Letter from America: A post-mortem on round one of Christmas shopping

First Data's research shows that Black Friday retail spending in the US, combined in store and online, increased 4.9% on 2014, and is up from last year's growth of 3.5% two-day spend.

Overall spend on Thanksgiving Day grew 14.3%; Black Friday overall spend grew 8.2%.  Online sales grew 19.8% on the Thursday and 12.1% on the Friday. Online sales (as a percentage of total spend) grew to 18.3% this year compared to a 15.7% share in 2014.

The Associated Press (AP) reported that Friday Black Friday sales in retail stores fell to $10.4 billion, from $11.6 in 2014, while Thursday Thanksgiving sales fell to $1.8 billion from $2 billion in 2014. Online sales increased 14.3% on Black Friday. Adobe research closely matches AP, stating online sales were $2.72 billion on Black Friday (a 14% increase) and $1.73 billion on Thanksgiving (a 25% increase).

Online sales are clearly the star of retail with continued double digit percentage year over year growth. The star shines even brighter when you add in Cyber Monday results which – according to Adobe – topped $3 billion. The company says 200 million visits to 4,500 retail websites generated $3.07 billion, an increase of 16% from a year ago making it the biggest day of online sales in US history.

Enough of the sales numbers, let's look behind them to identify changes to retailer and consumer behaviour that might forecast sales for this and future holidays. Oh, and let's examine margin and profit, the only numbers that really matter.

Positive impact of eCommerce on stores.  Many retailers finally realised their stores are always open via their website. Knowing that sales could continue with stores closed, some retailers took the bold move of honouring employees and family traditions by closing on Thanksgiving: REI, Costco, BJ's, Sam's Club, Home Depot, Lowe's, Dillard's, Nordstrom, Burlington Coat Factory, Marshall's, and TJ Maxx. In my judgment this is great for brand building and stimulating employees to provide customer service. It will be very interesting to see total season sales for these companies to measure the impact of closing on Thanksgiving. Will this be a future trend?

'Door-busters' encouraging shoppers to arrive at midnight to catch those first sales was a tradition de-emphasised this year. You will remember in years past that heavy consumer traffic for door busters that resulted in injury and even death to employees and consumers. Again online shopping is open all night so this change should have minimum impact on sales but positive impact on employees.

The first year of EMV in America has received little media attention. The one report I saw said less than two seconds processing time. However, my experiences in multiple retailers was 5 to 10+ seconds and that is without PIN. To smooth EMV processing, some predict a significant growth in mobile payment, Apple Pay and others in 2016. It will be very interesting to see season-end reports on abandoned shopping carts.

A warning to eCommerce marketing: reduce spamming. Online sales have clear advantages and continue to grow but the massive spamming of consumer with ads is creating a negative attitude. Over the Thanksgiving weekend I received daily dozens of unsolicited ads from retailers. I got annoyed and turned off my computer. I wonder how many of these ads prompted consumer to search Amazon, which accounted for 35.7% of all Black Friday online sales followed by Best Buy at 8.3%, Macy's at 3.38% and Walmart at 3.35%. Consumers own their personal information and it should only be used with their consent. This includes information as to which websites they are visiting and product searches. Systems to enforce this are under development in the US, including Datacoup and Pendx. Unless the industry self-polices, Americans will demand increase privacy regulation or shop only with online retailers that do not sell or share their information.  

Retailers showed concern for eCommerce margin and profit taking different shipping policies. Walmart announced it would continue to charge for shipping on purchases less than $50 encouraging customer to use click & collect. Target and Best Buy chose to continue free shipping. Many unsolicited digital ads highlighted free shipping.  Maybe Target over promoted, as its website crashed on Cyber Monday when it offered 15% off any item and free shipping.

Mobile was the technology of critical importance. Walmart said mobile accounted for 70% of online traffic and almost 50% of orders. IBM reported mobile was 57.2% of all online traffic, which represented a 15.2% increase and 36.2% of online sales. Mobile devices generated $799 million in sales. Apple iOS devices drove $575 million of mobile sales, while Android devices drove $219 million in mobile sales.

The challenge of competition for mobile shoppers was clearly indicated by the Eptica Retail Holiday Customer Experience Study that reported 23% of consumers using smartphones to purchase in store bought from the website of the retailer they were in, but 20% purchased from a rival. The study also highlighted that service is important to mobile shoppers as nearly half of those that bought in store complained about the service and/or information available.

Omnichannel services were employed to increase the opening round of Christmas sales. Many retailers reported using omni features particularly click & collect and ship from store. Kohl's reported these features were used in more than 25% of their online purchases.  But did they and all retailers have the inventory to support these new features? Chances are some customer experienced disappointment. According to a survey from GT Nexus and YouGov, 75% of US adults have suffered from an unavailable product in store in the last 12 months and 63% of US online shoppers have had the same experience. The survey reveals that 58% of frustrated in-store shoppers and 63% of online shoppers become lost sales.  Post-holiday reports on inventory availability will measure omnichannel success.

Customers expect deeper discounts and probably will get them. Retailers have, through many years of constant promotions and discounting, trained consumers to delay purchases waiting for better prices. This year we could see deeper discounts as retailers wishing to avoid the out-of-stock conditions mentioned above, may have purchased extra inventory resulting in deeper markdowns. Boomerang Commerce, which aggregated and analysed online price discounts and price perception for 1,000 popular products sold by Walmart, Target, Amazon and Jet tracked how each retailer shifted discounts and moved relative prices over the course of ten days leading up to Black Friday, throughout Black Friday weekend and Cyber Monday published these key observations:

An advantage of online retail is the ability to change prices frequently, allowing retailers to play cat and mouse with consumers. So retailers trying to preserve margin will delay final price cuts until later in the season.

One thing is clear, retail is changing due to technology and I expect consumers to set the direction. After all, they are the only reason to be in business.

Richard Mader, is president of Mader International Consulting and former executive director of the Association for Retail Technology Standards (ARTS). He writes a regular US viewpoint article, exclusively for Essential Retail.

Readers can contact him on richard@maderic.net