BFCM 2022 Was Huge. But What Does That Mean for 2023?

[00:00:00] Pre-episode-announcement: Hey folks, Richard here. Before we get to the show, I've got an exciting announcement for you. We now have an official email address for the pod, which is podcast@commonthreadco.com. Pretty straightforward. If you have any questions for us about the world of e-commerce at all, anything that we've talked about on a previous episode or a future one, go ahead and send those questions our way and we may answer them on a future episode.

 Again, that's podcast@commonthreadco.com, commonthreadco.com. All right, let's get back to the show. 

[00:00:26] Richard: Hey everyone. Welcome to the E-Commerce Playbook Podcast. My name's Richard Gaffin and your host, and I'm joined as always by Mr. Taylor Holiday, CEO of Common Thread Collective. Taylor, how are you doing? 

[00:00:38] Taylor: Just basking in my post Cyber Five Glow. Is that what we're calling it these days? Cyber five? 

[00:00:43] Richard: The Cyber five.

[00:00:44] Taylor: I'm doing well men. Yep. 

[00:00:45] Richard: Glad to hear it. Just came back from the Big Apple, as I understand it. 

[00:00:48] Taylor: I did. Awesome. Meet up, shout out to all the New Yorkers on Twitter, we had about 50 people. Random strangers show up at a bar and hang out and get to know one another. That was really cool to see. A bunch of uh, Twitter profile pictures manifest in real life. 

[00:01:00] Richard: Yeah, so generally speaking, vibes are good and the data from Black Friday in some ways reflects that. So, what we're gonna be talking about today, we're gonna be recapping, the Cyber Five as it were, and actually maybe we could even call it the Cyber Eight or so.

Because we're gonna be looking back at data that goes through the Sunday, previous to Black Friday. But what we wanna do here is just go through what we've pulled from our data set, look at some trends, and then kind of speak to what it means for next year and what it means for the future because, as we'll see the future may not be as bright as the numbers would seem to indicate.

So first off, I think the big story is that across the board, pretty much everything's up. 2022 was bigger than 2021. Cyber Monday this year was the biggest shopping day ever. 11.3 billion spent on Cyber Monday. And across our data set, we saw store revenues up. Average MER is up. Black Friday Day of Revenue up 44%. Cyber Monday Day of Revenue up 28%. The lead up to Black Friday, and this is interesting, up 45% from last year against only 14% increase in spend. 

So everything looks pretty great. There are a couple things which maybe are indicators that things aren't quite as good as they look. One could be our Cyber Monday data shows, AMR is about 5.78%. CAC is, was up 11% on cyber money across our data set.

And there's a couple reasons that could be, but Taylor, what we wanna talk about today, I should say, why is this actually not as great of news as it would seem on the surface?

[00:02:36] Taylor: I wanna stay in the positive to start because it has been a hard year for a lot of people and I think that there's a lot to celebrate. Like to have this continually progressive volume of consumption, is a good sign. Like it's a good thing. Many businesses had tremendous days. They realized a ton of value that they desperately needed in some cases.

 We had a lot of customers have record days, have just an awesome over expectation level performance. And as you said, to have the biggest day in American shopping history is like, it's nothing to sort of scoff at here. And I do think though, that there was a number of things that, stood out to me under the surfaces. I spent some time really sitting in this, that I think we have to acknowledge. Okay. 

So one of them, you started to call out, which I think is interesting, which was the pacing of the revenue over the week. Adobe has a data point. They're one of the larger data sets that you'll see. You'll see from Adobe, you'll see from Shopify, you'll see from Google and Facebook and all these folks.

And, that Thanksgiving day was also a record day for revenue 5.29. Billion on Thanksgiving Day alone, which is if Black Friday from Adobe was nine, Thanksgiving day was 5.3. So like almost 60% of the volume of Black Friday happened on Thanksgiving as well. And this was a thing we noticed in our data set was you referenced the period, you called it what, Sunday through Wednesday.

So you...

[00:04:03] Richard: Yeah 

[00:04:03] Taylor: even earlier, right? We're calling that like the pre-Black Friday period, Sunday through Wednesday. And our revenue in that period was up 45%, right year over year. There's a lot of talk that gets brought up in this period about sales moving earlier than ever. A lot of people use that to illustrate the beginning of the month or you know, like I'm looking now, Levi started their sale on Sunday at 1120, like these different brands, but really it's about pushing meaningful volume a couple of days earlier, and we're starting to really see that this year in a way that was novel.

And in our data set it meant that Cyber Monday, wasn't up as much year over year. Again, very big day, but the year over year comp for Monday versus Friday. It seemed like maybe the fumes started kicking in for a lot of brands that by the time they got to Cyber Monday, there just wasn't as much volume left maybe as there was, in the earlier month when they chose to extract it.

