Topics Covered:

    1. Amazon highlights: ad spend, aggregators into B&M, restock limits, hybrid
    2. Quantitative analysis: social’s impact on Amazon and Instacart
    3. Stratably’s work: Instant Grocery + Brand Marketing is Performance Marketing
    4. McKinsey argues for digital teams to lead the business
    5. Recapping digital initiatives at Costco
    6. Forecasting digital ad spend
    7. Recapping Chewy’s digital performance
    8. Instacart executive turmoil continues
    9. FastAF raises new round to grow its rapid delivery service
    10. Wayfair the latest digital retailer to launch B&M
    11. Mostly still questions: NFTs for CPG
    12. Idea: TBYB as a new Prime benefit?



Ad Spend, Aggregators, Rules

Cyber 5 ad spend: Advertiser spend on Amazon appeared to only grow slightly over the Cyber 5 weekend, down from the 30%+ growth it experienced last year, largely a reflection of decelerating sales growth.  Sponsored Brands were up 27% and down 14% on Black Friday and Cyber Monday, respectively. Sponsored Products were up 8.8% and down 8.3% on Black Friday and Cyber Monday, respectively. Compared to the week before, spending on these ad units jumped 1.6-2x. (link)

Aggregators expanding to B&M: Thrasio, the largest Amazon Aggregator, indicated it overcame supply chain challenges during the holiday season. In terms of its plans for next year: “We’re looking to expand into new verticals, geographies and new product line extensions to grow our brands. We are looking at channel expansion including investing in direct-to-consumer and brick and mortar partnerships.” (link)  

Amazon makes the rules:

  • Amazon's whipsawing 3P sellers around on restock limits. (link)
  • The Hybrid model seems to be perpetually at risk. (link)




Social Commerce Highlights

Service providers that can link social listening to retail media and operations are poised to capitalize on the growing relationship between the two channels:


  • Case study on TikTok/Amazon in beauty: SimilarWeb estimates revenue for a given product sees an average 85.3% month-on-month increase on Amazon after viral exposure on TikTok (one million+ reviews). Generating predictable growth is almost impossible though as virality is unpredictable and the sales boost tends to be temporary. (link)


  • Social commerce & food at home:  Instacart published results from a consumer study showing 70%+ of Gen Z and Millennial consumers have tried making a recipe from a trend they saw on social media, with TikTok the primary driver.  Trends lead to significant changes in search terms, such as “Feta” reaching 125th most searched, up 308 spots from before it was trending, and “Seaweed” increased to 222nd most searched, up 623 spots from before “Salmon Rice Bowl” was trending. As we’ll write about later this week, these types of spikes are mostly unpredictable, but social listening tools are improving and brands are putting in place processes to react quickly. (link)




Tail Wagging the Dog

McKinsey pulls no punches, arguing omnichannel retailers limit their organization’s growth by narrowing the digital team’s control to things like digital media and user experience. It instead recommends digital taking a leading position over all aspects of the business, including marketing, pricing, assortment, and user experience.
“While there is hardly a retail executive who would not describe online or omnichannel as a top priority, few retailers are substantially reallocating investments—marketing spending aside—away from their historical core. Even fewer retailers have moved beyond isolated e-commerce operations and truly shifted to an online-led, omnichannel go-to-market model.”

  • McKinsey estimated that for non-food retailers, every $1 sale online, offline benefits by $0.50-$1.00.
  • Established retailers with a physical presence can spend 25-75% less on paid digital activities for the same share of digital traffic, highlighting the “no free lunch” concept for pure eTailers and DTC brands.
  • On average, retailers invest 1.5% of sales into tech talent and technology, while leaders invest double that amount. (link)


Digital Demand at Costco

Costco reported digital growth of 13.3% Y/Y (ex-FX), compared to 8.9% Y/Y in the prior quarter. The acceleration is in line wiht accelerating digital growth Walmart and Target delivered during the past quarter.

  • Fastest categories: Categories driving digital growth for Costco included jewelry, tires and home furnishings, with total eCommerce now at ~8% of total sales.
  • Where it’s investing: The company continues to invest in the basics around its digital business including improving the mobile app UI, enabling its Citi Visa card to be used for payment, improving return scheduling, and it is rolling out eCommerce kiosks and lockers inside of warehouses. 
  • Operational Difficulties: Management expressed hesitation about buy online, pick up in store, as they don’t feel there is enough room inside their busy stores. 
  • Beyond digital, the company indicated inflation is trending around 4.5-5.5% for its assortment, and acknowledged some inventory won’t make it in time for the holidays. (link)




Digital Advertising Growing at Record Clip

GroupM estimates the digital advertising market is on pace to grow 30.5% Y/Y in 2021, one of the fastest rates of expansion on record. This translates to digital advertising reaching 64.4% of total advertising in 2021, up from 60.4% last year and 52.1% in 2019.
The agency estimates Apple’s ATT policy had a muted impact to advertising spend as a whole, drawing comparisons to the limited impact in Europe when GDPR was rolled out.
2022 is expected to grow 13.5% on top of the rapid pace seen this year.
The mix of advertising spend for large brands varies from the broader market, with an estimated 47% allocated towards television (vs. 48% in ’19) and 35% to digital (vs. 28% in ’19). This is largely a function of history and barriers to entry, with the status quo at large advertisers favoring mass media, while new brands can more easily get started in digital channels.
Amazon is expected to be a share gainer in 2022, with Stratably estimating 57% growth in ’21 and 32% growth in ’22. (link)



Digital Demand at Chewy

Chewy reported its third-quarter results last week, providing a window into digital pet shopping demand.
The company delivered growth of 24% Y/Y in the quarter, continuing the decelerating trend seen since the beginning of the year, and relatively in-line with the slowing trend seen at Amazon, Shopify, and other eTailers. 
The company indicated its EBITDA margins were flat as it successfully combatted cost pressures from supply chain disruption, labor market constraints, and rising inflation. (link)



For the Nerds

Instacart President out after a cup of coffee: Former Instacart President Carolyn Everson resigned last week, reportedly over a difference of opinion on her involvement courting the platform’s large grocery customers.  The role is being eliminated with her departure, with Fidji Simo taking on responsibility for those relationships. The executive turmoil is coming at a difficult time for the company as powerful new competitors like Gopuff, instant grocers, DoorDash, and Uber Eats have emerged, looking to take a slice of the growing online grocery market. (link)


Quick commerce fundraise: Fitting within the super-curated, rapid delivery space, FastAF raised $200 million in a Series A round this past week.  The company operates in NYC, LA, and San Francisco, offering thousands of products that tend to be more premium than what is offered on other quick commerce platforms. On its website, it promises delivery in two hours or less for free, with orders over $35. (link)


Wayfair launches B&M stores: At a time when department stores are increasingly likely to cleave apart their physical and digital operations, eTailers are progressively opening physical stores. This past week it was Wayfair, announcing plans to open three B&M stores in 2022. The stores, located in Massachusetts, will feature its AllModern and Joss & Main brands.  The launch follows Wayfair’s pop-up shop tests and a smaller format store. (link)


NFT’s for CPG?:  The market for a brand-related JPEG that is difficult to buy for the non-crypto initiated is admittedly small. But, a case can be made that NFTs are fantastic retention tools. It’s so early here the applicability is still unknown. (link)


TBYB: Interesting perspective on Try Before You Buy having the potential to become as commonplace as BNPL has become. It doesn’t take a strong imagination to think about Amazon offering TBYB as a new perk for its Prime Members. (link)