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Initial results from Black Friday showed signs that ecommerce has plenty of momentum heading into the heart of the holiday shopping season, even as 2022 is expected to feature a pronounced return to in-store shopping and more hesitancy to spend ahead of a potential economic downturn in 2023.
Propelled by an after-dinner boost on Thanksgiving, shoppers hit the ground running on Friday in search of deals in an exceptionally promotional environment. Here’s a look at the data we’re seeing so far:
Steep discounts bring sales growth, says Salesforce
US online sales reached $8 billion as of 5 p.m. on Black Friday (Nov. 25), according to data from Salesforce. When all of the data is in, the cloud-based software company projects that results will show sales growth of around 8% year-over-year.
Global online sales for Black Friday were $40 billion as of 5 p.m., and are expected to remain essentially flat in the face of stiffer headwinds from Europe.
Top categories globally were electronics and accessories (+19% year-over-year), active apparel and footwear (+9%) and health and beauty (+6%).
“It's looking like a very promising Black Friday for online – both for consumers because of the discounts they've been patiently waiting for, and retailers who are finally seeing that holiday pop in their online sales,” said Rob Garf, Salesforce's VP and GM of retail.
The standout tactic taken by retailers this year is heavy discounting, with price cuts being observed that are double what is typically offered throughout the rest of the year. Globally, categories like home appliances, apparel and health and beauty all saw discount levels above 30% on Black Friday, which is well above the 16% average observed in other quarters.
The deals are also a big increase from discount levels in 2021, which were historically low as consumers proved more willing to pay full price in an environment of high demand and inventory scarcity due to supply chain issues.
“We've now snapped back to pre-pandemic shopping behavior,” Garf said. “People are buying, but they are waiting for the latest and best deal.”
This year, the inventory issues swung heavily in the direction of abundance, and the interest in early shopping was met by retailers with pre-holiday sales events. But consumers appeared to find the deals for October and the first two weeks of November “lackluster,” Garf said.
“Consumers didn't bite. They waited patiently, and they are now responding in kind. They're seeing the deals," Garf said. Despite the slow start, retailers appear to have stepped up savings, as discounts are poised to peak with Black Friday and Cyber Monday. “Consumers are seeking value moreso than ever this holiday,” he said.
It points to “a strong correlation between discount rates and online sales,” Garf said, indicating that price is the driving factor behind holiday shopping that many analysts thought it would be. In fact, Salesforce research found that 50% of consumers showed a willingness to switch brands during the holiday season for the sake of price and value.
With the flexibility offered by ecommerce, consumers are undertaking their own price adjustments even after they purchase an item. Ahead of Black Friday, the rate of returns on Tuesday, Wednesday, and Thanksgiving nearly doubled year-over-year, Salesforce said. When shoppers saw the steeper discounts ahead, they returned one item in favor of a lower-priced alternative.
The online sales growth comes in a year that was expected to see more in-person shopping. But that can also help digital commerce. Salesforce research shows that 60% of digital orders are influenced by physical stores, so customer service or livestreaming performed by in-store associates has a big role to play.
Digital can also augment the physical experience. In-store pickup is set to become one of the behavior shifts of the pandemic that proves to be sticky during the holidays. In the post-purchase experience, Salesforce expects that use of chatbots will increase by more than 60% on Black Friday, as consumers seek convenience in customer service as they are on the go. So the rise of one channel doesn’t have to come at the expense of the other.
“For retailers, it's not focusing on digital or the store, it's an and equation, focusing on the digital and store experience and removing the friction between those touchpoints,” Garf said.
Black Friday sales built throughout the week, says FindMine
This year’s Black Friday came with a twist that fits with the trend of earlier holiday sales: Many Black Friday sales actually started earlier in the week, according to an analysis of about one million products by FindMine, which provides AI-powered dynamic content creation for brands.
FindMine’s data showed that the percentages of individual products on sale and full-price remained unchanged throughout the week, respectively. This indicates that discounts were already arriving when the final countdown to Black Friday was beginning.
