How Online Retailers Can Beat the Holiday Season

Huge discounts and campaigns mean more clicks and more customers. For example, Amazon.com's Prime Day has ballooned in just four years to a 48-hour online shopping bonanza, which this year raked in a whopping $7.9 billion and sold 175 million products.

Then there’s Black Friday, which has grown from one day to one week of slashed prices. Customers are driven by deals, and retailers go above and beyond in an attempt to cater to these key sales periods. But it's not all positive — e-commerce margins take a beating and outlets continue to miss their opportunity to maximize profit over such critical holiday seasons.

The easiest way for retailers to boost margins during the busy holiday season is to leverage the increased sales volume from discounted items to sell higher-margin add-ons. But even Amazon, the biggest player in the game, still doesn't have enough data in more than half of cases to make any additional product bundling suggestions. Furthermore, most miss out on the opportunity to ship products from the same location. This continues to be a massive missed opportunity that hurts retailers’ bottom lines.

Peak Periods Have Changed

Black Friday is one of the biggest days on the retail calendar. However, with fierce competition and high fulfillment costs, margins are being squeezed tighter every year. Amazon, Walmart and Target having upped their free shipping game, which means increased online sales often lead to higher fulfillment and delivery costs.

For instance, Amazon has forecast a disappointing fourth-quarter profit after its third-quarter shipping costs rose 22 percent to $6.6 billion, almost double its operating income. Walmart, for its part, has reported a narrower gross margin rate for the same period, hurt in part by higher transportation expenses and the increasing growth of e-commerce. Higher online fulfillment and other supply chain costs also hurt Target’s margin.

Retailers of all shapes and sizes need to be smarter in their approach to major shopping events.

Fierce Retail Rivalries

Retailers need to better prepare and react to competitors, and this means tailoring brick-and-mortar and online offerings. More people went online since stores put their best deals on their websites. Last year’s online sales for the Wednesday before Thanksgiving through Black Friday was 26.4 percent higher than in 2017, estimated Adobe Systems. In 2017, online sales were up 18 percent.

This means retailers need a strategy to make the most of these high-volume, high-value periods of the year. This isn't to say that there are no attempts to make deals seem more attractive to consumers. According to The Wall Street Journal, retailers will slightly increase the "normal" price of an item in the days before their Black Friday sales so that the discounts appear deeper. In fact, WSJ reported an 8 percent increase in a fifth of the sale items it tracked before Black Friday, and a 23 percent uptick in the pre-sale prices of toys and tools.

Nonetheless, there are plenty of instances where retailers miss opportunities to make bigger, better sales. Implementing small changes to e-commerce strategies can make a big difference during these peak sales periods.

From Little Things Big Things Grow

The good news is that retailers of all sizes have the ability to implement smarter sale strategies to make the most of these vital periods. First, retailers must ensure they provide incentives for loyal customers to shop at busy times. Why? Because 77 percent of consumers say loyalty programs make them more likely to stay with brands, and Black Friday provides an opportunity to make these incentives even more appealing.

Second, make the most of omnichannel offerings. Customer satisfaction extends to shipping, so consider offering free delivery or perhaps an in-store pickup option for those yearning for immediate gratification on their spend if they make use of your online shopping offering.

Third, provide bundles to bring more volume to the main product and increase margin. Bundling one product with another is an easy way to increase the value of the initial item at checkout. For example, pairing any laptop with its sleeve, or Microsoft Office, is more likely to boost the sale of that product while increasing basket size. This strategy also makes it harder for the consumer to compare the offering of one product to another.

Fourth, remember that longer sale periods are being more consistently implemented for the benefit of the retailer, and not the shopper. Pacing out deals offers a longer chance to sell, and this can be especially important if your website goes down and prevents shoppers from buying online. Some may complain about elongated deals and major retail days evolving into weeks, but keep in mind that they do spread the flow of people and grant higher sales potential.

Anthony Ng Monica is the CEO of Swogo, the world’s first automated bundle solution for e-commerce retailers to increase margin.