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Lessons Learned from the 2017 Holiday Shopping Season

JAN. 4, 2018

The 2017 holiday shopping season was filled with opportunities for retail therapy. Big shopping events like the infamous Black Friday and more online oriented events like Amazon Prime Day, Singles Day, and Cyber Monday gave consumers a reason to shop. However, are online stores beating out brick and mortar retailers in the competition for holiday spending? That’s the question many are asking as we review the 2017 shopping season and look forward to 2018.

“Are online stores beating out brick and mortar retailers in the competition for holiday spending? That’s the question.”

For Black Friday 2017 alone, online sales increased 16.9% over 2016.[1] Figures from GBH Insights show Amazon claiming between 45% and 50% of all online Black Friday sales, generating well over $1 billion in 24 hours.[2] The eCommerce machine doesn’t appear to be losing steam, with analysts predicting even greater sales numbers in the years to come.

Black Friday for eCommerce is looking strong, but sales don’t happen in a vacuum. Shopping patterns as a whole are changing as shoppers are asking for more than simple discounts. Brick and mortar stores are catching on to these changes and finding their way with their own unique offerings in the greater retail landscape. Let’s look at three major lessons we’ve learned from the 2017 holiday season.

FROM BLACK FRIDAY TO BLACK NOVEMBER

Black Friday continues to go through some growing pains in 2017, as we saw the specific day hold less significance over the value of the deals. Marshal Cohen, head retail analyst at the NPD Group, said it best when he called the 2017 season “Black November”, capturing the lengthening of sales into more and more days.[3] What started on a Friday has grown into well over a week of deals across all of retail with some larger retailers like Costco, Walmart, and Amazon starting their deals on November 1st, averaging more than $1 billion a day.[4]

“What started on a Friday has grown into well over a week of deals across all of retail with some larger retailers starting their deals on November 1st, averaging more than $1 billion a day.”

In seasons past, brick and mortar retailers who started their Black Friday sales on Thanksgiving or extended their deals beyond Cyber Monday saw major backlash from shoppers who found the idea of waiting in line and working during a family holiday distasteful. However, sentiments are starting to change with the growth of eCommerce, convincing retailers to reevaluate their sales strategies.

Adding to the ubiquity of Black Friday is the growth of shopping on smartphones. Now, shoppers can browse for the best prices and confirm their purchases on a single screen. In fact, 46% of all retailer traffic on Thanksgiving came from smartphones—a 15% increase over 2016.[5] Thanks to competitive pricing and deals at their fingertips, shoppers are more open to finding the products they want, when they want them. In 2018, retailers—both online and off—are going to have to figure out how to harness this shopping shift.

BRICK AND MORTAR STORES NEED TO AVOID THE PRICING GAME

While the holiday season was strong for eCommerce, brick and mortar retail stores knocked it out of the park, holding the vast market share of sales. According to a study by A.T. Kearney, 94% of all retail sales still take place in stores, generating $3.9 trillion in total sale value for 2016.[6] Industry insiders have long questioned whether brick and mortar stores can keep up with eCommerce’s growth. One particular eCommerce strategy that brick and mortar should steer clear of is the pricing game.

When it came to competitive pricing and product offers, eCommerce almost always came out on top. Retail enterprises like Target had a 39% children’s product overlap with Amazon and as high as a 44% more expensive price.[7] Best Buy’s tech products had a 48% overlap with Amazon and on average was 27% more expensive.[8] With eCommerce being virtually unconstrained by inventory space and a smaller overhead, brick and mortar stores would be against great odds if they engaged in a price war.

During the holiday season, most brick and mortars heeded this advice and worked to better compete against eCommerce retail stores with strategic specials and a great shopping experience. Walmart offered its shoppers five days of free shipping and discounts to all shoppers at select locations, not just premium members. Target hosted toy demo events throughout November and offered hot chocolate, pictures with Santa, and other family-centered events. In addition to unique in-store offers, some brick and mortar stores are collaborating with eCommerce strategies to strengthen the pull of their brand.

ADDING THE PHYSICAL INTO THE DIGITAL

Combining brick and mortar with eCommerce to fuel sales is a strategy that has been proven to yield massive returns by some of the largest retailers in the world. This was the strategy of Alibaba, the largest eCommerce retailer in China, who landed a tremendous $17.8 billion in sales in 2016 and $25.3 billion in 2017 with no signs of slowing down.[9] One of their biggest successes of 2017 has been Singles Day. The opposite of Valentine’s Day, Singles Day is a Chinese festival started by Alibaba in November that celebrates being single with major discounts and flash sales.  

