No Sale — Signs of Growing Consumer Sales Fatigue
Are sales events irrelevant in a transparent retail marketplace?
With Amazon and Walmart going mano e mano over a mid-summer sales event, the inevitable analysis and comparison to other sales promotions like Black Friday, Cyber Monday and Singles Day are all ripe for ad nauseam discussion and analysis. Did Amazon win? Did Walmart? Was the event larger than Black Friday? Does anyone outside the retail industry really care? As the overall noise level of sales grows louder, consumers are beginning to show signs of tiring of one of the most widely used retail tactics in existence.
Many media articles focused on the public criticism #PrimeDay received, especially on Twitter. But really, when is there not criticism about something on Twitter? Haters gonna hate and humorous posts of XXL Diane Keaton T-shirts actually get shared. The reality is that according to some reports, Amazon’s sales were up 93% and unit volume surpassed Black Friday (although the use of “unit volume” to describe the success of the day is suspicious. Sold more pop-tart units than flat panel TV units I guess). The company released some tidbits of its sales including 14,000 iRobot Roomba vacuums compared to 1 it sold the previous Wednesday.
Probably more important, Amazon and Walmart are relevant in terms of talk value in the middle of summer when most folks probably could care less about retail. Good and bad, the retailers were part of ongoing trending conversations. One of my favorite non-scientific data points shows Google indexing 96K results for #primedayfail vs. 301K for #primeday (#blackfriday has 422K). Criticism or not, Amazon successfully managed media coverage to drive awareness, engagement and conversion. Walmart to0 indicated that it was happy with the results and its sales (rollbacks) are continuing for up to 90 days. While talk worthy this time, is this repeatable and won’t other retailers jump in to make the response less effective for all participants next time around?
The reality is there is a fixed amount of consumer dollars available. As single day events like Black Friday erode in importance as deals break earlier and later in the shopping cycle, retail strategists are likely missing the point that with the ability to find deals on demand, specific sales are much less important. Search is increasingly becoming the point of shopping entry for many consumers. This is not lost on Google, Pinterest and Facebook as the platforms are rapidly enabling shopping technology within the user experience and viewing themselves as retail channels. With some 20–70% of retail product pricing going to supply chain middlemen, a wealth of margin exists to deploy direct to consumer models in most categories. This is true not only for durables but also for consumables which are already developing subscription models for frequently bought items.
One of the results of pricing transparency is that sales and deals have become expected table stakes vs. true discounting events. Retailers that use frequent sale tactics find that there is no way to move consumers away from the model once they’ve started. When Ron Johnson sought to move J. C. Penney away from a continual discounting model that had over 300 annual sale events, the result was horrific for the retailer and it has still not recovered. While there will always be a group of consumers that respond to sales, retailers will likely not much much if any profit chasing them.
In many categories, consumers simply will not buy full price retail goods. Apple now takes in 92% of all smartphone profits because it is one of the few manufacturers that can command full price for its products and doesn’t chase market share numbers at the expense of quality and service.
So are consumers now immune to sales? In the 2014 holiday season, overall sales volume rose 4% according to the National Retail Federation. This barely keeps pace with overall economic growth considering inflation at 1% and a 2% increase in 2014 household incomes. Combined with a collapse in gas prices and unprecedented holiday sales activity beginning much earlier than usual, one might expect a much higher growth rate. 2014 holiday sales actually fell in December as consumers had already gotten everything they needed from sales that started in late October.
There are simply too many sales and too much related messaging chasing too few interested consumers that realize they can get deals on products at a time of their choosing; the urgency of fear of missing out (FOMO) is gone.
Good news, there will be another sale tomorrow.