Retailers are right to be nervous about the months ahead. UK inflation has risen to 9.4% as of July this year, and prices continue to increase at the fastest rate for 40 years. After a strong period of online retail growth during the pandemic, many will be concerned whether they can sustain current operations and performance, let alone eyeball future growth.
During inflationary environments, non-essential retailers typically suffer from drops in consumer confidence, price freezes, fewer sales and higher costs – leading to a reduction in revenue and profit. And when you contrast this with recent industry-wide growth – 9 out of the top 10 global eCommerce companies (by revenue) experienced double-digit growth in 2020 – a considerable step change is on the horizon.
Leading retailers are showing signs of deceleration due to inflation. For example, millennial homewares brand Made.com has cited “supply chain costs and low consumer confidence” as the cause of an expected fall in sales of between 15% to 30%.
Similarly, fashion retailer Joules is seeking a cash lifeline with the support of KPMG’s debt advisory service as inflationary pressures have “drained the retailer’s cash reserves”.
However, there is some good news – AI is changing the game for online retail advertising, creating an opportunity to reduce ad spending and capitalize on unexpected trends in real-time.
Retailers should end ad spend wastage before making inflation cuts
Retail’s share of advertising spending on Google is by far the largest across all industries – growing 20% more than all other industries in 2022. And whilst retailers are suffering, Google’s advertising business isn’t, boosting its ad revenues by 32.6% year over year to $61.24 billion in Q4 2021.
When you consider that a massive 40% of ad spend on Google Shopping generates £0 revenue*, something just doesn’t add up.
At Upp, we’re putting that cash back into retailers’ pockets by eliminating the waste, using our unique operating system for retail trading. By connecting our clients’ inventory data with Google’s live consumer data, retailers can drive commercial outcomes and optimize their paid marketing campaigns with a level of success previously unseen.
Using Upp’s AI, Charles Tyrwhitt recently achieved a 42% increase in UK monthly orders and a 14X return on investment. Similarly, we supported Nordgreen in entering the French market, where they were able to increase their monthly recurring revenue by 1,600%.
Across the platform, Upp’s retail clients achieve on average a 27% increase in revenue growth* and a 62% increase in the rate of transactions*. And what’s more, plugging in the AI-powered ad optimization takes just 24 hours – eliminating advertising spend waste overnight.
A more empowered future for online sellers
Amidst an unstable trading environment, retailers still have the power to reduce operational expenditure and increase profit, and one way of doing this is to tackle the waste in advertising spending. Surely, this is an essential step before making other operational or headcount cuts that could be avoided or certainly reduced?
By investing in an operating system that uses AI to transform ad-optimization, online retailers need not only survive but can thrive in this challenging environment.
*Data average from all Upp clients on the platform for over 90 days.