Last year's Black Friday, the American day-long pre-Christmas shopping period which emerged in the 1980s, was a game changer.
That was the year that the craze was fully embraced on both sides of the Atlantic for the first time with TV scenes of Black Friday carnage offering some genuinely shocking moments. Despite the scenes, sales at the likes of Tesco, Curry’s, John Lewis and Argos reached around £850m as shoppers ravenously scooped up, and in some cases wrestled for, goods and clothing.
However, online retailer Amazon was one brand that saw more potential in the trend and will have been aware of the success that Chinese rival Alibaba had with Singles Day, topping sales of over $9bn. As a result, Amazon was certainly not content with its share of the $2.4bn the US raked in during the last Black Friday.
In response, Amazon this month announced the creation of ‘Prime Day’ in a bid to outdo Black Friday and Singles Day with the promise of thousands of items on sale. The deals on the day (taking place today 15 July) will only be available to its Prime members in an attempt to recruit new sign-ups to the e-commerce giant's delivery service. The move comes ahead of a mooted similar scheme from eBay and Walmart's 2,000 online exclusive rollbacks, which the retailer will launch in direct competition with Amazon on the same day.
Walmart even took a swipe at Amazon's $100 per year Prime delivery in a blog post today (13 July) which reads, "We’re standing up for our customers and everyone else who sees no rhyme or reason for paying a premium to save".
While July sales are nothing new, the sheer scope of Amazon’s stunt, alongside Alibaba's ‘Singles Day’, shows the rewards to be reaped when huge, time-limited discounts are marketed in the right way.
A secret door into shoppers' hearts
Amazon’s move may seem like a cheap sales gimmick but the red letter event gives shoppers a compelling reason to buy that rival retailers should sit up and take note. “Amazon’s Prime Day may look like a Black Friday-style sales promotion, but it’s not: it’s something much bigger,” says head of digital at shopper marketing agency Live & Breathe, Viv Craske. “It’s actually a secret door into shoppers' hearts and minds that most retailers won’t spot. Only those that do stand the best chance of (still) being market leaders in 10 years' time.” Craske says that given that Prime members will be actively engaged once signing up to the service, Amazon will then have the opportunity to turn them into loyal shoppers: “Prime is a service loved by subscribers,” he continues. “The churn rate is less than seven per cent a year and Prime members spend more than twice as much as non-members. There’s a very good chance these new shoppers are going to become loyal to Prime too and tell their friends about it”.
So does the play from Amazon and Alibaba herald the beginning of a new trend where retail powerhouses capitalise on hyper-consumerism at its most explicit? “American customers love sales more than just about anything in the world so all signs lead us to Amazon having a successful day,” predicts Sucharita Mulpuru-Kodali, vice-president and principal analyst at Forrester.
“Will it be enormous? That's relative. It is likely to be a day that does significantly more volume than the average 15 July, but 15 July is usually not a particularly remarkable day so it is unlikely to have the volume of a Cyber Monday. And we don't even really have any evidence that this day will be ‘anniversaried’ and carried into the future; it’s possible but I don't know that we can count on it”.
Eroding consumer trust
While Black Friday’s November event is far enough away for most retailers to opt not to share their plans, the recent tactics of Amazon and Alibaba indicate that it is likely they'll up their game in an attempt to stand out in a crowded market. One method, speculates eBay head of business development Enda Breslin, could be to take a staggered approach to discounting spreading them over days, hours, or even weeks. “We could have smarter collaboration between channels, creating different offers for online or in-store purchases,” he predicts. “This can lead to more streamlined stock management while creating a buzz around customers that could spread to social media."
However, in the UK lessons from 2014 will need to be taken into account after many retailers including Debenhams and Marks & Spencer were criticised for failing to adequately prepare for the demand from shoppers and the pressure on logistics which had far-reaching consequences over and above delivery issues.
“This is not just a question of missing deliveries and taking a hit to the bottom line; retailers may find that their fulfilment failings caused substantial damage to their reputation in consumer trust as their ability to meet demand during peak periods was eroded,” adds Breslin, who says that transparency and collaboration should run across the business when planning for Black Friday.
“Setting up a cross-departmental ‘peak planning board’ should be every retailer’s first move this summer, beginning in mid-July at the latest,” he advises. “All planning should allow for the knock-on effect to other departments; the impact of changing marketing offers on warehouse operations, for instance. To ensure that these promotions are resourced with adequate warehouse staffing levels and layouts requires plenty of cross-departmental communication, which should be facilitated by a team that reports directly to the board."
The dark side of retail
There’s another pitfall at play too, which could see retailers, including Amazon, risk becoming reliant on major events and discounts to retain custom, leading shoppers to become focussed on price over product. “I think the bigger ‘dark side’ for Amazon is that they in fact are going to the dark side of retail altogether,” says Mulpuru-Kodali. “Amazon has generally been able to avoid being overly dependent on sales and high-low promotions. It usually has ‘everyday low prices’ and free shipping. If this day is particularly successful, it will likely have more sale days, and risks sliding down the same slippery slope that virtually every other retailer in America has slid down – that of constant sales which it can't stop because it is dependent on them to make its numbers”.
Retails are having to up their game online in order to maximise their own brand potential. This is only the beginning, there is no question of that.