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In 2021 Consumers and Retailers Are Finally Ready for Social Commerce

Some retailers have been hesitant to buy into Facebook and Instagram advertising. Skeptical retailers believed the two platforms’ primary benefit was upper-funnel brand awareness. That made it difficult for retailers to justify large ad budgets for social media or invest in the developing social commerce space.

That changed in 2020, says Corey Feldman, Director of Paid Social at Sidecar. Thanks in part to the pandemic, Facebook and Instagram app usage was up 30% to 40% year over year, he says on Retail Uncharted. With consumers stuck in their homes and with stimulus checks in hand, they were ready to make big purchases online, particularly on social media.

As a result, retailers saw significant revenue gains on social media. According to Sidecar’s 2021 Benchmarks Report, both Instagram and Facebook saw return on ad spend (ROAS) increase year over year, up 11% and 29%, respectively.

Corey spoke to Retail Uncharted about key benchmarks from the report, winning social advertising strategies from the last year, and what retailers can expect from Facebook and Instagram in the near future.

During the podcast we asked:

  • What were the biggest impacts of the pandemic on retailers’ social media ad campaigns? 
  • Why did certain retail verticals, like automotive parts and accessories, see such huge revenue gains on Facebook and Instagram in 2020?
  • What were the most effective advertising strategies that retailers implemented on Facebook and Instagram in 2020?
  • How can retailers adjust their strategies in light of the iOS 14.5 update?
  • What is social commerce and why will this play a much larger role in retailers’ social media strategies in the near future?

Top Sound Bites

On the significant increase in return retail marketers experienced advertising on Instagram and Facebook in 2020:

Corey: All of a sudden, retailers had this ability to reach more people. That also gave Facebook the ability to be more efficient with their algorithm, finding the right people for retailers’ ads. On top of that, we saw that the stimulus checks sent out in April and May gave consumers the ability to purchase more. They were shopping more online and making bigger purchases. Consumers were spending more to revamp their homes, their cars. When you have an influx of cash like that, you tend to spend it on bigger ticket items. All of that combined helped drive up ROAS on Facebook and Instagram. 

Why auto parts and accessories retailers saw a large ROAS lift on social media in 2020:

Corey: That was definitely a surprise for me, but actually, the more we talked to our customers over the course of 2020, the more it made sense. If you think of those types of retailers that sell big ticket items, some of the best times of year for them are around tax refund season. A lot of those retailers are selling high AOV products, so you are really saving up for it. If you happen to get an influx of cash that you weren’t expecting like a tax refund or stimulus check, you may start to see some of those retailers have an increase in purchases.

We talked to a lot of our retailers about viewing the stimulus checks similar to tax season, and ironically, the first stimulus check did come around tax season. But you saw these higher value purchases that normally take a lot of planning. So maybe consumers were waiting to fix up an old car or change out some parts, but they were saving up for it. That gave retailers in the automotive space a nice opportunity to jump in front of these consumers who were in the middle of the funnel and bring them back to their site. 

On the top strategies retailers employed on Facebook and Instagram in 2020:

Corey: Let’s use this automotive parts and accessories vertical that we were just speaking to. One of the things that we do is we segment consumers by high, medium, and low parts of the funnel. That low funnel is really users who are interacting with the retailer in the last zero to 30 days. What we did for these automotive companies is we extended that. We increased our targeting for people who may have been thinking about a purchase outside of those 30 days.

These are high AOV purchasers and it takes more than a couple of days to convert. We started opening up and doing a longer tail retargeting campaign. Because of this longer decision-making process, we were able to draw in a lot of these consumers who were kind of just window shopping, or maybe in the browsing stage. We saw huge success with this across the board.

On the impact of the iOS 14.5 update on Facebook and Instagram advertising:
Corey: What we’re seeing here is a loss of visibility into user data. Losing visibility into data is what’s going to be a lot more challenging for advertisers. It will be harder to pinpoint people and see what the conversion rates are for different gender or age groups or geolocation.

We’re working on trying to find strategies around this, and I think we’ll end up seeing social commerce becoming a bigger theme, something that Facebook and Instagram start pushing more towards. . . I think we’re going to see a large push from Facebook and Instagram to get more users to check out through the platform and, in general, create more in-app engagements.

From a strategic standpoint we may be starting to focus more on users who like or comment or engage with posts, whether it be paid or organic. We may have to try to shift who we’re targeting and who counts as high intent and low intent now. Targeting people who meet in-app engagements is going to be a really more specific audience that we’re going to go after.

On the rise of social commerce in 2021 and beyond:
Corey: It’s going to be huge. I would be shocked if we don’t see a bigger push from Facebook and Instagram to get users and merchants to check out through Instagram, and I believe Facebook recently released Discover Commerce which I think is going to get users to check out through the application. Then Facebook can use that data, once they know who the consumers are, to fuel their algorithm.

Obviously, the downside of this for a retailer is going to be the 5% they have to pay, similar to Amazon, as well as potentially that loss of control of data from users who purchase.

I think that’s going to be an interesting space to watch and see the battle between Facebook and Apple and Facebook and retailers. What ground will retailers give up in order to make their Facebook ads more successful?

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