The global supply chain crisis has created challenges for ecommerce brands all over the world, and apps are no exception. At least 54% of all ecommerce sales now come from mobile devices. Mobile shopping apps’ rise as a main driver of revenue in the ecommerce industry comes at a time when distribution channels have been drastically challenged by the ongoing COVID-19 pandemic. We cover the global supply chain crisis below and how to deepen relationships with your users in the midst of its challenges.
The supply chain crisis explained
The global supply chain crisis is a result of a perfect storm of pandemic-induced elements, including factory shutdowns, shipping shortages and a drastic increase in consumer demand. Here’s a quick rundown of each.
The root cause of the supply chain shortage are factory closures due to the pandemic. Factories in manufacturing hubs like China, Taiwan, Vietnam and Germany were hit hard by coronavirus cases at the start of the pandemic. Many factories shut down or were forced to reduce production because workers were sick or in lockdown.
As factories closed, shipping companies cut their schedules to confront the expected drop in demand for transporting goods. Many trucking companies had a massive departure of drivers. In fact, the US trucking industry is currently facing a 80,000 truck driver shortage because of pandemic-induced retirements and resignations.
At the start of the pandemic, it was expected that as the economy slowed, so would consumers’ overall purchasing. But, while demand slowed for in-person experiences like travel and eating-out, the stimulus bill and savings from spending less on other things bolstered consumer shopping of retail goods. Retail sales during the 2020 holiday season grew 8.3% despite the expected slow down due to the pandemic. As we’ve discussed before, the ecommerce boom in 2020 shattered records and mobile apps were central to this growth.
When the pandemic started, factories expected a fall in demand and lowered their inventory per the “just in time” model of supply chain management. However, the demand for goods skyrocketed, spurring companies to overcompensate by ordering more items. This led to massive congestion at ports. For example, in Los Angeles, there were a record 100 ships waiting off the coast to dock at one point. Unfortunately, this congestion continues. In fact, experts are now saying the global supply chain crisis could continue for months or even years in the face of the newest surge of the Omicron variant.
How it’s affecting consumers
Along with facing delays in receiving their purchases, the main effect on consumers is the price of goods. The global supply chain crisis has driven up the price of cars, computer chips, furniture and other products. As of December 2021, the consumer price index had climbed 7%. This is the fastest rate at which consumer prices have climbed since 1982.
Despite inflation and the increasing price of items, consumer buying continues to surge in the pandemic. In 2021, US consumers spent more than $933 billion on ecommerce, up 17.9% from 2020.
How it’s affecting marketers
Understandably, businesses the world over have been impacted by the supply chain crisis. According to Accenture, 75% of Fortune 1000 companies have been negatively impacted by the crisis. In the face of these negative impacts, 55% of companies have downgraded or plan to downgrade their growth strategies in response.
How that has trickled down to app marketers are slashed growth budgets. Big Tech companies have seen the slowdown of growth spending firsthand. Evan Spiegel, CEO of Snapchat, noted in a recent talk to investors that the supply chain interruptions faced by advertising partners had affected Snapchat’s bottom line in its last earnings report. It would make sense that if companies can’t get their products to consumers, they would react by spending less money on advertising.
How shopping apps can confront the supply chain crisis
First off, do not cut ad spend. Why? Because advertising and marketing investment has a considerable and long-term impact on brand visibility. This means if you invest in a robust paid growth strategy one year, it will benefit your brand years down the road.
On the other hand, studies have shown that cutting your ad dollars dramatically for a period of six months or more might mitigate business challenges in the short-term by saving ad dollars, but it can have a negative effect on your brand’s visibility in the long run.
Instead, we recommend bulking up your retargeting strategy to create a frictionless mobile experience. As noted by Adweek, 86% of buyers will pay more for seamless customer experience. That being said, creating a frictionless mobile experience bolstered by a winning retargeting strategy can help you enhance customer loyalty during this time of uncertainty.
Take advantage of supply and demand
Major brands like Hershey’s and Kimberly-Clark have cut their advertising spending and many more are sure to follow. Use the fall in demand — as well as the increased share of voice — to capitalize on less competitive ad costs.
Be proactive in your communications
Communicate with your customers about their order status before they reach out to you. Add regular communications about their shipments to your messaging strategy, whether via email, push or SMS. These additional touchpoint opportunities will keep your brand top-of-mind to your customers.
Use inventory shortages to retarget
Add functionality to your shopping app that allows customers to be notified when a product is restocked. You can segment this list of users and retarget them for similar products in your inventory.
Create a loyalty program
During this time of tumult, reward consistent customers with loyalty programs. This could include giving them the ability to collect points on purchases and use them for discounts. Given the extended expectation of the supply chain crisis, make these points non-expiring.
Takeaways on the Supply Chain Crisis & Your App Strategy
The global supply chain crisis is a result of a perfect storm of pandemic-induced elements. One of these is the expectation that shopping would slow down in the pandemic when the reality is that consumers bought more retail goods in lieu of purchasing in-person experiences like flight tickets.
- Do not cut your ad spend. Studies have shown that cutting advertising drastically for 6 months or more can have negative impacts on your brand’s visibility in the long-term.
- Take advantage of supply and demand. Fifty-five percent of Fortune 1000 companies have downgraded their growth strategies in response to the supply chain crisis. Capitalize on the decrease in demand for ads by maintaining your growth strategy.
- Focus on building customer loyalty. Use proactive communication strategies and inventory restock notifications to re-engage your customer base. You can also set up a loyalty program that inspires retention through an ongoing rewards system.
Need help crafting a winning growth strategy?
If you need support confronting the global supply chain crisis in your growth strategy, schedule a meeting with our team! Whether you’re a shopping app, gaming app or subscription app, we can help you craft the right strategy to increase customer loyalty during this time.