Post-COVID Prediction … The New Normal
We've rounded the corner and thank goodness we feel the country is on the backside of the COVID pandemic. What a ride it has been! It's far from over, but under control. For many consumer companies, COVID caused a surge in business with more people working and shopping from home. It has put pressure on the supply chain to keep up with the demand. Forecasting sales throughout 2020 was impossible because the order flow was constantly changing. It has been a moving target in the upward direction. When will it end? Where will it level off? These are the $64,000 questions.
Unlike most consumer mailers, business-to-business (B-to-B) mailers were hit hard by the pandemic. The business-to-education market was also negatively affected. Many businesses closed temporarily and employees were told to work from home. This started in March 2020. B-to-Bers are starting to bounce back with staged reopenings throughout the country. The education market is still in flux. We expect to see a rebound starting in August 2021, when more schools will open at full capacity.
We're almost through the first half of 2021, and results have remained strong, especially for our consumer clients. However, for many of our clients, we're starting to see weekly sales dip below 2020 results, but still significantly above 2019. If we look only at last year’s results, it would be extremely easy to overplan by circulating too many catalogs. As I mentioned previously, it was next to impossible to forecast 2020 results. Well, it's just as difficult to forecast 2021 and beyond. This is an unprecedented time and there's no road map to follow. It's really difficult to predict what will happen in the coming months, especially through the fall and holiday seasons. We do feel that a significant portion of the increase is sustainable. COVID has caused a shift to catalog and online shopping that we feel is permanent. While many people will return to in-store shopping, consumers have become accustomed to and appreciate the convenience of shopping by mail.
Where will orders and sales level off? According to our crystal ball, we're expecting that sales will settle somewhere between 2019 and 2020 results. I don't feel orders and sales will return to the levels we saw in 2019. They will be higher. And we know they're already trending down from 2020 and early 2021 results. Typically, we compare current results vs. the same week one year ago. But these aren't normal times, so we now compare current results with the past two years. I feel it's safe to say that orders and sales levels will be a blend of both years.
It's important to understand where the surge in 2020 came from. For many of our clients, we've seen less of an impact on 12-month buyer counts vs. what we saw in orders/sales. Revenues and 12-month buyer counts are up, just not proportional to increases in revenue. This suggests that much of the gain we saw in 2020 came from core buyer segments including, to a lesser degree, older buyers and new buyers.
The pandemic has changed our lives forever. There really is a “new normal” as more people continue to work from home. COVID leapfrogged print and online businesses well into the future. We're being careful not to overmail because we're focused on reviewing historical results over time by segment. We're not relying solely on 2020 results for planning future performance.
Revenue gains in 2020 were up almost 50 percent vs. 2019 for the companies we track weekly. Orders increased approximately 25 percent to 30 percent compared with the previous year. The demand was way beyond expectations. It's interesting to look at average order sizes during this period. Average order sizes increased approximately 17 percent vs. 2019, and 7 percent higher than last year. Obviously, new customers are being added to the file at a nice clip, but the surge in business has come mostly from existing customers based on the results we see. The housefile is always the goose that lays the golden eggs.
As you plan to go forward, be careful not to base your forecasting solely on 2020 results. Don’t plan based on 2019 results, either. Forecast orders and sales using a blend of these two years. We're not yet sure where orders and sales will level off for the remainder of 2021, therefore, for 2022 forecasting, using a blend of 2020 and 2019 should be a more conservative approach. Regardless of the forecasting methodology you use, be prepared to make adjustments to your plan regularly.
Stephen R. Lett is the founder and chairman of Lett Direct, Inc., a direct marketing consulting firm specializing in circulation planning, forecasting, digital marketing and analysis since 1995.
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Steve Lett graduated from Indiana University in 1970 and immediately began his 50-year career in Direct Marketing; mainly catalogs.
Steve spent the first 25 years of his career in executive level positions at both consumer and business-to-business companies. The next 25 years have been with Lett Direct, Inc., the company Steve founded in early 1995. Lett Direct, Inc., is a catalog and internet consulting firm specializing in circulation planning, plan execution, analysis and digital marketing (Google Premier Partner).
Steve has served on the Ethics Committee of the Direct Marketing Association (DMA) and on a number of company boards, both public and private. He served on the Board of the ACMA. He has been the subject of two Harvard Business School case studies. He is the author of a book, Strategic Catalog Marketing. Steve is a past Chairman of both the Catalog Council and Business Mail Council of the DMA. He spent a few years teaching Direct Marketing at Indiana University in Bloomington, Indiana.
You can contact Steve at firstname.lastname@example.org.