[00:04:55] Richard: Yeah. And you make a good point around, focusing on the wins and focusing on the positive, because despite the fact that we lost steam, or rather, our data set looks like it lost steam around Cyber Monday, overall over the entire period, store revenue is still up 38%. 

[00:05:10] Taylor: That's right. It's a meaningful number.

[00:05:12] Richard: Yeah. Yeah, right. MER is up overall. CAC is slightly up, but barely. So, all that points to like, this was just a huge week for everybody. 

[00:05:21] Taylor: That's right.

[00:05:22] Richard: And a lot of effort paid off. 

[00:05:23] Taylor: So now, Taylor, what are you talking about? Why are you concerned? I have a friend at Google his name's Ben Kruger. He's one of the growth strategists over there at Google. Super smart guy who started to do a lot of writing. And at Google you obviously have access to tons of data and he put out a great article that will link in the show notes, it's called Cyber Five Still Alive, sort of outlining a bunch of the data and performance.

So I opened it up and I'm reading through it and like oh, you know, searches for Google for deals increase 25%. You know, there's all this volume, da da, da. And then there's this line that stood out to me that I was like, huh, what would that mean? And it said that there was a 78% increase in the utilization of buy now pay later.

 And I was like that's interesting. Buy now, pay later up almost 80%. And in theory, this could be attributed to a lot of things, right? It could be that there's just a way more prevalent availability of buy now, pay later on a lot of sites, right?

But there's also another article that came out earlier in the week that, I also saw that concern me. This is from CNBC. Household debt soars at fastest pace in 15 years as credit card use surges. Okay? Credit card balances collectively rose more than 15% from the same period in 2021, the largest annual jump, in more than 20 years. Okay? And they said that the Ink of the article goes on to say that the increase stems from a combination of robust consumer demand and higher prices. 

Okay, so here's some of the soil I'm, beginning to sort of hypothesize or pontificate around. We've talked about, e-commerce debt stacks and how the e-commerce landscape Is currently facing this crisis where there was a, excessive availability of cheap money.

But the reality is, is that that same principle applied to all of us as humans. Which is that we all had a bunch of free and money, whether it was in the form of stimulus or mortgage rates or lots of other things.

And this rise of buy now pay later is functionally, arbitrage on free money as well. We are willing to spend on an item, that may be outside of our buy immediately price range, but if we can get a 0% interest rate cuz the brand is floating, the interest on the payment, seems like a pretty good deal. 

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[00:08:18] Taylor: Now it assumes a thing though, which is that your earning power in the future is consistent at a level that allows you to pay for it. And my fear is this, Richard, I see rising credit card utilization. Well, when do you choose to use credit card versus cash? It's when you don't exactly want to pay for all of it right this second. And you have a massive increase in buy now, pay later.

I'm worried that this weekend what we as a culture may be exemplifying is that we have not capitulated to our reality yet. Is that we have not accepted maybe that the good times are over, that the job market is changing, that the landscape may be a little worse than we anticipated, that those mortgage rates are sort of gone for a while and that there needs to still be a consumer correction in the way that maybe the stock market and some of the tech sector has already corrected. eCommerce we're still maybe looming, but the consumer correction is what has me the most concerned about the future. 

[00:09:15] Richard: Yeah, there's discussion obviously throughout the year around the fact that even though everybody sort of feels like we're approaching a recession, consumer behavior hasn't necessarily mirrored that. Right. And I think what you're pointing out is that this is sort of a classic example perhaps of people have gotten used to a certain lifestyle and aren't ready to change it just yet. 

[00:09:35] Taylor: Yeah. 

[00:09:35] Richard: And what we may find in the near future is that all of a sudden that changes. Do you have in a sense What the timeline looks like?

[00:09:44] Taylor: That's a great question. What I'll say is that I am in hypothesis phase here. When I get to an opinion that I fully is fully baked, you'll see the blog, it'll will be very public about.

[00:09:53] Richard: Sure.

[00:09:53] Taylor: What I wanna encourage everybody to do is sort of like, as we get ready to move into Forecasting 2023. Right. And we're gonna have some episodes coming up about this. And one of the ones that I'm excited to do is with Steve Rekuc, who runs our data science team here at CTC and to talk about modeling spend and CAC in the future.

And how we are working on a model for this that will include macro economic factors, namely the Consumer Price, the consumer Confidence Index and its relationship to CAC that we have found.

And so I would keep an eye on this number. It's something that comes out ,every month and gives you an indication of how consumers are feeling about their own financial state. And it declined in November. 

So give you a little bit of data. It says the confidence board. Consumer confidence index decreased in November after also losing ground in October. The index now stands at a hundred 0.2 down from 102.2 in October. And we talked about earlier that in July it hit an all time low, and so it's up since then, but this is now consecutive months of a declining consumer confidence, while we're hearing these stories about all these revenues being up and so that underlying architecture, rising credit usage, declining consumer confidence increases in buy now, pay later.

