BFCM 2023 Recap

[00:00:00] Richard Gaffin: Hey folks, welcome to the e-Commerce Playbook podcast, special Black Friday, Cyber Monday recap edition. I'm your host, Richard Gaffin, Director of Digital Product Strategy here at CTC. I'm joined as I always am by Taylor Holiday, CEO, here at CTC Taylor, how you feeling in the the post BFCM moment right now?

[00:00:18] Taylor Holiday: People talk about the, like post-turkey nap that you have to take in our industry. It's like today, days are, I'm due for a nap. 

But it's good to get a, to get a collective view on what has occurred versus the anecdotal experience you're having. You know, on those days, I. We deal with so much inbound from different customers having different experiences that whoever's the loudest, either most celebratory or most problematic, can drive your experience of it.

And so it's good to have a chance to step back and now be able to see the data in totality and have a reflection on what happened relative to what we thought was going to occur. And we're excited to share that today.

[00:00:51] Richard Gaffin: Yeah, absolutely. So let's step back and take that look then let's get objective about it. So I think what we wanna kick this off is by just talking about what happened in terms of particularly how what 2023 looked like. I. Over and against 2022. So one thing we were talking about before we hit record is that the moments or the months leading up to BFCM seemed were sort of, the atmosphere was a little more doom and gloom.

This idea that like discounts were up, returning customer revenue was slightly up. A MER was significantly down. New customer revenue was significantly down, but Black Friday looked a little different than that. So, Taylor, let's talk about what happened this year as opposed to last year.

[00:01:25] Taylor Holiday: Yeah, let's set the, the stage with a few different numbers. Props to the team at Shopify. and Co were very public facing in sharing a lot of their numbers, and so I think we can start by contextualizing a broad view of the market where Shopify shared that they did 9.3 billion in sales. Over Black Friday Cyber Monday weekend, which broke the 2022 record of seven and a half billion 24%, so up 24% Shopify Merchants year over year.

Now what we know about that number and which is always deceptive in the way that Shopify shares their data is it's not a same store sample set, right? That includes merchants joining the Shopify platform, but 24% is a ballpark figure that I was curious to see How our dataset, which is a same store sample, and it's about 1% of Shopify, GMV.

So there's a good

revenue here as a representative sample of the collective looked against that. And so if we just start from line revenue metrics and work our way down here into some more specifics, you'll see that our store revenue year over year on a same store sample set. Was up 16% year over year, pretty close to in line.

Shopify had it at 24% on not a same store sample set. We have it up 16 or total total revenue. Lemme give you the exact number, was up 15.61%. The largest gains. We're on actually Thursday, or sorry, Saturday and Sunday, we're looking at cyber five comparison here. So on a Saturday and Sunday where it was Saturday was 24% gain. Sunday was 21%. Cyber Monday was actually, the softest of the days was only up 10% year over year. Black Friday at 18%. So that's right at the top line. That gives us a view of the actual revenue creation and 16% still to me. Representative of growth shows that brands are still able to produce. Top line revenue growth, which everybody always craves regardless of the financial position that you're in. It is the leading indicator in many cases for a brand of how they're doing on a general narrative basis. And we have it. We have growth. We have 16% top line growth as a leading indicator for those weekends, right in that same range as Shopify.

And so I think that's a pretty solid benchmark that we as an industry anchor into somewhere in that 16 to 24% range is representative of the e-commerce year over year growth expectations.

[00:03:54] Richard Gaffin: So one thing I wanna highlight is. So you just said 16% growth over year, year over year. For me, that's a good result. Are there people for whom in the broader sort of e-commerce space, this is a disappointing result, and why might that be the case?

[00:04:06] Taylor Holiday: sure. I, I would bet that that's down to plan for most people

is that the growth rates over the last three years for many of the brands, and, and look, there's high performing brands that are 50 to a hundred percent annually. Still today

exist, but I, I bet that most people didn't plan for 16% this year. And so I think that we're, we're still in the process of level setting to a new reality coming out of The hyper variable years of covid where 16% is probably like a, is a, in some ways a a moderate outcome, I would guess for people. But I looking at the market and where it's presently at, feel really good about that as a signal that, hey, the customer showed up. It was a healthy outlay of capital to acquire consumer products in a way that's like, man, that's, that's, I was concerned that it would be worse. And so I feel really good about 16%.

