“[Clients are] continuing to lean into social commerce and spend money against it, but the challenges at this point with tracking and measurement combined with the super high CPMs – it’s extremely expensive,” says Wong.
Consequently, in the month of June, Wong says that Belardi Wong’s clients decreased their spending on social by 27% versus the same month last year.
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“It’s a challenging time for social. There’s actually less advertising inventory because there’s less free time, so when consumers start travelling and entertaining and they are distracted – less free time means less advertising impressions, which drives up the cost of the impressions. But at the same time, the marketing and the measurement and the tracking is not what it used to be, and so you’re seeing decreases of results.”
Negative consumer sentiment is leading to reserved spending
As well as rising costs across the board, Wong says that it is increased competition – not just from big box retailers, but wallet share on experiences and services – that is becoming a challenge for D2C retail brands.
“Q1 was mostly very strong, and results started really softening in March and April. It’s spring break season and people are getting out into the world now,” Wong explained.
“And honestly, I’ve got to believe that consumer sentiment in the US is absolutely tanking. We don’t see that the younger generations respond as much in their spending just based on consumer sentiment. But definitely, we’ve got a million data points that tell us older consumers become very reserved in their spending when consumer sentiment is low.”
Finally, when asked about how the retail industry will evolve in the next 18 months, Wong was surprisingly positive – despite the ongoing issues related to inflation and distribution.
“You know, most people say that if we have a recession, it will be short and mild,” she said. “And so, I think that I expect probably by next spring everything will level out.”