Discount or Die?

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Despite some upbeat reports, the retail sector is facing a tough Christmas. A new Christmas Retail Survey released today by America’s Research Group (ARG) and UBS suggests that sales are weaker this year than in 2008. Of those consumers not shopping, 95 percent said they will wait if necessary until December 24 to get more items on sale. There’s still a lot of business out there: only 4 percent of parents have completed their purchases of presents for their children. ARG reports that many customers will not buy unless they see discounts of 60 or 70 percent.

Of course, online volumes are up and things are altogether rosier, aren’t they? But as we’ve noted before, volume increases are coming at a price with solid evidence that promotions are essential for driving any increases in holiday conversions. According to Hitwise, sites promoting specific Black Friday deals saw a 9 percent surge in traffic over 2008. The winners so far this year online seem to be the largest and best known bargain sites: Amazon.com, Wal-Mart and Target converted 18.9 percent more traffic among the top 500 retailers than last year and gained in overall visitors. While the top 20 sites increased traffic by 14 percent year over year, the top 500 saw a traffic decrease of 9 percent.

While customers may be able to wait until the last moment to purchase, hoping for ever-deeper discounts, ecommerce sites cannot. As the last-shipping-date deadline approaches, ecommerce teams need to maximize the remaining two weeks selling time before Christmas. However, rather than pumping out promotions, it appears that since Cyber Monday many online retailers have slackened their promotional offers.

For example, Tweets using the phrase ‘sale’ are now back down to the same level as we saw one month ago at the beginning of November. Trendistic shows that tweets for ‘Free Shipping’ have dropped back to one third of the peak on November 30.

While, theoretically, free shipping offers could be promoted via channels other than Twitter, this seems unlikely.

Connecting the dots, here’s what we have:

• Deal focused customers are waiting for deep discounts before they will buy.
• Shipping and handling costs are the #1 reason for abandoning shopping carts.
• The shopping cart abandonment rate is linked directly to promotional offers.
• Ecommerce teams have slackened their free shipping and sale offers.
• Increases in volumes are concentrated on the largest retailers.

For small and medium sized ecommerce companies, this combination is deadly — deal hungry customers, spending at the largest sites at the expense of all the rest. This begs the question about whether they can afford not to offer free shipping and significant promotions in the remaining two weeks of the pre-Christmas season.

As always, one of the most important lessons at this time of year is ‘don’t forget to remarket to your website abandoners.’ Email them that free shipping or special offer; invite them to a one day ‘private’ sale, or whatever — but remarket to them! The SeeWhy service makes this easy and automatic; but even if you don’t have SeeWhy, right now this is one of the few things that you can do that can still make a significant difference. So roll up your sleeves, get the data somehow and get a mailing out this week. Your customers are expecting to receive offers by email. In fact, if the research is right, they’re waiting for it. What are you waiting for?

Charles Nicholls
Charles Nicholls is a social commerce expert and board advisor to several e-commerce startups. He founded SeeWhy, a real-time personalization and machine learning platform, which was sold to SAP. Serving as SVP of product, he built SAP Upscale Commerce, an e-commerce platform for direct-to-consumer brands and the mid-market. Today, Charles serves as chief strategy officer for SimplicityDX, a commerce experience company. He has worked on strategy and projects for leading ecommerce companies worldwide, including Amazon, eBay, Google and many others.

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