Analysis: Black Friday: online marketing costs jump in bidding war with Temu and Shein

Nordstrom

27/11/2024 06:00

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      'Cost per click' for popular keywords increases
    

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      Retailers compete for visibility on key shopping day
    

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      Temu and Shein target rivals' keywords
    

  
    By Helen Reid
       LONDON, Nov 27 (Reuters) - Heavy online marketing
spending by Temu and Shein is making it more costly for other
retailers and brands to reach shoppers on Black Friday,
marketing and industry experts say, with both platforms bidding
heavily on search keywords used by competitors.
    Typing a few words into a search engine is a key starting
point for shoppers looking online for gifts or buying for
themselves in Black Friday sales, the unofficial start of the
holiday shopping season on the day after U.S. Thanksgiving. 
    Retailers compete for their advertised products to appear
high up in online search results, by bidding on keywords. The
greater the demand for a keyword, the more the search engine
charges for each click on an ad appearing in those results - a
metric called "cost per click".
    In the United States, for example, Temu has bid on keywords
including "Walmart Black Friday deals", "Kohls Black Friday", 
and "Bed Bath Beyond", according to data on Google search ads
compiled by online marketing platform Semrush for Reuters.
    Shein has bid on keywords including "Walmart clothes", "Zara
jeans", "Mango dresses", and "Nordstrom Rack shoes" in the U.S.,
the data showed. The cost per click for "Walmart clothes"
increased by 16 times from August 2022 to August 2024.
    Generic keywords like "cheap clothes online" and "shopping",
have also become much more costly, the data showed. 
    "It's brutal out there, it's really hard," said Erik
Lautier, ecommerce expert at consultancy AlixPartners.
    "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 drive anywhere from 15% to 30% or more
of a retailer's online sales, and account for as much as half of
the marketing budget, Lautier said. 
    
    'AGGRESSIVE'
    Brands bidding on other brands' keywords is not unusual, but
Shein and Temu stand out because they bid on a much wider range
of competitors' keywords than average, said Olga Andrienko, vice
president of brand marketing at Semrush. 
    "We are seeing a fundamental shift in search marketing
dynamics and the fast fashion brands are now outbidding the
traditional retailers, and it does look like their strategies
are a lot more aggressive," she said. 
    In response to Reuters' questions, a Temu spokesperson said
that the platform is committed to fair competition and
responsible advertising practices, and maintains a "negative
keyword list" to prevent ad targeting of brand names.
    "In rare instances, brand names may inadvertently be
included in our campaigns due to automated keyword insertion
processes on ad platforms like Google," the spokesperson said,
adding that Temu acts quickly to address these occurrences.
    Shein did not immediately reply to a request for comment.
    The rising costs are driving some businesses to shift
marketing spend away from paid search and into other channels
like Facebook  META.O , TikTok, influencers, and traditional
advertising, said Erin Brookes, head of the retail and consumer
practice at Alvarez & Marsal in London.
    "I've seen many brands really start to think, actually, that
activity maybe gets us a customer that we don't want – a
customer who is trading on price only, not a high-margin
customer who is coming back – and I want to invest in bringing a
more targeted customer into the brand," Brookes said.
    British online fast fashion retailer Asos  ASOS.L  this
month announced a new loyalty programme, part of its marketing
efforts to reach customers "in more engaging and emotional ways"
using cinema ads and influencers too, chief customer officer Dan
Elton said, adding that performance marketing is "just one piece
of the puzzle". 

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'Cost per click' of online search keywords rises    https://reut.rs/4eMUeLp
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 (Reporting by Helen Reid; editing by Jonathan Oatis)
 ((Helen.Reid@thomsonreuters.com; +44 7584 155 200 ;))