What a YTD Analysis of Consumer Transactions Tell Us
As the heat index increases across the nation, so do the questions surrounding what customers will expect and how retailers and brands will perform in the months ahead. From constant promotions to ease of returns, increased free shipping to buying on mobile, consumer behavior is shifting faster than ever, leading to intense challenges and distinct new opportunities for retailers and brands.
With the ever-growing chasm between the retailer “haves" (those that have embraced the need for transformational shifts in their business) and "have-nots” (those that are making bankruptcy headlines, cutting staff and missing financial projections), successful retailers are re-engineering their organizations and operational mind-sets with a keen understanding of shifting consumer behaviors and the new retail metrics driving profitable growth.
According to the DynamicAction Retail Index: Spring 2018, an in-depth analysis of over $8 billion in consumer transactions in the U.S. and Europe from January through Memorial Day 2018, North American consumers this year were not only increasingly shopping — and buying at full price — on their mobile devices, but also equating nearly every major or minor holiday with sales, expecting promotions, markdowns and free shipping at every turn.
Holiday Promotions Aren’t Just for the Holidays Anymore
Although promotions on average were down 5 percent year to date (YTD) and markdowns were up 7 percent YTD, displaying a balance of sorts, there's a distinct difference in the way “holidays” are being treated. Beyond just Black Friday or semi-annual sales, shoppers have come to equate almost every holiday on the calendar with sales and special offers. Retailers are answering this call with Easter Week, Presidents’ Day and Memorial Day all showing spikes in promotions in 2018. Memorial Day shopping (May 22-28, 2018) showed a 9 percent increase in promotions applied to orders vs. Memorial Day 2017, while both Easter Week and Presidents’ Day showed a 16 percent increase in promotional usage vs. last year.
Mobile is the Fastest-Growing Channel for Profitable Transactions
Every year in recent memory has been declared "The Year of Mobile,” and yet in 2018 we're finally seeing not just increased mobile usage, but both revenue and profit driven from mobile showing meaningful growth. Although desktop and laptop traffic continue to drive more revenue than other devices, the DynamicAction Retail Index reveals that profit driven from mobile is up 20 percent YTD in 2018 compared to 2017. In contrast, profit driven from web traffic and tablet orders was down 13 percent and 11 percent, respectively, during the same time period vs. last year.
Free Shipping Has Been, and Continues to Be, the ‘New Normal’
Orders using free shipping were up 6 percent thus far in 2018, with free shipping offers now a clear customer expectation during even micro-holiday sales and promotions. Traditional holiday 2017 free shipping offers extended into January 2018, with an average 15 percent increase in free shipping in the first two weeks of January. This trend continues into 2018, with Memorial Day shopping up an average 20 percent in North America.
Retailers Act Fast to Tackle Profit-Eroding Returns
After experiencing a 34 percent increase in the value of returns during 2017, North American retailers are focused on addressing core issues in size, fit, more personal curation, and quality to better answer customer expectations and to hold steady on returns in 2018. Returns are up just under 3 percent YTD vs. the same time period in 2017, with some core weeks of returns like the first week of January actually down an average 12 percent. Retailers and brands are shifting this trend through improved and connected customer data understanding across channels and throughout the searching, buying, shipping and returns processes. One of the most rapid shifts has been with apparel retailers and brands, as they have implemented technologies that help funnel customers to items where they’re most likely to have a successful purchase, considering each customer’s unique style preferences, personal size and fit.
Romney Evans, co-founder of True Fit, a data-driven personalization platform for footwear and apparel retailers, advises, “understanding returns is complex because it's often a byproduct of really positive shopping behavior and is usually tied to retailers’ most active shoppers. It's vital for retailers to analyze the distinct returns behaviors that manifest in the data in terms of size sampling, color sampling and style sampling which can occur within one order, as well as sequential sampling which occurs over multiple orders. Once you understand what your customers are really doing, you can target those behaviors with specific strategies, tools and policies, and then promote the positive ones.”
With both positive improvements in curbing returns and mobile monetization, and yet an almost constant drumbeat of promotions, markdowns and free shipping, there's a clear need to refocus on the fundamental elements of customer centricity, recognizing that even a single view of customers is not enough. To orchestrate the transformation and performance improvements necessary, retailers need a single view of the business across customers, products and channels, as well as new metrics to drive customer-first success.
Sarah Engel is the chief marketing officer at DynamicAction, a prescriptive retail analytics solution.
Sarah Engel is the chief marketing officer of DynamicAction, and spearheads marketing strategy, lead generation and communications, as well as HR and culture initiatives.
She's creator and chief analyst for the DynamicAction Retail Index, a multiyear study of more than $4 billion in consumer transactions which offers insights on metrics ranging from profit protection and inventory optimization to customer experience and promotional expectations. Sarah works directly with industry influencers to provide insights on evolving consumer behavior, the shifting economics of omnichannel retail, technology implications, and the specific ways in which customer-centric brands are thriving in the Amazon Era. Her commentary has been featured in top-tier publications including WWD, The Wall Street Journal, Washington Post, CNBC and the Associated Press.
Prior to DynamicAction, Sarah helped notable consumer and B-to-B brands with strategic marketing and business leadership, including Nieman Marcus, Estee Lauder, Stuart Weitzman, Wyndham Hotels, Travelocity, Chevrolet, ClearSaleing (eBay) and Match.com. She founded Elegant Disruption, a strategic consulting firm, which provided guidance for multiple brand reinventions.
Sarah serves on the Dallas board of directors for Step Up Women’s Network, a nonprofit focused on propelling young women to become the next generation of professional women, and was recently named a 2017 “Champion of PR” by PRWeek, a recognition of women innovating the communications industry and guiding other women to leadership success.