As the countdown to Christmas begins, with just 53 shopping days left, retailers and brands are gearing up for a holiday season characterized by increasing price sensitivity and evolving promotional tactics. According to Salesforce’s 2024 Holiday Forecast, global sales during November and December are projected to grow by 2% year-over-year, reaching $1.19 trillion, while U.S. sales are expected to hit $277 billion, also marking a 2% increase from the previous year.
With consumers becoming more budget-conscious, retailers are bracing for a shift in online shopping behavior this holiday season.
Heightened Price Sensitivity Shapes Discounting Strategies
Salesforce’s latest Shopping Index highlights a significant change in consumer priorities: 66% of global shoppers indicate that pricing will heavily influence their shopping decisions in 2024, a substantial rise from 46% in 2020. This trend toward discount-driven purchasing was evident during the recent Prime Day event, where retailers that significantly increased their discount rates experienced a 3% boost in U.S. sales, marking a notable return to positive order volume growth after years of stagnation. This indicates a strong demand from consumers eager to make purchases.
The effects of this price sensitivity are being felt by brands across various sectors. Advantice Health, which owns brands like AmLactin, Triple Paste, and Kerasal, reported improved sales during key shopping events in 2024 compared to 2023. Ash McMullen, Director of Ecommerce at Advantice Health, noted that this trend suggests consumers are indeed more price-sensitive.
Targeted Promotions Over Blanket Discounts
Brands are increasingly opting for more selective promotional strategies rather than applying widespread discounts. Laura Meyer, CEO of the retail-focused marketing agency Envision Horizons, advises against discounting entire product lines. Instead, she recommends concentrating on best-selling items or new launches to enhance visibility and improve rankings on platforms like Amazon.
Meyer’s agency has found that brands offering discounts of 30% or more during major sales events see a marked increase in sales, particularly in the beauty sector. “Our research indicates that offering larger discounts on top-selling products, combined with a lower Total Advertising Cost of Sales, yields better results than sticking to a conservative discount policy,” she explained.
This targeted approach aligns with the broader goals of maintaining profitability. McMullen emphasized the need for brands to balance discounting with profitability and brand integrity, stressing that companies must be deliberate in their promotional frequency while offering sufficient incentives to attract new customers.
Understanding Financial Dynamics for Successful Promotions
McMullen also pointed out the critical role of finance partnerships in navigating these promotional strategies. “Grasping your ecommerce profit and loss statements is crucial during event planning and execution. A key breakthrough for us has been facilitating communication between ecommerce and finance teams,” he stated.
An Extended Holiday Shopping Calendar
This year’s shopping calendar features five fewer days between Thanksgiving and Christmas compared to 2023. However, retailers are extending the holiday season through prolonged promotional events. Notably, Amazon is transforming the traditional ‘Turkey5’ shopping period into ‘Turkey12,’ effectively doubling the duration of discount opportunities. McMullen anticipates that other retailers will adopt similar extended promotional periods.
Participation from brands remains robust, with over 80% of Meyer’s clients taking part in Amazon’s October Prime Day, and all planning promotions for Black Friday and Cyber Monday. McMullen believes that the compressed timeframe between Black Friday and Christmas will lead to less downtime between these major sales events.
Innovative Customer Retention Strategies
Brands utilizing direct-to-consumer subscription models are devising innovative retention strategies beyond standard discounts. Hattie Gilpin, Director of Operations at wellness brand Wellbel, noted a 20% reduction in subscription cancellations by timing their Black Friday promotions for customers looking to unsubscribe. This tactic reinforces customer loyalty by showing that the brand values their business. “It communicates to the customer that we care about their experience and are not just trying to lure them in with a bait-and-switch,” Gilpin remarked in a recent podcast.
Nik Sharma from Sharma Brands suggested alternatives to traditional discounting that can preserve profit margins while still delivering value. “In addition to discounts, consider options like cashback or offering complimentary gifts with purchases, which enhance perceived value without significantly impacting profit margins,” he advised.
Meyer’s team has also successfully implemented post-promotion retention strategies by leveraging Amazon Marketing Cloud to re-engage high-value customers who participated in Prime Day in the months following the event.
A Nuanced Approach to a Competitive Holiday Season
The insights from Salesforce underline the necessity for strategic planning this season. Caila Schwartz, Director of Strategy and Consumer Insights at Salesforce, emphasized, “This season will be competitive and intensely focused on pricing strategies. Leveraging technology, particularly AI, and utilizing customer data are crucial for crafting effective marketing campaigns and holiday promotions that encourage repeat purchases from loyal customers.”
For retailers and brands, success during the 2024 holiday shopping season will hinge on balancing consumer price expectations with profitability. The expanded promotional calendar provides additional opportunities to engage with cost-conscious shoppers, but it necessitates careful planning around product offerings, discount strategies, and customer retention initiatives.
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