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261: Q4 Predictions For Online Retailers: The Case For (And Against) A Massive Quarter

Posted by Austin Brawner on July 21, 2020

There are only 130 days until Black Friday. With the global economy in so much flux because of COVID-19, what are your Q4 predictions? 

Are you preparing for a massive Q4 or wondering if your business is going to just get by? 

In this episode, I go over a few Q4 predictions with cases in favor of and against Q4 being a thriving quarter for ecommerce, factors to consider that are in and out of your control, and most importantly, how you can prepare.

Episode Highlights

  • 3:39 Why the ecommerce industry is primed to have a massive Q4
  • 5:59 COVID-19 effects on spending and your consumer’s potential psychological shift during Q4
  • 8:01 How to manage your ecommerce inventory to get a leg up against your competition
  • 9:12 If your target audience includes these people you might have a difficult Q4
  • 10:39 The biggest case against a successful Q4
  • 13:17 Large corporations marketing budgets and how they could impact small business’ ability to compete
  • 14:27 Austin’s Q4 predictions and his 3 step plan for preparing for the type of quarter in store

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Transcript

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Austin Brawner: What's up everybody? Welcome back to another episode of the Ecommerce Influence Podcast. My name is Austin Brawner, and I am excited to have a special episode here for you today. This is gonna be a solo episode. Andrew is taking a little break from the podcast, but he's gonna be back very soon. We'll continue with our regularly scheduled flash episodes. But today, my special episode for you comes from a conversation that I've had with one of my clients. Recently, we were having a discussion and he brought up he said, "You know, I'm preparing for a massive Q4, an absolutely gigantic Q4, and I'm preparing starting today."

And it got me thinking. We are in mid July, we're halfway through an absolutely bonkers year, craziest year that I can remember. The last four months, it felt like four years in terms of what's going on. And so I wanted to dive into that a bit more and think. I spent some time going through my thoughts about this, and the thoughts and the conversations I've been having with my clients over the last couple weeks about Q4.

Are we prepared to have a huge Q4 for ecommerce businesses? Or is this going to be a Q4 that is much slower? Is the economy going to ramp down? Are purchasing habits going to drop down? Are we going to look at this at the end of the year and be like, "Oh, man, this is the worst Q4 in a while,"? So I'm going to go through the case for and against a massive Q4. I'm also going to share with you my personal opinion and how I'm preparing for the rest of the year. So let's dive into it.

So this conversation that I was having, he says, "You know, I think we're going to have a huge Q4", it got me thinking about where we're at right now. It got me thinking about why we might have the biggest Q4 we've ever had, and it took me back to a little bit of research. So last year, about 16% of total retail sales last year were ecommerce sales. So it's still very, very, very small that was up from like 14.2%, the year before, and it's increased by like 2% every single year for the last like eight years, eight, nine years. The big question I have is what's going to happen this year? Right?

And I was playing this idea out in my head, I'm thinking about the holidays, right? We're, again, we're in mid July. But looking ahead to the holidays, the idea that people are going to magically want to go back to the mall, magically want to go back and make a purchase in their favorite big box stores, that they're magically going to want to go back, bring their kids to the mall and have them sit on Santa's lap. That is absolutely bonkers to me, it's not going to happen.

And in my mind, I think to myself, when I'm looking at the case for a really big Q4, that is the biggest case. It's that if 16% of total retail sales were attributed ecommerce last year, there's going to be a huge increase this year. Combine that with the fact that retail has been getting hammered, brick and mortar retail has been getting hammered during this pandemic.

And if you look at the, I think it's 14%, look at the stats that I saw, 14% of all jobs lost right now are in the retail industry. That's second only to travel and leisure. So the competition's going to be dropping. As we know how business works, a lot of these brick and mortar stores, they have high hopes. The ones who are still around probably had some cash around, they're getting support from the government, and they're hoping they could make it back.

But now you go into a Q4, which is the time when they typically would make their money and people aren't gonna want to come in. So I think that's a very relatively low number of job losses for the retail industry. I think it's going to be something, it's gonna be a little bit long. It's going to be more painful for brick and mortar in the future. So what happens, right, that shifts online and it potentially goes to your business?

Now, the next reason why I think we may have a very large Q4, and this is not going to be evenly distributed, but a lot of like the tech jobs, a lot of white-collar jobs that are you know, out of an office, haven't gone anywhere. And what has happened? Back in March and early April, but really like late March, everyone was concerned about what's going to happen when this pandemic sweeps across the country, we're all in quarantine, are people gonna cut their expenses? What's going to happen?

