On Wednesday, Amazon proudly proclaimed that the Black Friday/Cyber Monday shopping weekend was “its biggest ever,” but digging a little deeper brings to light a murkier picture.
There were many factors at play this year indicating that a difficult sales landscape is afoot. The most obvious one is the current economic climate — inflation has been rising for months and consumer spending has been slowing down as a result, especially in discretionary categories.
What’s more, many brands and retailers miscalculated product demand at the beginning of this year, meaning some are now sitting on excess inventory needing to be cleared. But there was one thing brands on Amazon did not expect, which may have had an adverse impact on their initial holiday sales: Amazon’s advertising platform allegedly experienced a reporting outage between the Friday and the Sunday of the Thanksgiving weekend, meaning marketers were unable to see how their ads were performing.
In an emailed statement, an Amazon spokesperson said, “We identified a reporting delay for some sponsored ads metrics over the weekend. This is resolved and reporting is now current. We will work with our advertisers to ensure they have the best possible experience with all Amazon Ads products.” The company didn’t say how it planned to make things right with impacted brands.
“It was astounding,” said Kiri Masters, head of retail marketplace strategy at Acadia. While Amazon’s ad platform has broken from time to time, Masters said she has never seen the program down for “as long, [and] never as terribly timed.”
The outage, she said, meant that the brands she works were “flying blind.” Before a big sales weekend like Black Friday/Cyber Monday, Acadia works with its brands to figure out a proper budget and how best to allocate those funds. For example, she is given a previously agreed-upon amount of money to spend if an ad is seeing above-average return on ad spend. “We’re adjusting throughout the period according to those goals,” she said.”
But this year, no one could see ad performance in real-time. “We can’t adjust up, we can’t adjust down, without knowing what is actually going on,” she said. As a result, some media buyers overspent on their campaigns without realizing it. By Sunday, the allocated budget was gone, as the buyer had no idea how much money was being spent on Amazon’s ad platform. “There were other brands who underspent and ostensibly would’ve lost sales when there were people potentially able to buy,” Masters said.
It really put a cherry on top of a rough time to be selling discretionary goods. While the data has to be finalized, Acadia said that the five-day sales average of Thanksgiving weekend was up 49% compared to the previous two weeks. Last year, that same statistic was up 88%, and in 2020 it shot up 83%.
Indeed, data from Profitero shows that some of the biggest BFCM winners were household items — not gifts. Household paper products were five of the top 20 best sellers that weekend — a 40-pack of Bounty paper towels was the #2 bestselling item.
It seems even Amazon was aware of this consumption shift. “The most prominent deals on the ‘deals and promotions’ page,” said Martin Huebel, a former Amazon employee who now is a strategy consultant for first-party vendors, “were categories with re-stockable items — beauty and personal care.” But more giftable items — “consumer electronics, computers, smartphones — more discretionary categories — those were the deals that, yes, they got featured, but they weren’t featured as prominently as grocery and personal health,” he said.
Amazon’s own results showcased this. The most popular categories, according to the company, were home, fashion, toys, beauty and Amazon devices. The company, however, did not go into granular detail about sales numbers for these categories beyond saying that the weekend event generated “more than $1 billion in sales for small businesses in the U.S.”
According to Huebel, the overall sense he observed was that all parties — sellers, vendors and Amazon itself — “wanted to play it safe.” For 1P vendors — who have to negotiate directly with Amazon the wholesale price of products, which then Amazon prices to the consumers — “you saw that the price discounts were not as aggressive as in the past,” he said. That, Huebel explained, is “an indicator that, depending on the category, Amazon is under pressure to increase its own profits.”
In short, the economic turmoil that may likely dampen holiday sales growth is also dampening holiday sales strategies. And it’s making sales numbers softer for brands, and making it difficult to make the economics work.
As Acadia’s Masters put it, there’s an overall change in how shoppers are thinking about buying things. “Last year it was, ‘if something is in stock, buy it,'” she said. “Now, the mentality has changed to ‘I’m just going to wait until it’s on sale.'”
Amazon news to know
- At an event hosted by the New York Times this week, CEO Andy Jassey spoke candidly about Amazon’s need to cut costs. “As we went through the plans, we realized we needed to be more slim on some of our resources,” he said.
- Amazon has a new, smaller drone it plans to use for deliveries in major cities. The company hopes to begin using it in 2024.
- Workers at an Amazon air hub near Cincinnati are trying to unionize.