Q4 is officially in full swing. Such an exciting – but high-pressure – time for e-commerce. Brands are working to get the most out of these opportunity-filled months. It’s all about capitalizing on Cyber 5 and other holiday promotions to maximize profit before closing out the year. But what about preparing for a profitable new year ahead?
Without the right prep, you’re likely to play catch-up in the first few months of the new year. Compounding this challenge is an economy that still feels as uncertain as ever. Inflation is leaving its mark on consumer spending in Q4 and possibly throughout 2023.
So what can you do to drive growth now and build momentum for the future? How can you stay laser-focused on Q4 results while preparing for a strong start in January?
In this article, we’ll dive into the challenges e-commerce brands are facing as they navigate the busiest time of year. Then, we’ll walk through five actionable tips for making Q4 count while setting the stage for a profitable 2023.
Gearing Up for a Profitable New Year
- The Q4 Conundrum (and Why It’s Intensified This Year)
- Why It’s Always Essential to Look Ahead
- 5 Ways to Set the Stage for a Profitable 2023
The Q4 Conundrum (and Why It’s Intensified This Year)
Q4 comes at you fast! The time between October and December is chock-full of holidays and the year’s biggest spending weeks. This period requires special promotions, agile inventory management, and precise planning to align your supply chain with growing consumer demand.
The calendar is packed, and there isn’t much time to stop and look beyond the new year.
Still, January looms. Sales in January may be slow initially, but businesses must lay the foundation for growth over the next twelve months. This year will require navigating unpredictable inflationary pressures.
KPMG reports that 72% of consumers are not only expecting a recession in the next year — they’re planning for it by adjusting spending.
Why It’s Always Essential to Look Ahead
Pending recession or not, depending too heavily on Q4 to meet your annual revenue targets is a misguided strategy.
It’s true that many of the biggest consumer spending days are packed into those last few months of the year — but Q4 as a whole accounts for about an equal percentage of total annual consumer spending as each of the three quarters preceding it.
The US Census Bureau’s Annual Retail Trade Survey data shows that in 2020 (the most recent full-year data available), Q4 made up 27% of total sales. Larger Census Bureau datasets analyzed by Business Insider in 2017 show that between 1992 and 2016, Q4 never accounted for more than 27.88% of total retail sales.
There’s no denying that Q4 is busier than other times of the year, but from an objective sales data perspective, it shouldn’t be prioritized at the expense of others.
Preparing now to kick off the new year with strong Q1 sales positions your business to earn higher profits and avoid the Q4 pressure (if not the hustle) that comes around every year.
In 2023, it can also steel your business against the inflation pressures on the horizon.
Let’s look at five actionable ways to do it.
5 Ways to Prepare for a Profitable New Year
1. Level Up the Buying Experience
When the pandemic upended retail as we knew it in 2020, it set in motion a decline in traditional brand loyalty across consumer demographics. According to McKinsey, 75% of consumers engaged in new shopping behaviors, and 39% of younger shoppers (Gen Z and millennials) ditched brands they trusted in favor of new ones.
The understandable reaction from e-commerce brands has been to widen the scope of their marketing efforts and find new customers to replace these once-loyal deserters.
And while there’s no harm in this approach, it doesn’t address the whole story: that consumers aren’t always (or even usually) leaving brands because they’re dissatisfied — instead, they’re looking for optimal choice and convenience.
To drive growth and build back customer loyalty this Q4 and beyond, think about the end-to-end buying experience your business provides. Ask questions like:
- Can customers easily make mobile purchases through an app?
- Do you provide frequent and accurate order updates?
- Are you delivering firsthand information to customers vs. handing them over to other last-mile contributors?
- Do buyers have consistent omnichannel interactions?
In short, go beyond loyalty programs and holiday promotions to design a buying experience that keeps customers wanting to come back at every time of year.
While you may not be able to implement a slew of new solutions amidst the hustle of Q4, you can optimize what you already have and enter the new year knowing where opportunities exist to improve.
2. Get Granular About Pricing
According to McKinsey’s latest Consumer Pulse research, two-thirds of US consumers report inflation as their top concern (over a plethora of personal and sociopolitical issues). It’s reflected in their shopping habits — 44% have delayed purchases, 37% have changed brands for a discount or lower price, and 21% have used a “buy now, pay later” program.
