Holidays High On Promotion, Low On Loyalty

The holiday shopping season is in full swing as Christmas looms just around the corner. But just as merchants thought they might be seeing green, insight from data analytics solution provider DynamicAction suggests that retailers’ profit margins are increasingly at risk as the industry grows ever more reliant on discounts and promotions to draw consumer interest. Here are some of the key findings.

While traditionally deal-heavy days saw some rise in promotional purchases — Cyber Weekend saw a 37 percent year-on-year increase, with Cyber Monday’s promotional load increasing a full 49 percent over last year — the real jump in promotions came in the remainder of holiday shopping days.

Looking at $4 billion worth of e-commerce transactions between November 1 and December 18, online orders placed using promotions increased 131 percent year-on-year. In that period, promotion-based buying accounted for over half of total purchase volume on average — depending on the day, deals were featured in between 51 percent and 86 percent of all transactions analyzed by DynamicAction.

Intriguingly, DynamicAction’s data showed that the promotion frenzy is far more subdued elsewhere, with orders using promotions in Europe up only 18 percent in the same period.

Zooming out, analysis shows that this isn’t just a problem for the holiday shopping season. DynamicAction’s Fall Retail Index 2016 found that retailers in North America are ramping up promotions in the weeks and months leading up to the holidays. This year saw an 85 percent increase in retailers using promotions outside the holiday season when compared to 2015.

Even with the holiday shopping season starting earlier than ever and consumers planning to spend some 12 percent more than last year, it appears that all the focus on deals and promotions in North America has led to a decline in both new customers and customer loyalty overall. The DynamicAction data found that first-time buyer conversion is down 7 percent year-over-year and new customer orders were down 9 percent.

So while orders are up, retailers soon might start to reconsider their reliance on promotions.