Consumer buying habits are in flux. Need proof? Just look at the affiliate marketing category.
Affiliate network Pepperjam is seeing “a dramatic shift” in how people shop,” said CEO Matt Gilbert.
Between March 11 and March 16, just as the coronavirus crisis was really starting to crack wide open, Pepperjam’s sales volume, measured across about 700 retail and ecommerce brands, dropped by as much as 9% from a year ago, after a period of steady growth of about 15%.
Here’s the clincher, though: Since then online shopping has returned. Sounds good, right? Sure. But there are some serious caveats.
Shopping in waves
Pepperjam has observed “a clear progression in how people are buying,” Gilbert said, which the company is using to try and anticipate what that the trend will mean moving forward.
For instance, sales of computers and electronics dipped later in March, after a surprisingly strong first half, which Gilbert said was driven by people preparing for home work setups and potential homeschooling situations. Clothing and apparel sales, on the other hand, suffered as people went into quarantine, but leapt from zero or negative growth to more than 200% growth in the last week of March.
People who want comfortable outfits to work at home were propelling clothing sales, Gilbert said.
Brands and retailers are gazing into their crystal balls, doing their best to understand how these waves of consumer spending will play out.
Clothing sales, for instance, may stay up for a few weeks, but that wouldn’t necessarily be a sign of strength, since retailers – brick-and-mortar based companies in particular – are heavily discounting product because they need to clear out stores and warehouses. The trend could be short-lived as shoppers opportunistically snap up bargain bin rates from upscale mall retailers.
Getting a handle on shopper motivations is key for retailers and manufacturers trying to interpret these currents of behaviors now in order to get their discounting and production strategies on track for the back-to-school shopping surge.
Consider the home and garden category, which would typically be in serious prep mode right now, Gilbert said. Is the big uptick in home supplies from early March an indicator of a good season? People are stuck at home and looking to do projects or renovations. To what degree are home and garden purchases driven by people who plan to host friends and family down the line?
Retailers and manufacturers are attempting to answer these important questions – and place their bets – without historical precedent.
So, what’s next?
An additional wild card is the fact that the coronavirus may reshape how people shop even when the crisis is over.
New direct-to-consumer companies and CPG brands are reading the tea leaves and entering the affiliate marketing space, Gilbert said.
It’s a logical next step, since online food and drink sales rocketed up to 400% annual growth by the end of March. Grocery delivery services and curb-side pickup present direct online conversion opportunities for CPG brands, which historically have only been able to use online advertising for brand campaigns or online shopper marketing, such as coupon deals or sales at Amazon.
Many DTC companies and big-name CPG brands never touched affiliate marketing before, Gilbert said. But in the past few weeks those brands have accelerated testing of affiliate and other channels, including influencer marketing, because they’re worried about losing their brand connection, since people are making more SKU-based purchases (i.e., people want toilet paper, but don’t care right now whether it’s Charmin).
Brands are also considering new fulfillment options for the first time as well.
“This crisis exposes the vulnerabilities for a brand being dependent on outside distribution,” Gilbert said.
With brick-and-mortar chains down and Amazon delaying all nonessential product deliveries and additions to its warehouse network, some of the best-known brands are suddenly stuck with full inventory and nowhere for it to go, he said. They’re also worried about losing share to DTC upstarts that have already figured out shipping directly to a customer’s front door.
But some categories, unfortunately, have no recourse or new tricks to learn. They’re just taking a beating.
Travel is the clear loser. By the end of March, Pepperjam’s travel-related affiliate sales had fallen by about 100%. Which is to say, they disappeared.
Jewelry and accessory brands are struggling as well. A surprising portion of the accessories category is dependent on travel, Gilbert said. Those are the kinds of connections companies didn’t appreciate before, but that seem obvious now that people aren’t buying the tech and accessories they normally would for trips, he said.
So, what can a brand do, if its sales have evaporated right now due to quarantine and fears of a recession?
Not much, unfortunately, unless they can pivot into the coronavirus economy.
Some luxury accessory brands, for example, have converted factories to make essential products, such surgical masks.
It’s a combination of capitalism – there is strong demand, after all – and a hint of marketing theatrics mixed with a sense of frustration. The fact is, there isn’t much else brands can do right now.