How can e-commerce brands be mindful of these concerns while continuing to drive growth in the coming months?
McKinsey says the solution lies in a more granular pricing strategy — one that takes a “surgical” approach. Their research says:
“Instead of implementing broad price increases that may erode customer trust, retailers can tailor their inflationary price response by customer and product segment, considering both margin performance and consumers’ willingness to pay.”
In other words: blanket price hikes won’t do the trick.
Instead, consider your full set of product offerings and each unique customer segment. Which warrant (and could best handle) an increase in price? Where will your margins benefit most from a slight increase? Should you pull back on promotions rather than increase certain prices?
It’s a balance, for sure, but taking an intentional approach and being transparent with customers is a surer way to optimize pricing without an adverse impact on sales volume.
3. Optimize Your Content Library
Content marketing has become a powerful way for brands to connect with consumers. You can use it to build relationships with potential customers both old and new throughout Q4.
Even better: you can do it largely with content you’ve already created.
First, think about how you can repurpose existing content. It can be as easy as sharing your high-performing blog posts on social media or repurposing them as a different type of content (ex: a how-to product blog turned into a demo video).
Next, look at older content to find opportunities for quick updates that earn renewed traffic.
Updating content is much faster than creating new content and can yield higher ROI. HubSpot reports that more than three-quarters of their blog views and a massive 92% of their blog leads come from “old” content that they’ve given a refresh.
Finally, as you continue to create and share content, optimize customer pathways to purchase. This means clear website navigation pathways, optimized CTAs, and in-text ad offers (to name a few strategies).
Given that nearly a third of B2C consumers start product searches with a search engine and a quarter start on social media, you can expect an optimized content strategy to drive higher traffic and sales — and for its compounding effect to set you on the right trajectory in 2023.
4. Execute Data-Driven Personalization
Personalization is the name of the game in modern retail. According to McKinsey, 72% of consumers expect personalization, and 76% become frustrated when they don’t experience it.
The good news? You’ve already got the keys to the personalization kingdom: user data.
Partner with your marketing team to provide personalized communications, customized offers, and other tailored digital experiences. Use the customer and lead data you’ve collected through sales transactions and other digital engagements (1P data) to do this.
When you do, you can expect results to show up in your sales results. An overwhelming majority (90%) of consumers say personalization directly impacts how much they spend with a particular brand.
Then, as you look toward 2023, consider how you can more systematically collect and leverage your data to deliver exceptional customer experiences all year long.
5. Prioritize Supply Chain Visibility
A recent McKinsey survey found that nearly every company respondent has experienced supply chain disruption. A staggering 97% have added new supply chain strategies to boost resilience — dual sourcing, inventory increases, regionalization, and more.
The takeaway is clear. Companies need resilient supply chains to meet the demand of Q4 and to drive consistent growth in an uncertain 2023.
While you may not be able to implement sweeping changes in a busy Q4, you can start with the part of your supply chain you can control: visibility.
As you navigate the busy next few months, look both upstream and down. Consider how you can optimize vendor relationships, proactively address potential bottlenecks, and make smart decisions about inventory based on sales and demand forecasts. Centralize the supply chain as much as possible to create a single source of truth for stakeholders managing every stage.
Finally, plan ways to be transparent and over-communicate with customers in ways that relieve frustration even amidst delays. For example, frequent delivery updates and conservative delivery estimates posted on product pages.
In the end, brands can’t control most causes of supply chain disruptions — rising fuel costs, labor shortages, and the like. By taking control of your own logistics network, you can be ready for what’s ahead and minimize its impact on customer satisfaction.
Ready Your Business for Growth Now and in The Future
Economic uncertainty may be here for the long haul, but with an innovative mindset and agile approach, your e-commerce brand can thrive.
At SellersFunding, we’re committed to helping e-commerce entrepreneurs achieve their goals no matter how big or small. Whether you need funding solutions or growth-maximizing tools, we’ve got you covered.
Ready to kick off 2023 with a growth mindset and the resources to execute? Reach out to our team to learn more about how we can help.
Our flexible working capital and other e-commerce funding solutions can help you scale faster, operate with greater agility, and increase your profitability, even in a tough economy.