And no, they did not cut their expenses, that did not happen. For a lot of people who have got online businesses, sales actually boosted. They were products that were somewhat essential. Sales went up and we had some of the craziest months we've ever seen in the ecommerce space.

So what's happening to the rest of the year? Well, these white-collar jobs haven't gone anywhere and people's expenses for travel, for food have all dropped significantly. So when you look at what people might spend their money on towards the end of the year, it's probably going to go towards gifts. And I can see the psychological shift people making. It's been a, it's been a challenging year, let's buy things for each other, rather than going anywhere. Which bodes very, very well if you are running a business that targets people who have not been hit very hard in this pandemic.

On the flip side, there are a lot of people unemployed right now. And this is going to kind of shift over. Well, I'm not gonna go into that yet. That's going to be when I talk about the case against a good Q4. But back to the case for good Q4. So those jobs haven't changed. expenses have dropped, people might have more income spent on your products.

Another case for a big Q4 is that we're having, everyone's having supply chain issues right now. And this is where I think there's a good opportunity for a smart business owner. Now, if your competition during this time does not order products in a, does not order products early enough or has supply chain issues, there's a high probability that that demand shifts from their company and their business to your business.

The people that prepare early and make sure that their supply chain is secured, and they make sure they have enough inventory, have a huge leg up on the people who don't because it's going to be very, very hard at the last minute to, you know, drive extra sales or get an extra order this year. It's going to, it's going to require earlier ordering. And that's it, that's a potential advantage. So if you do a good job with that, you might have a larger Q4 than you would expect based on the fact that your competitors might have not done a good job ordering inventory. Now, though, that's my case, that's my bull case for a good Q4. And I think there are some really good points there.

Now, let's go into why this could be a really, really rough Q4. COVID is here to stay at least in the US, right? We've got in July 11% unemployment rate. I was reading that 42% of the recent job loss related to COVID is going to result in permanent job loss. Those jobs are not coming back. We've had massive job loss during this time.

July 31, the $600 federal unemployment benefit expires and we don't know what's going to happen with that. We don't know if there's going to be an extension of that at this point. We don't know if it's going to be reduced and extended. At this point, it's a wild card, but it's 100 billion dollars that is being pumped into the economy right now, every single month, and if that stops, we're going to start seeing the consequences of this pandemic.

So that's what, that's kind of the state of where we're at, right? The hardest hit, they're going to be the working class, the people that would hit the hardest so far. And if that's your audience, if that's, if you have a product for people who are in typically in food service, the younger people in our society, it could be challenging for you because they're going to run into some real consequences from this. That's one case against it, that's not the biggest case against it in my mind, though.

The biggest case against it in my mind is that we have an election coming up. When you think back to what it was like in early June when the protests had popped up all across the world, and you're sitting there as a business owner or a marketer, and you're trying to navigate that. We're going into this time, just remember what that was like, how challenging it was to think about. People were shutting down their advertisements, people were cutting back on things because bigger things, bigger shifts were happening in our economy and in our society and a lot of the trivial stuff that we typically think about wasn't appropriate.

Now, let's look about what's going to happen between now and November. There's any number of things that could happen that could bring that back. And I look at it and I say, we get to November, and now regardless of where you fall on the political spectrum, I don't see any future where we go back to stability right away.

If Trump wins, very likely the streets will be full of people protesting, potentially go back to more riots, immediate chaos. And that happens right in November, right? That happens in November. That happens right during the holiday period. Who knows where we're going to be at with the pandemic at that point all complicating this and making this even more challenging. So are you advertising during that time? Are you moving forward with your Q4 plan? When all these things are happening in the world or not?

On the flip side, say Biden wins. What happens to the stock market? Does it immediately tank because you pull out this person who might be, you know, artificially inflating it or the security around Trump having that as his number one metric for the society? I think that we may look at this market being a little bit artificially inflated, because we know how much he values it as a metric in our society.

So you have a shift in any sort of regime, there's instability, what happens there? I'm not saying either one is good or bad. I'm just saying that if we look at it objectively, we're going to see, I don't see a case where we're more stable in the near future. And that makes me question where to make investments and question how we're thinking about this.

Now, let's think about the actual effects that happen when instability hits and businesses are not able to advertise or ramp down their advertising. It's like what happened during the protests and the riots. Large corporations stopped their advertising, but they have a marketing budget. So they stopped their advertising in early June. And then in the second half of June, to end the quarter, they have to spend their marketing budgets.

