now need to give us 20% more advertising dollars than you did this day last year, the retailer says, okay, let me write a check right now. The advertiser. The advertiser has no strength in these negotiations. And so this chart that Matt has right here is again, Mic Mac data. We work with over 600V brands and we have the privilege of working with some of the biggest executives at the biggest consumer brands. They sit in our customer advisory board. And in one of our customer advisory board meetings this year, I asked them, what percentage of your media spend today goes to brand versus retail media? And they told me, Rachel, 25% goes to retail media, 75% goes to brand media. I then asked them to project that into the year 2025 and it was the inverse. They said that 75% of their media spend would go to retail media and 25% to print.

I mean, this is kind of crazy. I mean, think of if I'm a cpg, if I'm Procter and Gamble, I'm basically building my own retailer. Because we're basically, earlier we were saying that the retailers are creating their own products and now they're creating their own re. You know, they own the Rails now they're creating their own media channels. They're essentially, you know, going vertical. And how would the CP, traditional CPG companies going to be able to compete? I mean, ultimately they're going to need to create their own rails, right? I mean, you kind of see how this is all playing. And, and these guys have air cover, right? Target and Walmart have air cover because they're not going to get, they may get antitrust concerns on the private label stuff, but ultimately Amazon's the 800 pound gorilla in the room. And ultimately no one's going to say, target Walmart, you're getting too big because of that.

Yeah. So this is my perspective on all this.

Yeah.

And I will get to predictions, but retail media has essentially been given a hall pass the last few years.

Right.

And no one was really looking at the efficiency of it.

Pay to play. It was almost a means to an end to get the distribution. And because of that, they can write the checks because they know they were getting the sales on the back end.

Exactly. But for my most sophisticated customers, this year is the first year really for many of them that they're starting to build in retail media into their media mix models, primarily with Amazon and Walmart data. And what they're learning is that retail media is not as profitable as you might believe it is. And that is because to do retail media, you actually have to do lots of other things. You have to pay slotting fees. That's essentially paying rent to the retailers for shelf space.

Right.

Then you have to pay fines, like if your product shows up late to the distribution center, you have traditional shoppers hidden costs that.

I'll go into the ROI analysis and.

They'Re putting it all there versus Meta, where you can log into Facebook Ad Manager and buy an ad for a dollar and it just literally costs you a dollar.

Right.

And so that I truly believe will become the conversation going into 2023, as more people become more educated around the expense around retail media. And I believe that more brands will start to come together and you're starting to see it at the ANA and the iab and they will create a more of a collective force to create more balance in the ecosystem. And that's why I believe if you went back to those pie charts, we're not going to end up at 75, 25. But yes, I do believe we're going to end up at 50, 50, which.

Is just a shocking number compared to where we were just a couple years ago when retail media wasn't a thing. I mean, there were someday circulars back in the day, Right. Maybe for your time, where brands had to buy ads and Best Buy Sunday circular in order for them to be sold at Best Buy. And this is basically that rebuilt for the digital generation. Right. That's. That's kind of the best way to put it. But it seems like they have more leverage than ever before to kind of impose these channels. And on the retail side, it probably just stretches their margins even further. Right. Because they must have incredibly high margins on selling this retail media, 100%. So let's talk about social because, you know, that's kind of the area, you know, that Mic Mac really specializes is in terms of social commerce and driving those social interactions into E commerce. How has social media and social commerce fared this year? There's been so much negative publicity. I mean, there are articles now saying we're at the end of social media. Right. Because to think about it, we have the Twitter debacle, which is a whole nother webinar in its own right. You obviously have all the challenges that's going on at Meta as, as Mark Zuckerberg tries to take Facebook into the Metaverse and you know, maybe moves away from their core business. And then you have TikTok and all the concerns that regulators have about their connections to China. There's just so much headwinds in the world of social media. But despite all that, how is it performing as an actual channel for brands in terms of driving commerce?