“Many retailers were already running site-wide discounts leading up to Black Friday, making it abundantly clear that this year’s shopper is going for the deepest discounts – even if the percentage of products ‘on sale’ remained unchanged,” FindMine CEO Michelle Bacharach said.
Retailers also shifted sales between specific products throughout the week, so different items had their own moments to shine in the discount spotlight. As the days progressed closer to Black Friday, customers purchased products that were on sale at a higher rate, with revenue jumping 26% throughout the week. This indicates the strategy of promoting deals around individual products is working, said Bacharach.
In the culmination of the week, FindMine found that there was actually more shopping on Thanksgiving than Black Friday. In the first 12 hours of Friday, the percentage of sale products purchased (29%) decreased 13% from Thanksgiving's rate of 33%.
Salesforce had reported that the Thanksgiving bounce was most prevalent in the after-dinner hours of 6-10 p.m., as people wrapped up dinner and turned to their phones. It helped that the biggest retailers set the pace. Amazon started Black Friday sales on Thanksgiving and Target started its Black Friday sale on Monday.
It will be worth watching whether these results lead to a more permanent push to spread out deals throughout the holiday week going forward, instead of waiting for the weekend.
Walmart dethrones Amazon in search, says Captify
The initial Black Friday results also produced an interesting data point In the ever-present push and pull between the nation’s largest retailers: Walmart topped Amazon in search on Black Friday, adtech firm Captify reported. CNBC shared the news:
Searches for Black Friday discounts on Walmart surged 386% year over year, leapfrogging rival retailer Amazon, which last year ranked first in Captify’s survey of most searched retailers on Black Friday. This year, the world’s largest ecommerce company ranked fourth, behind Target and Kohl’s, respectively.
This finding underscores a point that has already been made many times about Walmart in this inflationary year: It is built for a highly promotional environment.
Walmart is strongly associated with low prices, and people seek it out because it is known for delivering value. In turn, the retailer presses that as an advantage throughout its supply chain in order to keep the rollbacks coming.
For the holiday season, Walmart is seeking to make deals more prominent in the ecommerce experience through app upgrades that flag on-sale items with green tags, much the same way red tags signal deals in stores.
It is also set up to help brands gain advantages in search through its fast-growing advertising network run by retail media arm Walmart Connect. The high volume of search only figures to help that venture, which executives are particularly bullish on for the future due to its higher margins.
While Amazon is widely known as the site where the most product searches start on the internet, the data suggests Walmart stands to gain at a time when “on sale” is a popular search term in and of itself.
Trending in Operations
LadderUp is aiming for 50% LGBTQ+ and BIPOC participation. Shopify will provide access to its platform.
Shipt is launching a new accelerator program designed to provide ecommerce tools for local retailers.Called LadderUp, the program is centered on equity. Target-owned delivery owned Shipt said conversations with business owners have revealed that local entrepreneurs face “gaps” in technology, but they also want to participate in ecommerce platforms. The COVID-19 pandemic was especially difficult for Black business owners, who saw earnings drop between 11-28% in 2019-2020, as compared to the earnings decrease of 5-17% for the rest of the population.
With the new program, the company’s goal is to reach at least 50% LGBTQ+ and BIPOC participation in the program.
Shipt is aiming to serve businesses in Atlanta, Birmingham, Alabama, Detroit, Houston and Washington, D.C.
Target categories include: grocery/beverage, health, beauty, and floral/gifts retailers.
“Working with small businesses to build up their capabilities is a key part of our commitment to help create healthier, more resilient and equitable communities,” said CEO Kamau Witherspoon. “We recognize the unique role that we can play in both combating hunger in under-resourced communities and boosting small, local retailers that are so vital to communities across our country.”
What will entrepreneurs receive?
Education: Business owners who are selected will receive an 8-week course with industry leaders that covers business-building topics including finances, efficiency, marketing, ecommerce 101, the basics of using Shipt, and legal knowledge.
Funding: Upon completion, retailers will provide $5,000 for businesses to invest in ecommerce.
Shopify access: Shopify, which is partnering with Shipt, is also providing to its access for a limited amount of time to help business owners build an online storefront and manage inventory. The program will also provide technical assistance.Applications are open Feb. 6- March 6.