So what do they do? They dump them, they dump them to spend them all up so that they have the same marketing budget in the future. And you see CPM's go up. You see cost per acquisition go up, and advertising gets very, very, very expensive. Now is that going to happen in Q4? I mean it's possible if there's periods when these companies cannot advertise and they're trying to hit their Q4 numbers, it's likely that they might dump advertising and make it very challenging for a small business owner to have success advertising. So that's my case against it. Right? And I look at this and I think, well, we're going into a very interesting time and I'm not sure what's going to happen.

So back to this, if I look at the case for and the case against personally, here's what I'm doing. Most importantly, I'm taking care of my mental and physical health. It is so easy to get distracted right now. There's toxic news on social media, from cable news. There are all these distractions trying to pull you away from what your focus is, and from moving you ahead and that makes it really, really hard.

I've been spending a lot of time outside in solitude, trying to get clear around my thinking so that going forward during the rest of the year, I can make good decisions. Spending time working with clients to cultivate a sense of well being and be easy on myself right now, because this is something we've all not dealt with before. I've been straight up blocking social media, from my computer and from my phone, because I understand, I know that it makes me feel less capable of making good decisions if I spend all my time being outraged. And that's, that's where we're at currently.

And now, let's think about what happens for the rest of the year. The way that I think, it's the most important thing, the best way you can prepare for the rest of the year is to focus on making sure you're in a healthy mental and physical state because we're going to be asked to make changes to our business and to our life and make changes in rapid ways. You got to expect that over the next couple of years. So that's my number one priority.

Number two, I'm personally preparing my business for a huge Q4. I think the case for a huge Q4 is much stronger than the case against. And so that's what I'm looking at. I'm saying, "What can I do now to prepare for a big Q4? What can I do now to help my clients prepare for a big Q4?" That to me seems like what's going to happen, so I'm going to prepare for it. And if it changes, well, then we can adjust, but that's where I'm at.

And number three, I'm taking a very long view here. I don't know what is going to happen, but like I mentioned earlier, I don't see any path to stability in our near future, in the US at least. I am both remaining conservative and being aggressive at the same time. This may sound like a contradiction, but I don't think that it is. I'm being conservative to give myself the opportunity in the future to be aggressive. I'm trying to make conservative decisions in the business and remain cash flush, so that if we see an opportunity in the future that seems like a no brainer we can dive into it during all this chaos and during all this instability because that's when opportunities typically arise.

And ultimately, I'm not expecting us to get back to any "normal" anytime soon. I think we're in for this for a long time and we, as business owners, as marketers, need to come together and expect that we need to figure out how to operate during this new time and take care of ourselves. So we can make good decisions as the situation evolves and changes over time, and that's my main focus. That's, that's, that's really what I've been thinking about. I think we're going to come out of this with some huge changes that are gonna be positive, some positive, some negative, but definitely this time of change, to me, is a time of opportunity, is a time when big businesses grow, and big businesses evolve from small businesses. So that's my mindset on it.

I would love to hear how you're thinking about Q4. I would love to hear your case, your ideas for and against it. The best way to hit me up would be hit me up on Twitter @a_brawn on Twitter, and let me know what you think. If you like this episode, I would love to hear your feedback, how you're preparing for Q4. Super excited to dive into this.

And again, my last parting message is this has been, the last four or five months have been a lot, they've been condensed. Take care of yourself. Go out make sure you go for a walk. Take a weekend off. We all went into this year with expectations and forecasts. Again, those are all just projections of ideas that we have and when those change, it's okay.

Don't tie your success, your mental health to revenue, because if you do, we're going to go through this period of time when there's going to be massive changes. And if you're tied to your revenue, it's going to be a very unstable period of time over the next couple of years. So that's my advice. I hope you guys have a great day. I'd love to hear from you. Talk to you guys very soon.

Hey, guys, it's Austin and if you've been loving the podcast, you gotta go check out brandgrowthexperts.com that's where I work one on one with my clients to help them build faster growing, more profitable online stores. I've got coaching programs and workshops that we host all over the world, would love to have you come check it out.

If you're a fast growing ecommerce business or you want to be a fast growing ecommerce business, you gotta check it out. That's the spot for you. We go more in depth than we do in the podcast with comprehensive trainings and coaching to help you scale up.

Check it out brandgrowthexperts.com. See you there.

Austin Brawner: What's up everybody? Welcome back to another episode of the Ecommerce Influence Podcast. My name is Austin Brawner, and I am excited to have a special episode here for you today. This is gonna be a solo episode. Andrew is taking a little break from the podcast, but he's gonna be back very soon. We'll continue wit...

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