The marketing might of two online retailers might mean a bleak Black Friday for rivals.
As Reuters reported Wednesday (Nov. 27), digital marketing spending by eCommerce firms Shein and Temu is making it harder for other retailers, as both companies have bid heavily on search keywords used by their competition.
As the report notes, retailers bid on keywords to ensure their products rank highly in online search results. The more demand for a keyword, the more a search engine charges.
Data on Google search ads compiled for Reuters by the online marketing platform Semrush shows that, for example, Temu has bid on keywords like “Walmart Black Friday deals,” “Kohls Black Friday” and “Bed Bath Beyond.”
For its marketing, Shein has bid on keywords such as “Walmart clothes,” “Zara jeans,” “Mango dresses” and “Nordstrom Rack shoes” in the U.S., the data showed.
And while the cost of a keyword like “Walmart clothes” has risen 16-fold in the last two years, generic keywords like “shopping” are also becoming increasingly expensive, Reuters noted.
“It’s brutal out there, it’s really hard,” Erik Lautier, eCommerce expert for consultancy AlixPartners, told Reuters.
“By definition, when you increase the cost per click, the return on your marketing investment decreases. In some cases, that may mean it becomes unprofitable, and that can be highly impactful for retailers that depend on paid search ads to drive their business.”
Paid search ads can generate between 15% to 30% or more of a retailer’s online sales, while making up as much as half of their marketing spending, Lautier added.
Making matters worse is the fact that retailers may be competing for a smaller base of customers this year. Recent research by PYMNTS Intelligence shows that 25% of consumers report that they are less likely to shop at deal events this year.
“Thirty-nine percent of shoppers said they are somewhat or much more likely to wait this year than last to buy a product they immediately need,” PYMNTS wrote earlier this week. “Roughly 59% of consumers said they will either spend the same amount or less than they did last year.”
And many consumers now feel overwhelmed by the deals retailers are offering for the holiday shopping season, the same research shows. A third of consumers told PYMNTS they feel “bombarded” by sales offers, while 41% said the frequency of these promotions make the deals seem less special.
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