Alibaba nurtured the growth of its sales by creating “smart” stores that featured virtual browsing, shopping tours, virtual fitting rooms, payments, and order fulfillment locations. These stores were located strategically throughout China for the shopper’s convenience, totaling over 100,000 physical shops for the online shopping event.[10] As an online giant, they’ve boosted eCommerce by taking advantage of the role that physical stores play. With all of the dramatic changes in retail, it’s clear that the divide between physical stores and eCommerce is blurring. Patrick Toomey of Faris Investments points this out,

“Best Buy has a physical store where customers can touch and experience what they want to buy, obtain it at a competitive price, and return it or get help with it. You cannot do this with Amazon (yet). And Best Buy’s revenues have been steady over the last three years.” – P. Toomey, Faris Investments.

If brick and mortar brands want to compete with online giants like Amazon, they need to consider merging their shopping experience, like Alibaba, more seamlessly to include a physical and online presence.[11]

The holiday season continues to be a proving ground for retail strategies. eCommerce is projected to maintain strong sales with no sign of slowing down, but technology and trends are shifting. This gives brick and mortar stores a significant opportunity to adapt and maintain strong performance in 2018. One of the strongest advantages for brick and mortar is stellar customer experience. If brands continue to capitalize on this, as well as strategic offers and creative in-store experiences, there will always be a strong desire for shopping at brick and mortar locations. 

Due to the nature of brick and mortar retail, it can be difficult to provide a consistent customer experiences and train employees on the latest offers. Our store relationship management platform, CoEFFICIENT, can help disparate teams stay connected to corporate and communicate more easily with one another. Interested in learning how CoEFFICIENT can help you move initiatives forward in 2018? Contact us to learn more.

  1. Edward M. “Black Friday 2017 sees record online sales”. CNet. https://www.cnet.com/news/black-friday-2017-online-sales-record/
  2. “Amazon Seizes Half of All Online Black Friday Sales”. NASDAQ. http://www.nasdaq.com/video/amazon-seizes-half-of-all-online-black-friday-sales-5a18a37b83b51f496fc60beb
  3. Janelle N. “Black Friday is dead. Welcome to Black November”. Boston Globe. https://www.bostonglobe.com/business/2017/11/22/black-friday-dead-welcome-black-november/vpygM63oy3xFchvOwQtUfI/story.html
  4. Lauren H. “At 1$ billion a day, or more, online shopping has already set a new record”. CNBC. https://www.cnbc.com/2017/11/22/at-1-billion-a-day-online-shopping-has-already-set-new-record.html
  5. Richa N and Nandita B. “U.S. online sales surge, shoppers throng stores on Thanksgiving evening”. Reuters. https://www.reuters.com/article/us-usa-holidayshopping-thanksgiving/u-s-online-sales-surge-shoppers-throng-stores-on-thanksgiving-evening-idUSKBN1DO066
  6. Michael B, et al. “On Solid Ground”. ATKearney. https://www.atkearney.com/documents/10192/4683364/On+Solid+Ground.pdf/f96d82ce-e40c-450d-97bb-884b017f4cd7
  7. Laura H. “5 takeaways from Amazon Prime Day 2017”. RetailDIVE. https://www.retaildive.com/news/5-takeaways-from-amazon-prime-day-2017/446919/
  8. Ibid.
  9. Adam R. “Alibaba Records $25.3 Billion in Singles Day Sales”. Barron’s. https://www.barrons.com/articles/alibaba-records-25-3-billion-in-singles-day-sales-1510538618
  10. Deena A. “Alibaba’s Singles Day shatters records”. Chain Store Age. https://www.chainstoreage.com/technology/study-singles-day-2017-expected-break-new-records-2/
  11. http://www.globest.com/sites/geofferymetz/2017/11/28/no-magic-bullets-during-the-retail-evolution/ 

ABOUT THE AUTHOR: LOGAN RODGRIGUEZ

A member of our strategic accounts team, Logan is our resident retail expert. He has a keen understanding of the many facets of the retail industry and is passionate about brick-and-mortar retail and omni-channel initiatives. He brings to Square Root more than 16 years in retail management, where he was consistently recognized for his outstanding leadership. His motto, “No one wakes up in the morning thinking, ‘I want to do a bad job today,’” and brings that attitude to our team everyday. Outside of Square Root, Logan is an avid traveler. He once scaled the second largest glacier in the world in Patagonia. He also loves running the trails of Austin and is always seeking inspiration. He holds a degree in political science from Texas Tech University.