COVID-19’s global impact has forced Amazon advertisers to adjust to a new reality or what some are calling “the new norm”.
According to Tinuiti’s client data, advertiser performance from the week of March 15, which followed the first major national announcement from the CDC regarding limiting gatherings to 50 or fewer people, showed an uptick in conversion rate for Sponsored Products, which peaked at 18% higher than last year.
However, conversion rate has since fallen, and while it remains on par with what was observed at the end of March last year, this is a meaningful decline from the 10%+ year over year increase seen for much of Q1 2020.
In turn, CPC growth has fallen in line with conversion rate, such that the cost per conversion has remained roughly even throughout the late-March, early-April shifts.
According to Andy Taylor, Director of Research at Tinuiti, it’s important during volatile periods of time such as this to have “a robust reporting and bid system in place to understand and adapt to current market conditions in hitting profitability goals”.
Why now is the time to invest in Amazon advertising
Largely due to the COVID-19 response, a new “normal” is emerging on the Amazon Marketplace as it relates to spend, average CPCs, and click-through rate.
For some advertisers, the good news is average CPCs are decreasing. For brands who have the resources, now is the time to focus on bolstering conversion rate and accumulating relatively cheap clicks.
We spoke with our team of experts at Tinuiti to get their take on how COVID-19 is impacting advertisers on Amazon and what we can expect to see in the future:
COVID-19 Amazon roundtable: The future for brands
Expert: Stuart Dooley, Senior Marketplace Channel Analyst at Tinuiti
“I believe the drop in CPCs is mainly driven by an exodus of sellers from the advertising auction. Companies built on solid foundations will weather the storm, and subsequently take advantage of their rivals backing out of the ad auction. Conversion Rate is still strong, especially if your products help consumers during this tumultuous time period.”
Expert: Jordan Gisch, Sr. Strategist, Marketplace Search at Tinuiti
“There could be a lasting impact of COVID-19 that runs throughout Q4 2020 and severely impacts the holiday shopping season due to supply chain issues and inventory constraints. It has never been more valuable to diversify your production to ensure you are set up for success. Advertisers who are in strong inventory positions come Q4 will be the ones that win as they take advantage of the lower cost to play that could last through 2020.”
“In the long term, this is a big win for Amazon and Ecommerce in general as the adoption of online shopping has increased dramatically in the U.S. during the past month. While COVID-19 will pass and our days will return to normal, the new habits formed and the ease of shopping online should last.”
“Currently, this a great time to invest in upper funnel strategies as traffic and detail page views are currently “on sale”. eCPM and aCPC are down as advertisers are focusing on efficiency and purchase tactics in this uncertain time. The brands that are willing to take a short hit in profitability now and invest in awareness traffic as shoppers are all online at home should reap the benefits of the low-cost traffic now and be able to retarget those new customers in the future to drive purchase.”
Expert: Courtney Macfarlane, Senior Analyst, Marketplace Search, Tinuiti
“Those that were loyal to brick and mortar stores are now turning to Amazon to purchase products. With all the new visitors to Amazon, advertisers have the chance to focus on awareness and consideration with the larger audience pools to target.”
“Categories like beauty are booming online, and as people start to learn that they can get the same products they know and trust on Amazon.”
“It’s easier than ever to gain market share from competitors if they run out of inventory. Those shoppers who may have been loyal to a certain brand and having to purchase a different brand may find they prefer the new brand even better. Top brands on Amazon are pulling back on ad spend, which gives brands the ability to gain market share if they take a more aggressive approach during the Coronavirus.”
Expert: Eric Kauss, Director, Marketplaces Operations at Tinuiti
“Right now vendors and sellers need to execute hardcore planning to make sure they are ready for Prime Day and Q4. If they haven’t done the work in advance, they are going to find themselves behind the eight-ball.”
“Vendors and sellers should understand their inventory position (as it stands today) and make plans for when business returns to some semblance of “normal”. The key will be to drive traffic to the top asins where there is ample inventory to restart the PO algorithm to generate future PO.”
“For vendors and sellers producing non-essential products overseas and have not received PO, inventory planning needs to be discussed now vs. later to prevent any critical supply chain issues. My recommendation is to partner with an agency who can help you better understand Amazon’s inventory forecast, and how to use any excess to your advantage, so you can place product production orders in advance and be prepared for Prime Day as well as Q4 holiday sales.”
For more information on COVID-19’s impact on advertisers, visit our resource hub.