5 Shifts E-commerce Brands Should Make to Mitigate the Supply Chain Crisis | Marketing Maestros | Blogs | ANA

5 Shifts E-commerce Brands Should Make to Mitigate the Supply Chain Crisis

December 10, 2021

By Ki-Hoon Chung


Retail experts predict an all-time high of over $1.147 trillion in holiday-related retail sales this year — a staggering 9 percent increase from last year's sales, per eMarketer. However, one major obstacle stands in the way of every single brand: the global supply chain crisis.

Tech companies are experiencing chip shortages and an unprecedented demand for electronic goods. Large retailers such as IKEA, Home Depot, and Walmart are opting to commission their own shipping vessels, despite exorbitant prices. Layer on soaring shipping costs, extensive wait times, health-related labor issues, and a lack of raw materials, and holiday shoppers may be cutting up their wish lists.

The Supply Chain's Impact on Brands

For brands, the supply chain crisis can lead to four main issues: lowered profitability from slower shipping and lack of inventory, increased order cancellations, disrupted holiday campaigns, and decreased customer satisfaction.

Undoubtedly, brands run the risk of damaged profit margins and limited product availability if they don't adjust campaign messaging, measurement, and a shift in digital ad strategies.

The Five Shifts E-commerce Brands Should Consider

Supply chain issues can cause revenue drops and plummeting profitability, but it doesn't have to be this way. Rather than simply just surviving the 2021 holiday season, companies can thrive by capitalizing on the changes and riding supply chain trends. Here are some of the best ways brands can respond to the supply chain crisis and maintain profitability this holiday season.

1. Launch Loyalty Programs Promoting Scarce Goods for Diversified Revenue

Some companies are launching loyalty programs that give members access to in-demand products at an annual cost.

For example, Best Buy's "Totaltech" program will give members exclusive access to high-demand holiday products before other consumers for an annual fee of $199.99. Members will also have access to Black Friday discounts, free two-day shipping and a variety of other perks.

For Best Buy, this gated membership enables the diversification of revenue during the supply-chain crisis. The loyalty program also allows Best Buy to potentially adjust ad spend toward retaining loyal customers over acquiring new expensive customers.

Launching loyalty programs offer an opportunity to bring in new revenue and ease profit margins, and a chance to shift focus to customers with the highest lifetime value potential.

2. Partner With Domestic 3rd-Party Product Fulfillment Services Like ShipBob

International shipping continues to experience high costs and fulfillment delays. Thus, when possible, lean on domestic shipping services.

Also, keep an eye on emerging third-party shipping solutions such as ShipBob will be especially helpful for e-commerce brands seeking efficient, reasonably-priced shipping within the continental U.S.

Consider negotiating partnerships with Supply Chain as a Service (SCaaS) companies, which will be essential for your brand during and after the holiday season. Experiment with a number of these SCaaS companies that understand specific industries for the best fulfillment results.

3. Run Campaigns Without Relying on Discounts

While discounts are directly tied to holiday campaigns including Black Friday and Cyber Monday, consider running campaigns that are not solely dependent on discounts. Focus on limited product releases, in-store credit incentives, and strong subscription-based loyalty programs to maintain profitability.

In addition, it is crucial to set expectations for shipment times to lower shipment costs and properly stock inventory. Well placed campaign messaging with strategic timing can promote purchasing at a less sporadic rate and decrease the strain of trying to maintain product inventory.

4. Focus on Customers with the Highest Lifetime Value (With Proper Measurement and Attribution Techniques)

Identify the digital ad campaigns that are acquiring and engaging the customers with the highest lifetime value. Focus on measurement and attribution techniques, which are crucial to maintain or raise profitability.

Consider shifting spend into seasonal marketing efforts that target the most valuable customers. Instead of relying exclusively on last-click or first-touch models (which may provide inaccurate data that cuts into profit), pair them with techniques such as multi-touch attribution, media mix modeling and incrementality testing. This will enable campaigns to adhere to data privacy changes while still reaching customers with the highest lifetime value.

Optimizing based on measurement insights will enable brand flexibility by leaning into the highest return channels and target segments.

5. Reduce Unnecessary Marketing Costs by Applying Marginal Bidding

When using paid advertising for holiday campaigns, it is critical to apply marginal bidding techniques. Reducing unnecessary ad spend on paid media will shift the focus to the channels that are producing the best incremental revenue.

Consider integrating marginal bidding in tandem with other advanced measurement and attribution techniques. Keep in mind that the application of these strategies is dependent on choosing meaningful KPIs including First Order Profitability and Customer Lifetime Value to Customer Acquisition Cost (LTV/CAC).

This year, the challenges may be new, but the goal remains the same: Design the most profitable programs possible within the constraints of circumstances and budget. By implementing creative thinking, thoughtful partnerships and comprehensive testing, your brand can still extract the best from your digital marketing plans despite supply chain disruptions.

Ki-Hoon Chung is the director of digital media at WITHIN.

The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.

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