Yeah, well, first, yes, we started in social commerce, but we get traffic everywhere, programmatic brand websites, you name it. It's been a really interesting year for social commerce. So, you know, first headwind, as I alluded to, was the changes that were that occurred in iOS 14 that happened last year really carried over into this year. And for most brands, all of a sudden they said to themselves, okay, social is really an upper and mid funnel channel. We can't rely on it for lower funnel campaign objectives. We'll do that in search, we'll do that in retail media.

Right.

And so that created started some shift in spend. The second was the continued rise of TikTok. I would say in 2020 and 2021, most brands still considered it an experiential channel and they probably were putting less than 1% of their total media spend into TikTok. We've seen an astronomical rise of spend. We're seeing that spend essentially move from Meta and snap at streaming video into a platform like TikTok. And TikTok has done a really, really good job of building out its Dr. Ad products, its direct response ad products. Twitter. Twitter was.

Are brands concerned about TikTok at all, about all the kind of rumblings about their connections to China and security risks? Or is that sort of just kind of just like fluffy headlines that don't really impact the way they do business?

You know, there has been that. We've had some, some customers who chose not to invest in TikTok because of that. But for most folks, they're moving money into TikTok.

Right.

And that's also because there are not so many options right now. Right. So essentially everyone that I know has pulled spend out of Twitter. If you guys have seen some of the Mic Mac data, because it's made the national news headlines, we've seen essentially now a hundred percent decline in our Twitter traffic. When.

Wow.

Where on October 27, when Musk took ownership of Twitter, we immediately saw 75% decline. So overnight, brands just paused spend. And during that time, we saw a rise in TikTok traffic. So brands were reallocating spend.

So TikTok's been a bit, as you've seen, the biggest beneficiary of what's been going on.

But the other interesting thing about social is that you're starting to see social and retail media blend. And so I think that is what is going to continue to evolve over 2023. And there's been like, this has been going on since 2019. So Kroger did a deal with Pinterest in 2019 where you could buy Pinterest ads against Kroger data. And so since then, you've started to see these types of programs be built out. The challenge is it's happening in a bespoke manner. And I think the conversation that will happen going into 2023 is, are you buying the same audience over and over at a premium on different platforms? Like you buy the Walmart audience and the Trade Desk, and then you buy it in meta and then you buy it on TikTok, and you're just literally reaching that same consumer over and over and over. And so I think the new metric in all of this that brands are going to be holding the platforms as well as the retail media groups accountable to is, are you driving incremental revenue?

Right.

Net new.

Really? What's the return on ad spend and how is it. How is that different than other channels?

Exactly.

Ultimately. Right.

So, but as you. If there was a pie chart you had before where you saw around 63% of our traffic is still occurring in social, and then a lot of it after that is in Programmatic.

Yeah.

And Programmatic is also inclusive of ctv. A lot of our customers are essentially buying on Trade Desk, and it ends up on Roku. So social is still strong. But if I made this pie chart for you two years ago, it probably would have said 75% social.

Gotcha. So we are seeing some headwinds overall and social, given everything we discussed. So let's switch gears a little bit and kind of round out this presentation about Black Friday Cyber Monday. Obviously, it's the culmination of the Shopping year for brands. So many big brands and big businesses have a disproportionate amount of their business happen during a very small period of time between Thanksgiving and the Christmas holidays. So really curious to see your take on what we've seen. Consumers intended to shop on Black Friday Cyber Monday about the same levels we've seen in the past. 45% had intended to shop Black Friday, 37% Cyber Monday. This is an interesting thing we pulled up in terms of which trending topics we saw from consumers. This is just a side thing, but we had stuff like low content books, coffee table, fluffy books, mushroom decor and gaming sleaze. It's always interesting to see some of these new exploding topics that consumers see. But what do we actually see? Let's start with Black Friday in terms of consumer shopping. Rachel?

Yeah, so we actually saw record sales. It was modest growth. So it was around 2 1/2% year over year growth.

And what was the growth last year, if you can remember, in 2021? From 2020 it was, it was higher.

It was like 16%. Growth has certainly slowed.

But it is this online growth we're talking about or just shopping in general?

This is online.

Yeah, online.

