{"id":29045,"date":"2023-01-10T17:42:44","date_gmt":"2023-01-10T17:42:44","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2023\/01\/10\/best-buy-party-city-walmart-wayfair-prepare-for-recession\/"},"modified":"2023-01-10T17:42:44","modified_gmt":"2023-01-10T17:42:44","slug":"best-buy-party-city-walmart-wayfair-prepare-for-recession","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2023\/01\/10\/best-buy-party-city-walmart-wayfair-prepare-for-recession\/","title":{"rendered":"Best Buy, Party City, Walmart, Wayfair Prepare for Recession"},"content":{"rendered":"

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In November 2022, Amazon CEO Andy Jassy<\/a> announced layoffs in the company\u2019s corporate offices by explaining that \u201cthe economy remains in a challenging spot.\u201d The news reportedly impacted<\/a> about 10,000 employees in Amazon\u2019s devices, books and people, and experience and technology (PXT) departments\u2014and Jassy added that cuts will continue in 2023.<\/p>\n

Amazon is hardly alone. Retailers like Best Buy, Party City, Walmart and Wayfair also announced layoffs in 2022. And a recent survey from job site ResumeBuilder found 61% of companies expect more staff cuts in 2023.<\/p>\n

But for anyone harking back to the last major recession in 2008, the stakes are far different this time around for consumers and retailers.<\/p>\n

\u201cLosing your home puts you in a different shopping point of view,\u201d said Juliana Prather, CMO of retail analytics platform Edited. \u201cToday you might see the impact is people are going to buy more accessories and less outfits for weddings because accessories help you use your existing wardrobe more. In 2008, you\u2019re talking about foreclosures.\u201d<\/p>\n

There\u2019s another key difference between now and 2008: digital technology. And retailers will have to make some adjustments as they contend with the biggest recession of the digital era. The good news, however, is they have plenty of options in their product assortments, store footprints, customer behavior and even virtual worlds as they face these economic headwinds, using tools including basket analysis, which shows what customers are buying, and assortment planning, which helps retailers decide what to sell. <\/p>\n

\u2018Recession-resistant\u2019 categories<\/strong><\/h4>\n

One tactic is to focus on growing private-label brands<\/a>, which cost less and are therefore attractive to price-conscious consumers.<\/p>\n

\u201cWe continue to hear the brands that have private labels want to grow that business, and the retailers that don\u2019t have it want to expand into it sooner rather than later,\u201d said Brad Jashinsky, director analyst at research firm Gartner, pointing to Walmart and Kroger as examples of brands that have leaned into private labels. (Neither company responded to requests for comment.). \u201cIt is such a value-add and a great way for retailers in many categories to be able to have higher margins and then keep prices more competitive.\u201d<\/p>\n

We will also see multicategory retailers zero in on \u201crecession-resistant\u201d categories, which include products consumers need rather than want, such as grocery, health care and pet goods.<\/p>\n

Meanwhile, the biggest challenge for retailers and retail marketers will be lower conversion rates and basket sizes, which impact return on ad spend (ROAS). And while steep discounts have helped retailers move excess inventory, they are not sustainable because they impact profit margins, Jashinsky said.<\/p>\n

\u201cIn response to this shift, brands can adjust strategies to match the consumer mindset, including using downturn-friendly messaging to reinforce the value of their products and build loyalty,\u201d said Jason Alan Snyder, global chief technology officer at digital agency Momentum.<\/p>\n

This will not be welcome news for brands in other product categories like apparel and home goods\u2014especially newer brands looking to make names for themselves\u2014as retailers become less likely to take on risk with unproven products. Zach Weinberg, vp of ecommerce at\u00a0performance marketing firm Reprise\u00a0Digital, noted \u201cthat may mean a challenge when it comes to a brand gaining shelf space. And that also may mean brands will have some challenges when it comes to launching new items as well.\u201d<\/p>\n

Jashinsky agreed retailers will be \u201cmuch, much, much less aggressive\u201d in their expansion plans in 2023. This includes hiring freezes and layoffs, in addition to lowered investment in physical expansion, store refreshes, distribution centers and experiments that are not central to driving profits and revenue.<\/p>\n

\u201cThe media talks a lot about a crypto winter,\u201d he said. \u201cI think this is the retail winter, where it\u2019s time to hunker down and focus on what we know and not make any aggressive bets.\u201d<\/p>\n

Embracing the metaverse<\/strong><\/h4>\n

While physical expansion is unlikely, we will see development elsewhere as more retailers set up shop in the metaverse in 2023. In fact, Gartner predicts 25% of consumers will spend at least an hour a day in the metaverse for work, shopping and entertainment by 2026.<\/p>\n

We\u2019ve already seen movement in this space from luxury fashion brands<\/a> like Gucci<\/a>, which has partnered with platforms like Roblox to release digital apparel. (Gucci did not respond to a request for comment.) Virtual world Decentraland also hosted its first Fashion Week in 2022, which Snyder said \u201c[marks] an inflection point for fashion\u201d and \u201charbinger for brands and retail.\u201d<\/p>\n

He expects to see more brands \u201cstep up their game\u201d in 2023 as they treat the metaverse as a commercial platform and growth opportunity.<\/p>\n

We\u2019ll also continue to see secondhand marketplaces such as Depop, Poshmark, the RealReal and ThredUP grow as retailers embrace recommerce, or recycling old products at lower costs.<\/p>\n

This is, of course, not a new concept, but will become a \u201csafe bet\u201d for brands in choppy economic waters. Per Snyder, there are multiple advantages for retailers, including less overhead; more competitive pricing\u2014and faster movement\u2014of underperforming products; and immediate value from products offering the best for less.<\/p>\n

