Since Amazon exported ‘Holiday’ sales to the UK in 2010 they’ve grown aggressively with more and more retailers getting on-board, sales windows are widening and discounts growing.
Christmas came very early this year, with some retailers starting sales as early as September and many others starting to discount before Black Friday triggering a race to the bottom. Market research firm Senex reported that Walmart tied Amazon for first place in the five-day Black Friday week race, with each selling to 53% of US shoppers online and instore.
This year we saw retailers report a decrease in visits to physical stores with bigger, longer online sales dominating the period and driving a 15% year on year increase in online revenue (Smart Insights).
Smart Insights report that email was the channel of choice with automated messaging on the rise as retailers clambered to communicate to their bases
The risks of this strategy are certainly clear. Extended and escalating promotions will be putting massive pressure on margins and operations particularly for smaller retailers who are likely to suffer the added blow of reputational risk if they cannot fulfil orders due to failures in demand planning. Worse still, they may find themselves unable to fulfil demand in the post-sales pre-xmas period and lose business to larger players who are able to hold excess capacity and offer attractive delivery options.
Several retailers have already called time on peak sales, likely for these reasons. Fat Face has abstained for the last four years instead focusing on a ‘Festive Price Promise’ and concentrating on the traditional sales period from Boxing Day. These tactics helped Fat Face deliver a sales rise of 5% over the 2016 Christmas period (Pragma 2017). Similarly, Jigsaw also bucked the Black Friday trend in 2016 and managed to deliver a 10% rise in turnover at full price.
So, As Amazon tightens its death grip on the retail world, what does the future hold?
We’ve seen an increasingly diverse range of tactics in the past two years ranging from standard discounting, the use of discount codes, retailers starting sales early and in some cases retailers opting out in favour of the traditional Boxing Day sales focus.
In 2018 expect an even to see even starker differentiation as retailers attempt to cling onto margins, distribute risk and operational pressure across the year and engage their consumer bases in an attempt to keep their brands top of mind.
We expect to see more competitive pricing emerge much earlier in the year with retailers investing in communications and loyalty offers to retain their bases and instore events being used to create a point of difference from online retailers. These events will give retailers the chance to showcase new seasons and lines, recruit users and generate app downloads and critically, bring spend forward.
Whilst Amazon armed with its Prime proposition represents a threat to them from a pricing and delivery perspective it has yet to make inroads into product inspiration and experience.
One thing is for certain, retailers, particularly those in the fashion, beauty and gifting categories need to work harder to create an emotional connection with their users whilst reassuring them that they will offer fair (but not necessarily rock bottom) prices.
A key characteristic of 2018 will almost certainly be inspiration. To win, brands need to get creative and remind the consumer why and how they are different and work even harder to activate the inspired shopper albeit on thinner margins.
Expect more exclusives to emerge with retailers and brands partnering to offer unique PR’able concepts that are not available on Amazon, expect to see campaigns focused on ‘recruiting’ customers not just range communication and expect more innovation to emerge across the board as brands flex their muscles in a bid to reinvigorate the high street and encourage loyalty.