[00:04:56] Richard Gaffin: Right. So spend, total spend is also up 17%. So that's something to highlight as well, because what that indicates, of course, is that MER is actually down year over year. So what, what are your thoughts on that in terms of like. Is that a signal for, what? Is that a signal for?

[00:05:11] Taylor Holiday: So let's start to move down the, the,

the data stack here from top line revenue, which again, is more of a vanity metric than anything else. And let's ask what did it cost us to get it? And to see, spend up. So 15.6 in revenue, about 16.7 in spend, almost 17% in spend means that we had to spend a little more to get there. We had to actually increase the amount of dollars and a MER. Our new customer revenue was down, our new customer efficiency was down about 4%. So you're getting that little bit of lag. New customer revenue returning customer revenue both up. In terms of the specifics of those numbers, new customer revenue was up 14.7%. customer revenue was up 16.58%. So you can see how like. If a, if efficiency is down a little bit when spend is up, then you're gonna get deep less growth from new customer revenue than from returning customer revenue. So that all pencils and makes a lot of sense there, but it's all really consistent.

It means that, and, and this tends to be what happens is that brands tend to spend to their marginal threshold in a lot of cases some go flying past it. So we would expect those things to move somewhat in tandem, that MER And revenue kind of move together because people can't spend beyond it usually.

And so they have some target that represents the marginal outcome they can stomach and they move together. But that means that growth didn't come wildly inefficiently. It means that it came while producing likely some increase in assuming that the the spend from last year was profitable, an increase in profitability based on those numbers. So slightly less efficiency. But overall pretty strong in terms of the ability to increase spend in revenue on a consistent corollary basis.

[00:06:52] Richard Gaffin: Okay, so let's keep moving down then to the platform level. Is there anything that's worth highlighting there in terms of year over year performance?

[00:07:00] Taylor Holiday: One thing I want to, before we get to the platforms,

[00:07:02] Richard Gaffin: Oh, sure.

[00:07:03] Taylor Holiday: that we were tracking it relates to the discount rate

[00:07:07] Richard Gaffin: Oh yeah.

[00:07:08] Taylor Holiday: there was leading up to BFCM, we saw that discounts. In the the prior months we're way up year over

And so we were interested to see does that mean people are gonna go more aggressive with their sale during BFCM? And we didn't really see that. We actually saw that discount rates were only up about 2.7%, so 20.6%. year, 20 point 20% basically flat last year. And that sort of gives you a sense that the average discount rate on Black Friday, cyber Monday is right at 20%. Friday was at 22%. And Monday was at 20, or sorry, Monday was at 23.08%. So slight increase from Friday to Monday in terms of the discount rate. But year over year, that's about the threshold. And again, these things have some bounds on them in which brands really can't go beyond, but discount rate the same. Spending MER up, the same. That's a pretty good sign that we didn't have to overpay or over discount to get the growth that we acquired as an industry. So all of that was a good indication for me on the the profitability, revenue overall spend spectrum before we go into the specific channel breakdown.

[00:08:16] Richard Gaffin: cool. Makes sense. All right, well, so let's do that then.

[00:08:18] Taylor Holiday: Okay. So, in terms of spend, F by far and away the largest channel of spend on average for customers was on meta. During this time. I'm sure that's not surprising to anybody along the way Lemme pull this up exactly. Sorry. Google spent, it's, and it was not wildly higher, it was about 50% more on meta than Google on average for brands.

Over the course of this weekend, you tend to see actually those things move together. During moments of peak demand capture. You'll see Google in expectation as a percentage of total media usually during this time than throughout the rest of the year. But Facebook spend was up 9% year over year. CPMs, the price of the ad inventory was up 11% year over year, and Facebook revenue was actually down about 2.9% year over year. So ROAS was down about 10% year over year. So spend up about 9% revenue down about 2.9%. Efficiency was about a 3.08 was the average. Facebook Ross reported on a seven day click basis a 2022 average of 3.43. So, a decent difference there in terms of the performance on that channel.