Leaning in to loyalty<\/strong><\/h4>\n

At a time when price-based switching becomes more common, rewarding loyalty\u2014and retaining shoppers\u2014will become a powerful retail defense strategy.<\/p>\n

Expect to see retailers emphasize their loyalty programs to keep the customers they have and grow basket sizes as a result. Elizabeth Marsten, senior director of strategic marketplace services at performance marketing firm\u00a0Tinuiti, pointed to Kroger\u2019s Fuel Points program, through which customers earn discounts on gas via their store purchases.<\/p>\n

In addition, retailers like Instacart and Walmart offer advertisers targeting options for behaviors like past purchase, in category and never purchased, which brands can also use to grow baskets and could lead to promotions or discounts.<\/p>\n

Loyalty programs also offer opportunities for greater personalization by analyzing data through retail media networks, creating targeted messaging for partner brands based on users\u2019 past behaviors.<\/p>\n

\u201cOn one specific retailer, 96% of all purchases happen with a loyalty card. That data can be leveraged to be more targeted and personal for consumers,\u201d said Jeff Malmad, global head of commerce at media agency Mindshare. <\/p>\n

Retailers can appeal to price-conscious consumers with more and better experiences, too, which has become increasingly valuable for both brands and consumers. \u201cThe result is a significant lift in positive sentiment, engagement, purchasing, trial and retention,\u201d Snyder said.<\/p>\n

Each Saturday, Lowe\u2019s holds \u201cWeekending at Lowe\u2019s\u201d activities for families at its stores, offering everything from tailgate parties to DIY workshops on tiling a bathroom floor. \u201cAnd while they\u2019re in our stores doing fun things as a family, odds are they\u2019re going to pick up a few things they need around the home,\u201d said Jen Wilson, svp of enterprise brand and marketing at Lowe\u2019s.<\/strong> \u201cGiving consumers new and interesting ways to interact with your brand doesn\u2019t have to be expensive.\u201d<\/p>\n

This, too, will boost loyalty and engagement, as will providing innovative methods for consumers to virtually sample, visualize or explore products through channels like AR and wearables.<\/p>\n

In the end, no matter what happens, it\u2019s important to remember something is better than nothing.<\/p>\n

\u201cBrands that cease advertising during a recession can suffer long-term negative effects, and when they resume their efforts, it can take years to recover the equity losses they have incurred,\u201d Snyder said. \u201cMarketing accounts for a significant portion of a brand\u2019s equity, so it is crucial to continue investing in advertising, even during difficult economic times.\u201d<\/p>\n\n

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Preparing for the Highs\u2014and Lowe\u2019s<\/h3>\n

Jen Wilson, svp of marketing, Lowe\u2019s, on the retailer\u2019s 2023 marketing priorities in a year of economic uncertainty.<\/h5>\n

What are your top priorities for 2023? Why are they on your list?<\/strong>\u00a0
As we continue to navigate a challenging macro environment, there are three top marketing fundamentals that we\u2019ll look to focus on in the year ahead: agility, productivity, and business and consumer insights. \u00a0<\/p>\n

Although we focus on planning quarters and months ahead, being prepared for economic downturn comes from the agility we demonstrate on the weekly and daily turning of the dials. While we are not seeing any softness currently, we have a proven playbook and are ready to respond if we do.\u00a0We\u2019re also focused on productivity and are constantly looking for opportunities to ensure our brand is working harder than ever. For us, this means having\u00a0consistency in creative, messaging and media so that every moment is meaningful for our consumers. <\/p>\n

Finally, we\u2019ll continue to pay very close attention to the broader zeitgeist of consumer demand and impacts on the business. An example being that in a down economic time, consumers will be more likely to spend home improvement dollars on maintenance and repair or smaller refresh projects versus, say, big remodels. Staying in tune with how consumers are feeling frequently allows us to enable the right ideas and messaging that will resonate. \u00a0<\/p>\n

What are the challenges that come with encouraging consumers to spend at a time when they will be less inclined or able to do so?<\/strong>\u00a0
Providing value is key during a time when consumers\u2019 wallets are pinched, and value doesn\u2019t have to mean just lower prices. At Lowe\u2019s, we have activities every Saturday in our stores to help provide households with something fun to do together on the weekends. We call this \u201cWeekending at Lowe\u2019s,\u201d and the activities can vary from a tailgate party to a workshop where kids can create a holiday ornament to a DIY workshop on how to tile a bathroom floor. Giving consumers new and interesting ways to interact with your brand doesn\u2019t have to be expensive. And while they\u2019re in our stores doing fun things as a family, odds are they\u2019re going to pick up a few things they need around the home.\u00a0<\/p>\n

What is working for you so far, and what\u2019s not working?<\/strong>\u00a0
We know that providing consumers with value is working, which for us means everything from the\u00a0\u201cWeekending at Lowe\u2019s\u201d Saturday events or helping to reinforce that we have consumers\u2019 backs with our Lowe\u2019s Price Promise, which is our commitment to be priced right or we\u2019ll match it. Customers want to feel like they have a transparent relationship with a brand that goes above and beyond the wallet\u2014and into their hearts and minds.\u00a0<\/p>\n

How has this impacted your road map for 2023?<\/strong>\u00a0
We\u2019ll remain fluid in 2023. We are prepared for multiple states of the economic climate and plan situationally to ensure that the impact is manageable for any scenario.\u00a0 \u00a0<\/p>\n<\/p><\/div>\n