This holiday season is turning into one for the record books, but for very different reasons than originally expected. Defying all predictions, we have seen Black Friday flop and Cyber Monday soar. We’ve witnessed select retailers, particularly REI, thrive by taking a stand against Thanksgiving and Black Friday hours – resulting in increasing sales despite going against the norm.
Given the unusual results, it’s important to take a step back and reflect on the shifts taking place in the retail industry. This year we compiled data comparing results from last year and this year leading up to and immediately following Black Friday and Cyber Monday in our inaugural Retail Holiday Index. The Index focused on three main categories of data year-over-year: markdowns and promotions, shipping preferences and returns.
Taking a look at each category reveals some interesting trends happening this year.
Markdowns and Promotions
It was a banner year for markdowns and promotions. Last year, we found retailers were relying much more heavily on markdowns or promotions. This year retailers opted to sell 21 percent fewer items at full price compared to last year leading up to Black Friday. While this might have prompted shoppers to visit those stores, DynamicAction found that markdowns and promotions negatively affected those retailers’ profits by 28 percent during the Black Friday and Cyber Monday shopping weekend.
For the past few years, consumers have been plagued by shipping snafus. While some issues aren’t within the retailer’s control (think the winter storm of 2013 that bombarded the Midwest through the Northeast), retailers have stepped up their game this year when it comes to fulfillment. Compared to last year, we’ve seen significant improvements in on-time shipments, with a 45 percent reduction in late-to-ship orders compared to the Cyber 5 of 2014. Additionally, free shipping continued to grow as the “go-to” promotion for retailers, with a nearly 17 percent increase during Black Friday through Cyber Monday in customers receiving this upgrade.
In the IHL research report commissioned earlier this year, we learned that retailers lose $642.6B annually in returns worldwide; $246.2B of that is in North America alone. We’ll just have to wait and see how those ugly Christmas sweaters we’ll all be returning impact the figure this year.
We’ve found that retailers who analyzed and connected their data well in advance of the holiday season are seeing improved performance in their balance of inventory availability and customer experience. They are running leaner, with 14 percent less inventory in their warehouses, yet views by product are up 26 percent, meaning retailers are more efficient in directing traffic and their customers are having a better experience finding the products they are searching for in-stock.
Reviewing the results, it is apparent that some retailers are having a holly jolly holiday, while others are still fine-tuning their strategy for the final days of this season’s shopping and beyond.
Check back in for our final report in January analyzing how retailers fared overall this holiday season and predictions for the New Year.