[00:09:35] Richard Gaffin: Right, and this, the story on Google is also similar and, and are sort of parallels to the the general story, which is like an increase in revenue. It decreased more significantly on roas. So let's talk about what Google looked like.

[00:09:47] Taylor Holiday: Yeah, so Google, we see that Our Ross was down about 11.57%, 5.95 versus 6.73. Google Ross is, I always hold it the grain of salt because it's really difficult to understand the composition of brand versus categorical spend, and we're always trying to push brands more and more into that categorical space.

So I, I struggle a little bit more with the Google Ross in terms of being able to, to drive a lot of insight from that specific number. But overall what it tells me is that that channel we were right? We're, we're pushing up to that absolute marginal threshold, and there wasn't necessarily a ton of profitable gain to be had just driving through that specific channel. So I think that's all fairly consistent. A MER, again, down about 4.49%. So overall in terms of the media mix, you're getting roughly the same efficiency at a, you know, about 16% more spend. The channel mix changes a little, you get a little bit more in Google, you get a little bit less. On meta to the rest of the year, I'm saying.

And then efficiency comes down just a little in year over year comps.

[00:10:51] Richard Gaffin: Okay. So is, is there anything else you wanna hit on the platform level before we move on to sort of broader analysis?

[00:10:58] Taylor Holiday: Um, I don't know. I think the thing I, the thing I would just make sure that I think is really important to understand about the data comps that we would use in these scenarios is we're, we're using seven day click attribution for meta.

That's always going to drive the most consistent in our view, incremental connection to customer revenue. And so we, that's the attribution model. So if you're comping against your own data, just keep that in mind. In terms of it, one of the things that's just interesting is that the conversion rate on meta was actually up 9.7%, but the CPMs were up 11%. So You, you had strong demand. It's not that the purchase behavior was in decline, it's that the ad inventory price was up year over year.

And that leads to then just a slight decline in revenue. Now, sorting out the causal relationship between C-P-M-C-T-R and conversion rate, it's always challenging, but just in terms of those basic metrics, the price of the ad inventory rate at which the, the users converted. That led to less efficiency.

[00:11:57] Richard Gaffin: Gotcha. Okay, so let's . Let's maybe kind of synthesize this a little bit and, and think about what it means. So one thing that struck me again, as, as the editor of the D two C index, the story that Steve, our data scientist has been telling for the last, like two or three months, is this idea, as you mentioned before, that discounting has been up significantly in September and October.

And new customer revenue has taken a major hit. A MER has been down significantly for a while. Returning customer revenue has been fluctuating, but not great year over year. So. What this points to is, so rather I should say Black Friday, cyber Monday year over year was good. Everything moved in the same direction that it has been moving.

So if you, we look back at 2021 averages, the things that have gone up have gone slightly up. The things that have been going down have been going slightly down. So nothing too unexpected about Black Friday, but the period leading up to it has been, if not unprecedented, then certainly weird year over year.

So. What do those things mean together in combination about the state of the industry, I guess is my question?

[00:12:58] Taylor Holiday: So I think the behavior in non-sale moments reflects this attempt to get back to A comp of a plan or budget that was being missed most of the year

that I, I think that

from our customers and people we enact with is that like most people missed the budget or plan that they put out at the beginning of the year because it wasn't rooted in very thoughtful data.

Candidly, like I

that forecasting sophistication was not great and there and in, in fairness to people building forecasts over the last years, like The data is really wonky because you have these massive outliers of growth

that we're, we're trying to normalize out of a covid thing that is such a Black swan event that it makes data analysis challenging. The problem when you get to Black Friday, cyber Monday is that like that lever can't be levered up anymore.

[00:13:45] Richard Gaffin: Right.

