U.S. shoppers spent a record $34.36 billion on retail websites over the five-day period from Thanksgiving to Cyber Monday, up from $28.49 billion for the same period last year, according to Adobe. Despite, some very aggressive predictions, online sales for the long holiday weekend ultimately rose 20.6% year over year.
Digital Commerce 360 asked retailers via a post-Cyber 5 flash survey to share their revenue gains, current promotional strategies along with how they are attempting to compete with Amazon this holiday. We also hoped to understand the consumer behavior that retailers were seeing and any cause for concern that they may have during the holidays and beyond. We are happy to share the findings from 108 retailers representing a broad cross-section of segments and categories.
Just as we mentioned at the outset, three in four retailers reported sales are up through Cyber 5. Breaking down the results reveals year-over-year sales patterns as follows:
- Up: 76%
- Flat: 11%
- Down: 13%
Given that most are seeing an upward spike in their numbers, it’s valuable to emphasize that more than one in three are seeing significant growth at 50% or higher, while 19% came in mid-range at 25%-49% and the remaining “up” retailers (20%) with growth of 25% or lower. Bottom line, retailers are benefiting from strong ecommerce numbers.
Looking at how the customer is behaving almost gives us a behind-the-scenes view into the results. Shopper behavior reveals that unconditional free shipping and promotions continue to drive purchasing. The price-sensitive shopper is in a powerful position to benefit from sharp prices this holiday season. With ecommerce volume on a growth trajectory, some of that increase is likely coming from shoppers increasing their average order size. One can only surmise that their limited store visits mean they are taking a “get it while you’re there” approach to more of their online visits.
While the first look showed the weighted average of each of these features on a five-point scale, I find it helpful to also look at the general agreement. Six in 10 retailers are experiencing promotional proclivity among shoppers. Retailers will need to be cautious and hopefully have built in these promotional costs into their profitability as 65% report buying when unconditional free shipping is available and just slightly lower (54%) when conditional free shipping is an option. When it comes to convincing shoppers to buy, 63% of retailers report their customers are mostly buying on promotion. As we have learned, shoppers are no longer partial to one particular holiday, nor do they wait, but instead find the majority (57%) is buying evenly across promotional holidays.
A look at spending patterns provides important insights and that starts with the 68% of retailers who are seeing shoppers increase their AOV. Marketplaces continue to play a growing role in shopper habits, according to 57% of those surveyed. Over half (53%) report that shoppers are buying with greater frequency, particularly given store restrictions. One in three cite some hesitation on the part of shoppers where they will make multiple visits, but in the end, one senses they ultimately make the purchase. Lastly, ordering digital gift cards is experienced by 22% of retailers and likely will see an upwards bump given its role as a last-minute purchase.
Looking in-depth at promotions is important given the attention they are receiving from shoppers as well as their likely bottom-line impact. Most online retailers offered at least the same level or more promotions in 2020. They also appear to be delivering them earlier in the season to attract shopper attention. A quick look at promotion volume finds that almost the same number of retailers will have either more promotions or about the same. One thing to note is that only 19% will have a lower promotional volume this season. And how about the timing? As expected, 28% of retailers are pushing out promotions earlier while 18% have chosen to spread them throughout the season. Only 6% are delaying their offers, which appears to be wise, given that retailers are seeing shoppers buying early. Hopefully, they have not missed their chance to make a sale during these vital times.
We asked retailers to take a moment to share what gives them pause this holiday. Not surprisingly, almost half of retailers are concerned about having the right inventory in stock. The supply chain has been a challenge since the onset of COVID-19 and will likely play a role in how the season pans out for most retailers. Delivery has also been fraught with difficulty, making it hard for 31% of retailers to establish appropriate delivery cutoffs. Retailer messaging has been aggressive and hopefully shoppers are heeding their warnings. Additional concerns on the minds of retailers are linked to profitability with the following thought process. 30% are concerned that logistical costs will impact profitability. One in five are worried that marketing costs will be more than anticipated (22%) as retailers aggressively pursue customers. At the end of the day, 21% are concerned whether all this incremental ecommerce volume will still deliver the desired profitability. And then there is always the dreaded returns, which 14% believe may be heavier than expected. To me, this is to be anticipated with the growth in ecommerce and the constraints with fluctuating store circumstances.
On the demand side of the equation, there are few concerns. 21% feared revenues might be slower than expected while 18% cited consumer demand may not be as predicted. I am sure some believe that Amazon will dominate, and this was expressed by 19% of those surveyed with 17% of respondents, who may be dependent on marketplaces, fearing that business might not meet expectations.
We zeroed in on Amazon, given their dominance in the industry, to explore what has been most effective in competing with them this season. Retailers are attacking on all fronts to combat Amazon effectively by utilizing free shipping, selection, onsite content, and customer service to compete. From a price/promotion perspective, free shipping maintains its dominance and was cited by 40% of merchants. It far exceeded lower prices at 19% and Prime-like loyalty programs that also deliver savings for shoppers. The fundamentals were important for maintaining competitive parity and a unique/curated selection was an important strategy for 37% while 34% indicated they were giving greater attention to customer service. We believe both can be important retention strategies for retailers long-term. Growth emanating from expanded marketplace participation was experienced by 30% of those surveyed. If not currently participating, we would expect that most retailers will be evaluating this opportunity in 2021.
Another way that retailers have evolved to compete with Amazon is an upgraded customer experience, which was on the list of 28% of retailers. A variety of methods ranged from upgraded onsite content (36%), a more personalized experience (29%) to innovative merchandising (29%). Of course, there are many opportunities for making this upgrade, which involves both standard expectations and more category-centric efforts. I was surprised that more was not being done in the delivery arena as it was only cited by 17% of those surveyed with 10% expanding or delivering better omnichannel execution. At the end of the day, perhaps that is because it is likely too late to impact any in-season efforts. While same-day delivery is very low at 6%, it can still be a differentiator long-term.
We will watch the growth and inquire at the end of the year how the holiday ultimately delivered. We will also be thinking about if consumer behavior has permanently tilted towards ecommerce. Lastly, we will look at the changes that retailers must make to better position their ecommerce initiatives.