The holiday season is an opportune time for retailers to implement cutting-edge promotion and pricing strategies to win consumer attention and dollars. During the 2013 holiday season, the results were a mixed bag.
During the webinar, titled: Retail’s 2013 Holiday Winners And Losers: What Worked, What Didn’t, Nick Desbarats, Director of Insights and Analytics at 360pi and Deborah Weinswig, Chief Customer Officer of Profitect, spotlighted holiday spending trends and retail results. Specifically, Desbarats and Weinswig honed in on how pricing strategies influenced overall sales between November and January 2013.
Total holiday sales increased 3.8% over 2012 to $601.8 billion, while e-Commerce sales swelled 9.3% to $95.7 billion. Many analysts pointed to the compressed holiday season as a challenge for retailers, as it was the shortest online shopping season since 2002, Weinswig explained. However, the cold weather also swayed shopping strategies and spending trends.
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A one-degree change in temperature could lead to a “significant change in shopping behaviors,” Weinswig said. Overall, the holiday season was four degrees colder than last year. It also was the 28th coldest holiday season in 119 years.
“There has been an estimated $50 billion impact to the economy this winter, $15 billion of which will not be made up,” Weinswig said. “We do think that’s part of what impacted the holiday season.”
Price Transparency Becomes Key
To boost sales during a highly competitive season, many retailers implemented aggressive pricing strategies, sometimes changing rates on a weekly or even daily basis. Desbarats shared research conducted by 360pi, which delved into the pricing strategies of 23 retailers and five marketplaces across eight categories, including TVs, tablets and digital cameras.
Pricing research was combined with Q4 2013 results and analyst predictions to determine the potential business impact of pricing strategies. “Pricing has always been a big factor but it’s getting bigger,” Desbarats said. “Price transparency is huge, and pricing strategy execution is a key factor.”
Of all merchants analyzed, Overstock and Amazon had well-executed dynamic pricing strategies, Desbarats noted, which means the retailers were able to alter prices based on market conditions. An audience poll confirmed that other retailers are noting the potential benefits of dynamic pricing: Approximately 70% of webinar attendees said dynamic should be a high- or medium-level priority.
The 360pi research also explored how retailers altered prices during notable shopping holidays such as Black Friday and Cyber Monday. Desbarats explaind that retailers “jumping the gun” by discounting before Black Friday — such as h.h. Gregg, Sears and Target — tended to not have strong financial results. However, retailers that discounted more broadly on Black Friday generally performed better financially.
Retailers that continued to discount after Cyber Monday also fared better than those who increased prices after the holiday, such as Office Depot, Toys “R” Us and Sears. Amazon, for example, raised prices by approximately 12% during the week after Cyber Monday, Desbarats reported. He noted that the retailer’s motivation may have been to “soften profitability issues” after it lowered prices so aggressively earlier in the holiday season.
To that end, Amazon had the lowest prices during the entire holiday season. But highly competitive prices did not associate entirely with high profits, Desbarats acknowledged.
“I think that’s a really important point because it means it’s possible to not match Amazon across the board and still not only survive, but even thrive,” Desbarats said. For example, Overstock, Home Depot, Rakuten and Costco performed well from a financial perspective, according to the 360pi research.
The primary lesson to be learned from the 2013 holiday season is that it is more important than ever for retailers to have a well-executed pricing strategy, Desbarats concluded. That way, “you’re not just matching across the board or racing to the bottom, which is not a good strategy.”
Click here to access an on-demand version of the webinar.