And that's consistent with what we've seen throughout the calendar year at Nick Mac is that it's been a modest growth year. But news headlines were, you know, speculating the end of the world and shopping as we know it. And so what we saw on Black Friday is that consumers were willing to show up for deals and then what they bought, a lot of them, what they bought were against Staples. And so I think it continues to speak to the tough economic times and it speaks to why Walmart is becoming the Trojan horse over Amazon. If you think about Walmart, they're America's biggest grocery store.

So a lot of the Black Friday sales were actually groceries and staples versus people. Right. Versus people buying gifts. And what many would probably think Black Friday is for is holiday shopping. It's what this was really shopping for. Staples messed within a holiday shopping period. That's fascinating. And I mean it's no surprise to your point in terms of Walmart, Amazon, Target continuing to dominate. How about some of these other platforms that we have at the bottom of the list here, Drizly and Instacart, because those are obviously startups that haven't been around for that long. Talk to me about why they are so popular and have such big share.

Yeah, I mean, so brands, especially in the categories where their SKUs are available in Drizly and Instacart, they see really high conversion rate with the promise of same day delivery. And so when they're buying media or they're doing influencers or even organic, that's a value proposition that they really shout to a consumer and as a result drive traffic to those retailers that can deliver on the promise of same day delivery. A particular customer who's in the beauty category, they saw around a 70% lift in econ conversion by just simply communicating get it today. And so that's, that's really the power of that. Folks speculate what's the longevity of these platforms, especially if, you know, Walmart can come to market with their own solution and not have to rely on a third party, which you know, they are, they are experimenting with their high value loyalty program. But it goes to show what people are buying and where advertisers are directing traffic to.

Yeah, it's fascinating. And obviously Uber, during the pandemic they had a huge push for Uber Eats and you know, they bought Drizly and it's a huge piece of their business as well. What do you think about Uber and their future in the e commerce space?

So I think Uber is a retail media platform to watch.

I do too.

They brought in some heavy hitters to build out their ad business and in Q4, you know, as someone who is an active Uber user, it is very clear they are coming out guns a blazing with their ad program and the amount of time that one spends with an ad in Uber is a lot. So just knowing the investments that they're making, I think it's one to watch.

Another thing we saw during Black Friday, which kind of goes against some of the trends we talked about earlier today, is electronics actually had a nice little surprising bump both during Black Friday and Cyber Monday. What do you think was behind that?

I think it has to do with folks wanting to show up for deals and take advantage of this moment and potentially not shop the rest of the season. I think that's what's yet to be known is what's it going to look like between.

Right. Was it a pull forward? Was it a pull forward because the deals were so good and then we're going to see a huge drop off for the rest of the holiday season.

Exactly.

And in terms of Cyber Monday, is that, is there any distinction anymore? Because it used to be a distinction. Obviously the background was people didn't go to work on, on Black Friday so they would go into stores. Cyber Monday, everyone's back in the office and they're doing E commerce shopping now we're in a work from home, zoom based world and it's all kind of blended together. Is there really distinction even worth discussing?

No. I think it's now the opportunity for consumers to have deals over four days and use that as an opportunity to build their baskets, make decisions. When the clock strikes midnight, they ultimately decide where they want to spend their dollars.

Yeah, totally makes sense. And buy now, pay later. We can just bring it up again because I see this being one of the biggest bubbles yet to burst. Because what's happening is, you know, the, the quality of this debt from consumers in the buy now. And Peloton was the first huge beneficiary with the firm where Peloton's business exploded. But very few people of any put down the $2,400 for a Peloton bike. They're all still paying $48 a month and they're going to be for a very long time. And that's how one reason why Peloton was able to take advantage of the COVID boom, but there's so many other smaller examples of that. I mean, do you see this going away? Do you see maybe the retailers taking over this financing themselves?

I mean, there's a business there. Listen, this is, this is my personal opinion as Rachel Tippograph. This headline scares me to my core.

Yeah, me too.

Like we're training consumers continually to spend money that they don't have. Right. I don't think that is wise for them or the economy.

Right.

And for me, it's a question of ethics. As a retailer, do you want to support this type of behavior? Because it's going to have long term negative effects for consumers as well as society.