[00:13:46] Taylor Holiday: other words, the discount that you were already running, there's not really marginal room to like go increase it a bunch. so the idea that that period would actually reflect a more Moderate normal comp to previous periods actually makes sense to me that

just can't go too much further and still make money. Whereas 20% off in September is really novel. 20% off on Black Friday, Saturday, Monday is not. And so I think what you're seeing is that that just got kind of dragged out longer. But overall, like I think we have this almost uh Toxic addiction to hypergrowth or really wild outlier data

[00:14:26] Richard Gaffin: Mm-Hmm.

[00:14:27] Taylor Holiday: But in many ways, this Black Friday Cyber weekend, my main reflection is like, that went about how I thought it was

to go. And it was stable and it was good. It wasn't wildly amazing.

But it was solid. And now we get to continue on, you know? And I

think I think we're entering into that era a little bit

[00:14:45] Richard Gaffin: Yeah.

[00:14:46] Taylor Holiday: 16% growth being, 

Hey 

[00:14:48] Richard Gaffin: Being fine. Yeah, totally. Well, how do you think, so here's another question then, like, how do you. Rather, I should say, it seems to me that the DI elevated discounted rate for the months leading up to BFCM didn't seem to have an impact on BFCM itself. Does that

[00:15:03] Taylor Holiday: Yeah that that is I think, I think an interesting point because I think there is this sense by which we were afraid or concerned that we had squeezed the sponge ahead of time, so to speak,

and that that would cause us to experience a depressed. Returning customer revenue moment for some brands

[00:15:23] Richard Gaffin: Mm-Hmm.

[00:15:24] Taylor Holiday: during BFCA. But I think what it just continues to highlight, and it's funny, if you look at in the DT CCI survey data, was a really interesting data point that just I think shows how ingrained this cultural moment is into American culture.

[00:15:38] Richard Gaffin: Yeah.

[00:15:39] Taylor Holiday: question that we ask in the D-T-C-C-I survey is are you going to spend more or less and in the future. And so leading up to Black Friday, there was this really steep increase in people declaring that they were gonna spend more in the future. And then when you look at the, the survey responses after Black Friday, cyber Monday, you see this massive divergence, which is that people saying that they were gonna spend more now went through the roof and people spend the saying that they were gonna spend more in the future collapsed.

so it just reflects that this is the spend moment and People showed up and spent money and the, and continued to behave in a very capitalistic fashion in a way that, I don't know how that reflects the actual health of the financial state of customers. I think that's the big ambiguous question that everyone's sort of wondering is like, how does this keep going? How does the

keep playing?

But for now, showed up and they spent, and we'll see how that continues to play out over the coming months.

[00:16:38] Richard Gaffin: Yeah. Well, I know, I, I think it is a great example of how marketing is particularly like thinking about revenue peaks is like harnessing a natural force of some kind. Like you can't control the wind, but you could maybe use it to blow a fan around or something like that, by which I mean

[00:16:54] Taylor Holiday: right 

[00:16:54] Richard Gaffin: by people wanting to buy on Christmas.

And that being culturally ingrained is way more important than the amount of discounting that you do to try 

[00:17:00] Taylor Holiday: That's right 

[00:17:01] Richard Gaffin: Throughout the rest of the calendar year. 

[00:17:03] Taylor Holiday: I, I think that's so right, is that these are things that are very deeply embedded in us as people. Is that buying gifts for your children on

friends is like to not do that. I. Would require a very desperate situation that I don't actually ref re I think reflects the state of the economy.

we're in a very desperate situation. I think we might be in a worse than we think, or worse than we maybe are acutely aware of.

those cuts may come still. Like that's my general sense is just it seems like there's, there's still some choppiness to, to be had, but Black Friday and Cyber Monday is still continues to be a moment where people get out there and get to the mall and.

[00:17:43] Richard Gaffin: Yeah. Right.

[00:17:45] Taylor Holiday: T-shirts 

[00:17:45] Richard Gaffin: No, that makes sense. Yeah. I think like, so maybe a way to recap some of what you're saying in terms of what this means is that we're still suffering a bit of a year over year growth hangover from Covid. Perhaps like there's a certain expectation that we have and maybe the months leading up to Black Friday and just 2023 in general have been just indicative of what the new normal is.

