Holiday 2014: Expect a Wild Cyber Weekend
Last week I took a call from a reporter who wanted me to prognosticate on the impact of mobile on Black Friday this year. Just the question brought up the bigger issue: what are the overall prospects for Black Friday/Cyber Monday and the rest of the 4th Quarter 2014? In our 2014 benchmark study on Pricing practices, we noted that especially in the United States, promotional fever continues unabated in spite of the fact that most retailers claim that the top objective of their pricing strategies is to “maximize gross margins”. The report noted that “it can’t go on like this forever. Sooner or later, the industry must shift to fewer, more strategic price changes.”
Well, based on the numbers that rolled in last week, it doesn’t take a genius to guess that promotional fever will be high for this 4th quarter. The U.S. Department of Commerce noted that retail and food service sales had unexpectedly dropped 0.3% in September, and even though year-to-date retail sales are up 4.3% over the prior year, one Moody’s analyst described it as “trudging along”. And according to the Wall Street Journal, “Forecasting firm Macroeconomic Advisers lowered its estimate for gross domestic product expansion by a tenth of a percentage point to a 3.3% annualized rate in the third quarter.”
In my Retail Paradox Weekly column from October 7 (More Musings About Growth), I noted that in the US and UK, the percent of personal spending growth closely follows the percent of GDP growth, certainly since the beginning of the new century. So if that holds true, the NRF’s October 7th prediction that it “expects sales in November and December (excluding autos, gas and restaurant sales) to increase a healthy 4.1 percent to $616.9 billion, higher than 2013’s actual 3.1 percent increase during that same time frame” seems to be a little on the rosy side.
Maybe way too rosy? CBS Marketwatch on October 7th noted that “PricewaterhouseCoopers… is forecasting that average holiday household spending will decline 6.9% to $684. PwC polled 2,200 U.S. consumers, finding that limited disposable income and a rising cost of living are among consumers’ worries. Overall, 84% told the consulting firm that they plan to spend the same or less this holiday season, versus 76% last year.”
Juxtapose those forecasts against another number, the volume of imports coming into the US (up 5.3% YTD over last year, according to the NRF), and you can infer that there will be more inventory for retailers to move, against potentially lower demand.
And that means more promotional fever.
So What’s The Answer?
Let’s put this all together with what we know about consumers’ digitally enabled shopping behaviors. Our own eCommerce benchmark found that 40% of retailers believe that between 5-25% of their total sales are influenced by the digital channels, 16% think that 25-50% of their sales are impacted, and 11% say that between 50-75% of their sales are affected. And we think they are being conservative!
Thinking about Black Friday and Cyber Monday in the context of all of these datapoints, and I conclude that we’re at a big inflection point. In 2013, Joel Anderson, then CEO of Walmart.com, noted that the year was the “tipping point” for mobile shopping, and IBM reported that sales through mobile devices rose 55% in 2013. This can only continue.
To the question: how will 2014 Black Friday store sales be affected by mobile? We’ve noted many times that while it may be a difficult challenge for retailers to support omni-channel shopping, it is taken for granted by more and more consumers. Retailers get zero points for doing it right, but lots of points off for not getting it right. My RSR partner Paula Rosenblum and I have been working on a study that looks at digital enablement as part of retailers’ growth strategies, and one of the points that has fallen out is that a disappointingly low number of retailers have integrated mobile shopping with their eCommerce sites and the stores. How disappointing? Only 40% of Retail Winners (over-performers) say they have implemented that level of integration compared to 30% of other retailers.
But consumers expect it. In practical terms, this means that consumers might be waiting in line for the doors to open at midnight on Black Friday to buy one of the N number of big screen TV’s a retailer says are available, only to be disappointed once they get to the Electronics department. Not a happy picture! And from there it seems to me that it’s only a short hop-and-a-skip to deciding to order it online via the mobile device in the first place, and sleep in peace after a big Thanksgiving dinner.
So here’s what I told the reporter: consumers will check for store availability of the things they want to buy before they go to the stores, but will often be disappointed by the poor accuracy of that information — and that will drive them away from Black Friday in future years, and towards Cyber Monday. Some wit will rename it Cyber Weekend, and we won’t differentiate between Friday and Monday anymore. And the inflection point for that to happen will be 2014.