I think that narrative, this hypothesis around a consumer's unwillingness to accept the reality of what might be their present future could still be on the horizon, and how quickly that comes probably has to do with the job market, probably has to do with how many, many more businesses continue to thrive and whether people are gainfully employed at the level that they want. It probably has to do with the success of the stock market. It probably has to do with the continued downstream effects of what's happening in the crypto markets. This is like a another, I don't wanna get too, off the e-commerce trail here but yesterday I saw that like Blackstone which is, you know, a gigantic financial institution is potentially holding withdrawals on one of their REITs.

Like, because there's rumors that they might have been mixed up with some crypto issue. It's just like, there's a lot of stuff that's still, out there that I, don't know what the domino is on the consumer side, but it's worth keeping an eye on and considering, I would say. 

[00:12:03] Richard: Yeah. So maybe to keep it out of the realm or move it away from the realm of like, obviously we don't wanna just be purely fearmongering here, and that's not really what we're doing. 

[00:12:10] Taylor: No.

[00:12:10] Richard: But like, what's like the practical application or what do we need to start shoring up or thinking about to anticipate this potential crash or rather decline in consumer behavior basically.

[00:12:20] Taylor: Well, if consumer confidence declines, what we have seen is that CAC rises. That's a very practical implication. And you said it earlier, Richard, and I like this phrasing it's that, convincing people is more expensive. It's like a simple way. Convincing them to buy, to pull out their wallet costs more.

And so as you think about the model that you have for what you believe CAC is gonna be in January and February, is that I would build in some scenario models where that is wrong, 10 to 20%. And why 10 to 20%? 

Steve, again, who does work every month to try and predict CAC on the aggregate data set, and he publishes this and his most recent tweet he just published is he had CAC modeled coming into the month at 31, 34 was his prediction for the month.

CAC came in at 33, 46. Now that's within the 90% air bounds, like that's still, a pretty good prediction of the future, but it was wrong by about 8%. Right. So, what I'm seeing is that on a large enough data set, ROAS aggregate where the movement's gonna be less dramatic potentially. Now some categories are more recession proof than others. Steve with a lot of data was wrong, about 8% on CAC and he was wrong to the downside, like meaning it was more expensive than he thought. 

And as we look at CCI, consumer confidence, cause I think there's a story there. And so I think that that's what I would start to think about is I would make models at 15% less efficient than you anticipated and make sure you're okay.

Hopefully you're wrong. Hopefully you're right to the upside things get better. But make sure you're okay at 15 to 20%, off on the CAC. 

[00:13:52] Richard: Makes sense. Um, So if there's a summary about what Black Friday 2022 meant, what is it? Can you kind of wrap everything up in a bow for us? 

[00:14:00] Taylor: We are still, as an industry in this transition from the celebration of revenue to the celebration of profit. And I don't want us to take a step backwards today. Okay? All these stories, all these numbers that you're gonna hear are about revenue growth, top line demand, increase record, days of revenue. Avoid that temptation. Continue to be diligent about making sure that your strategy is backing out to the bottom line. And as you think about the future, have a consideration for what has deteriorated your bottom line in the past, and continue to think about being antifragile. Continue to think about the ways in which you can win, even if CAC deteriorates in some capacity.

 Be more thoughtful with your models. More clear with your input and celebrate where you won. You know, I, I was fighting for the screenshot battle this weekend on Twitter. I believe in screenshots. I believe in celebrating milestones. I believe in celebrating victories. This game is really, really hard, but let's avoid together, not taking the opportunity to be reflective of the deeper reality that we're in.

And damn it, I hope I'm wrong, and there's nothing but good signs ahead and everybody printed a bunch of profit along the way, but I know that CAC is up slightly still. I know that there's some underlying things that we have to keep an eye on and we've gotta be diligent. And I think that's really what I'm saying is that like, this is good, there was good stuff here, but let's be diligent.

Let's not get caught in some of the mania that we got caught in last time. Cause this is one of those moments. Let's be diligent. 

[00:15:19] Richard: Thanks again for joining us on the E-Commerce Playbook podcast. Please remember to rate and review if you're watching on YouTube, like and subscribe. Now, if you want more data insights, down to an industry specific level, be sure to check out the DTC index, which will also link in the show notes.

Whenever you see us talking about data on Twitter, most of those charts are taken from the DTC Index. It's a database. It aggregates 27 key metrics from across our portfolio of brands. And then generally speaking, if you're interested in starting a conversation about working together, you can always drop us a line at commonthreadco.com or you can now email us at podcast@commonthreadco.com if you have any questions or comments on this or any other episode, we wanna hear how your Black Friday went. So have a good one folks. And in the spirit of the season, Merry Scaling.