And, and in some senses it kind of maybe looks like the old normal. There's no longer the, the sort of specific things about Covid that made e-commerce grow so spectacularly. So now it's just you grind throughout the year and then on Christmas people buy presents for their kids the way they always 

[00:18:21] Taylor Holiday: I mean black Friday got its name because it's when you became profitable.

that means is that you were running 10 months of not being profitable

Right Like that's that's the retail cycle that these moments do drive disproportionate value capture. And what, what I'll say is that. I do think that the question for every brand to consider is that, did you this year acquire new customers last year? If no, how does that ref, how is that reflected in your revenue expectations for next year the efficiency of that revenue for next year? If you acquired less new customers this year than last year? Your existing customer revenue is gonna be depressed which means that to create growth, you're gonna have to pay for it with new customer acquisition, which means the overall business is gonna be less than less efficient on a percentage basis than it was in the past. Unless you can somehow create wildly disproportionate new customer acquisition through some really amazing marketing 

tactics 

[00:19:24] Richard Gaffin: Mm-Hmm.

[00:19:25] Taylor Holiday: But if you're gonna roll out a game plan that is pretty consistent with what you've done as a business historically, you move out into the, the customer curve and you get further into the maturity of your business, that customer new customer acquisition is actually gonna degrade inefficiency.

And so that's where brands get themselves in sort of this catch 22 where. They've spent a bunch of money, this is like a pretty common theme I see. They, they their new customer acquisition was significantly down year over year. They've grown a ton. They've matured as a business. They've created much wider distribution for their product.

So in other words, customers can get it in a lot more places. And so their new customer acquisition efficiency just kind of is slowly going down and they're acquiring less new customers. And the ones they are acquiring are slightly less efficient and they're looking out and they're going, where is gonna growth in our.com channel gonna come from? And this is where I think you have to take a step back and you have to move out of channel views of your business. And you have to start to consider and ask the question, where is growth gonna come from a business in total? And why do I think it's going to be that this channel, dynamics of it, remain consistent over time? such a way that it will continue to produce linear or uh uh positive incremental profit growth over time. That may not be the case for how you're treating the channel mix that you're creating. Like that may not be where growth comes from, or at least not at the same rate as it has in the past. If you're broadening distribution 

specifically okay, that can still lead to a better business overall, but you just can't look at the channel as if the surrounding context that it exists in is the same all the.

[00:21:01] Richard Gaffin: Right. No, that makes sense. Yeah. Another another lesson maybe about margin innovation becoming important or yeah.

maybe the central focus in 2024. Okay. Cool. Well, I mean, I think is, is there anything else you wanna hit on Black Friday? Any other reflections, things that happened?

[00:21:16] Taylor Holiday: I think, I think as a business, what I would encourage you to do is if you are, if you've grown this year greater than that, 16 to 24%, take a moment to celebrate it. Enjoy that you outperformed the market and that. And then look out into next year and see if you could level set your expectations against those kinds of moderate growth realities.

And if you're less than that, that's okay too. Especially if you got healthier on the bottom line. There's a lot of brands that are in that position as well. Remember, we're sharing averages. Averages are the. The aggregate view of a lot of individual stories that are not the same as that. And so we have brands that have grown less and we have brands that have grown more.

We have brands that have taken the step back to get healthy on the bottom line. That's, that's really what this is, is how can you help your business create predictable, profitable growth going into next year, and 16% might be a damn good number.

[00:22:02] Richard Gaffin: Yeah, and if you want to go into next year with thoughtful data, that will help you in the planning, leading up to Black Friday, cyber Monday of next year.

Feel free to talk to us. We would love to build that for you. All right folks, well that'll, that'll do it for our Black Friday Cyber Monday recap.

We'll see you again next week for my conversation, I believe with Eileen as we continue going through the profit system. But until then, we will uh, see you later and see you next week.