Retail & Ecommerce

Discount Retailers Meeting Challenges and Taking Opportunities in 2023

Illustrating retailers challenges

Last Updated on: 27th September 2023, 01:49 pm

2023 is an economy of contradictory forecasts. There is market uncertainty and many macroeconomic factors pointing to difficult times ahead. Meanwhile, we see continued success and strong growth projections for many retailers and categories. 

Consumers are also unsure how to feel, but there is a general sense of caution. According to a recent Forrester Report, 64% of Americans and 55% of French consumers are anxious about a possible recession. Because of this, everyday and discount retailers have become critical for online and in-store shoppers. 

We will look at some of the challenges and opportunities for discount retailers, focusing on some large brands from the US, Australia, and other countries. We’ll be discussing three elements of retargeting ad campaigns that can positively impact business right now. 

Table of Contents:

Discount retail trends in challenging times

Much like other categories, value and everyday retail suffered during the pandemic. In fact, some brands were hit twice as hard. Because many discount retailers focused on non-food categories considered not essential, they were hit by the lockdowns. On top of that, as customers traditionally only browse and buy in-store, many discount retailers needed robust online sales channels. Stores worked fast to rectify this and, by September 2021, the online share of sales in the wider retail market in Australia hit 15%. In the US, the percentage of online sales was around 2.5% of the total retail sales in 2010 and grew steadily to 11% at the end of 2019, but then saw a sudden leap to 15% in a single quarter at the start of 2020. Some sources suggest even more significant spikes in other countries, with the UK reaching 26% in online sales.

In 2023, we are seeing another shift. Consumers have to deal with the reality of high inflation and the fear of recession. This has negatively impacted many categories, but economic pressures are often a catalyst for growth for discount retail as consumers become more budget conscious.

Wesfarmers, an Australian conglomerate, saw its stores struggle in categories such as hardware in the second half of 2022; however, its multi-category discount retail store, Kmart, performed well enough to push group profit up 14% overall, which was well above analyst forecasts. A similar everyday products retailer, Big W, also saw sales jump 15.3% during the last six months of 2022 as customers prioritized value over luxury.

Of course, these results may be slightly skewed by inflation, but the big picture for discount retailers is clear. Customers are turning to stores that can help them stretch household budgets further and are now shopping in-store and online. 

It’s a similar story in the US, where retailers that can meet the needs of more cautious buyers might see less of an impact from inflation. Walmart can offer more deals and discounts for customers than Amazon and is predicted to better weather an extended period of inflation. Almost half of Amazon Prime customers state that they plan to spend less on the platform in 2023, but only 38% of Walmart+ customers said the same. 

Retailers need to seize this opportunity and use retargeting ad campaigns to maximize online sales and brand visibility. Here are three elements of online campaigns that can have the quickest effect on business as retailers react to a dynamic economic situation and look to move fast.

Multiple retargeting strategies in ad campaigns

We spend a lot of time helping to bust a specific retargeting provider myth. Online businesses have mostly come around to the idea that working with multiple retargeters allows them to reach more of their potential audience and, crucially, to reach more people ready to visit a site and make a purchase. Businesses that utilize a multiple retargeting strategy are getting a bigger picture of their clients and are speaking to more of them with targeted ads. 

Some businesses have previously worried that running multiple retargeting campaigns means paying multiple times to reach the same prospect. Realistically, the overlap between different retargeters is relatively minimal. If a company uses two retargeters with the same brain and the same technology, then there will be a greater overlap and a so-called “cannibalization” of leads. However, this is never the case. Each retargeting partner–while offering broadly the same service–is coming from a different angle and using different tools. Only minor tweaks in campaign setup and the technology that drives campaigns can lead to targeting different people. That said, it is essential to check which vendor brings additional value and how these competing but complementary solutions fit together. 

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The advantage of Deep Learning-powered campaigns

That “different technology” is where our Deep Learning-powered algorithms come to the fore. While other retargeting partners may be using basic artificial intelligence or Machine Learning algorithms, we are leveraging more powerful Deep Learning technology to find new customers through data and behavioral patterns that other solutions don’t see. 

For discount retailers, this is vitally important. Shoppers value convenience, price, location, and familiarity with everyday brands and will repeatedly purchase with one retailer for a long time. Identifying and converting new customers takes work when so many people have already chosen their brand. 

Deep Learning can more effectively measure customer intent and find those ready to buy–whether they are new customers looking for value shopping options in times of economic uncertainty or customers who are prepared to switch from other brands.

Increasing traffic to help buyers find your products

Value and everyday brands thrive from many sales, but they still need to guarantee a level of product quality that will keep customers satisfied and coming back. 

Traffic from online campaigns is the same. Retailers may look to increase the reach of campaigns and create more online site traffic, but this volume only makes strategic sense if the customers convert views and visits into actual sales. This is, again, where the right technology and campaign setup pay off. 

Consumers are making smarter economic decisions

It’s important to note that, for many consumers, choosing an everyday or discount retailer is a choice, not a necessity. Forrester research from 2023 suggests that buyers are showing more financial awareness and are likelier to be smarter with budgets than in previous times of economic uncertainty. During the pandemic, consumers took stock of the coming situation and banked up to six times more savings than in previous prerecessionary periods. This led Forrester to predict that, despite the overall caution, there could be an average 5% increase in spending across categories over the coming year.

For savvy consumers, discount stores are a way to protect their savings and keep an even keel. Through better target ad campaigns, discount stores can offer right-priced products to these buyers as they steer through 2023, however the situation may unfold. 

If you want to know more about winning campaigns for retailers, contact us to discuss the specific needs of your discounter business.

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