Couldn't agree more. And I think ultimately in a boom cycle, no one thinks about it. And then when things start to unravel, as recently with crypto, you start to see some chinks in the armor. I mean, ultimately some of these buy now, pay later, later companies will probably go under. They're probably selling off their debt to other financial institutions. But you're right, it's training consumers to not think about, you know, what they can afford. And what we're starting to see is while we were in a period of record high savings 18 months ago, now we have record high consumer debt. And the cost that that is going up as interest rates go up, and to me that is really could be the Black Swan of 2023 is massive consumer debt defaults, consumers not being able to pay their mortgages, et cetera. I mean, there's a Lot that wrong. And I think for the government it's going to be a balancing act between wanting to tame inflation, which they can do by raising interest rates. But if you do it too much, then you obviously can tip the economy over and really put consumers in a position where they can't afford the, even the daily necessities, the staples, which has really been the saving grace, it sounds like during the holiday shopping season. So I would love to, we have. I'm going to just try to get this deck off so you can see our screen. And I'd love to take some questions from our audience. We have a really highly engaged audience and some really amazing brands here. One question we had is what do you think the move back to basics will mean for specialty retailers, Rachel?

I mean if you look at some of the interesting moves like Sephora at Kohl's, I think for specialty retailers, they, they really need to think about their marketplace strategy.

Yeah.

To win in this hyper competitive environment, you need to have a wide breadth of SKUs. And I have concerns. Unless you're like super top of the market like Bergdorf's where you're catering to a special consumer and you can meet their luxury needs. If you're a specialty retailer that is targeting like mass America, I really think that you need to focus on your marketplace strategy.

Right. Yeah. So basically go niche, try to find that tribe, so to speak, if you're going to be a specialty retailer. But specialty at scale, it sounds like, is where some of the challenges are.

But a good example would be like Petco. So when our mutual buddy Taraq Hassan was cmo, that was really when Petco started to rebrand itself as a pet wellness company and invest in the services. Like you go to Petco, there's a vet there.

Right.

And so I think that's the other part of the specialty retail model. How do you make it about experience and services that can cater to that group?

Yeah, and I think that is going to be a trend that we're to continue to see. I mean, we saw the announcement from Amazon who's really deeply investing in content to get consumers in movie theaters again. I wouldn't be surprised if Amazon bought a movie theater chain, used that as a, you know, used prime video as a kind of catalyst to get people to maybe shop. Do you see Amazon having physical retailers at scale? I know they've had fits and starts with that, but are they going to need to go in that direction ultimately to fend off the Walmarts of the world?

I think they need to do another thing in grocery. I'll say that with significant confidence. I can't tell you exactly what that'll look like, of course, but I think that's. If I were leading Amazon, that's where I would make another investment.

Yeah, absolutely. So in terms of the positioning of a Walmart, I mean obviously everyday low prices in a down market is going to be a positioning that's going to work. Target very famously went up market in the 90s and early 2000s to try to be more fashionable, appeal to a younger, more contemporary consumer. Do you see Target and other brands that maybe had moved away from value positioning, going back to that kind of value positioning to try to capture maybe the consumer that they're losing? How's it. And it's not just about targets, about other brands as well. Seeing the success of Walmart, do you see other retailers sort of, you know, changing their course?

I think they already have.

Right.

I think that a lot of folks are focusing on price and they're also encouraging, they're trying to drive profitable growth. So the thing we didn't talk about is how E commerce can often be unprofitable. And so the other value proposition that they're really focusing on is buy online, pick up in store. That's a high value, very profitable consumer.

Yeah, makes sense. Really interesting question we got from Danielle who said why wouldn't we consider. Well, basically what she's saying is since brands have to pay sliding fees regardless, why should the slotting fees be sort of factored into the retail media fees? Like why should that play into the roi? Co agent, what's your thinking behind this? What?

And this isn't me, this is what I see across our customers. So a 650 brand is that when they're having conversations with their CFO, it's about total cost to serve the customer. They do not divorce media from the rest of the investments because the reality is they can't do the media without doing these fundamental other things. And so they create a line item. Total cost to serve Walmart, total cost to serve Kroger. And that's the conversation that is being had between the people who are managing the media budgets and the finance department at these brand manufacturers.

Yeah, totally makes sense. What are some of the changes that you think you're going to see heading into next year in terms of newer channels? You know, whether it's TikTok et cetera, continue to gravitate. You know, a lot of brands are thinking about the Metaverse and things like that. Are there any emerging things that you have your eye on, that you really see actually making it to mainstream next year.

I think CTV is going to continue to grow.

Ctv meaning Programmatic Television. Targeting consumers over.

Yeah, yeah, like ads showing up on your connected TV and those apps that you're playing with. I think that's going to be a continued area of growth.

What about influencers?

Influencers are 100% here to stay. Like it's. We live in a creator driven economy and that's a, that's a big part of how you go to market. TikTok will continue to grow, I think a platform that doesn't get enough love and we're already seeing growth because a lot of the changes that are happening in the ecosystem is Pinterest. So I think like fall back in love with Pinterest as a platform to consider. Programmatic will continue to have a large play. Retail media will have a large play gaming and the Metaverse. I would say when applicable to the right customer base. So for example, like we work with a lot of toy manufacturers so like a lot of investments within the Metaverse make a whole lot of sense for that consumer. I think other brands that just like played around just for branding purposes in tough economic times, you might not see them do that again. I think you'll see brands and we've seen it over years, but as more money shifts to retail media and they lose more control of their customer, I do think that brands are going to try to come to market with more inventive loyalty programs.

I was about to ask about subscription. Do you see that coming back?

So they'll figure out a way to still have some level of a one to one connection with their consumers.

Right. Because they need it. Right. Because I think that my main takeaway from this, and I'm curious to hear everyone else's in the weeks to come, is that the retailers are doing what Apple did with the iPhone is they understand that they control the Rails. And once you control the Rails and you have the data and you can create your own products which they're doing with private label and they can basically force anybody else who wants to play on their rails, like pay to play, you really have just a huge competitive advantage. And you really put these traditional consumer packaged goods companies really on their heels. Companies that it used to not be the case and if you had a big brand you used to be able to dictate a lot more because consumers would seek you out when you went into a store. But in an economic downturn, maybe not so much anymore. And to me that's the biggest takeaway and it's going to be fascinating to see how that evolves over the next couple years.

Yeah, there is a nuance that we didn't really touch upon, but it's the challenging place that small medium businesses are in. Yeah, you know, they can't really. The only retail media that they can participate in today is Amazon, because Amazon is. And so it's a really, really challenging place for them to be. So I think that you're going to continue to see acquisitions, but not at favorable terms for some of these more challenger brands by the big holding companies, and then you're going to see a lot of them go out of business.

So the question is, it's really sad, right?

Yeah. What happens to product innovation when that happens?

Right, Right. Absolutely. Well, it's going to be interesting to see. We're running out of time. First of all, Rachel, and for those of you who obviously gave so many comments, where you can hear more from Rachel. Rachel hosts an amazing podcast called Brave Commerce with a mutual friend of ours, Sarah Hofstadter, and they do an incredible job of diving deep into this stuff. Just like my Speed of Culture podcast is part of the Adweek Podcast Network. So be sure to tune into that. We'll send out a link to that as well. And it's just amazing having you on every year. I think we need to move this to a biannual, so I'm going to make a for you to do that and just wishing you all the best as you wrap up the holiday season. So thank you so much for joining us today.

Thank you for having me. Always the best.

Absolutely. Talk soon. Thanks everyone for joining and until next time, we'll see you soon. Take care, everyone. The Speed of Culture is brought to you by Suzy as part of the Ad Week Podcast Network and a guest creator Network. You can listen subscribe to all Adweek's podcasts by visiting adweek.com podcast. To find out more about Suzy, head to susie.com and make sure to search for the Speed of Culture in Apple Podcasts, Spotify and Google Podcasts or anywhere else podcasts are found. Click follow so you don't miss out on any future episodes. On behalf of the team here at Suzy, thanks for listening. RA.