In-Store

Prime Day a stark reminder to traditional retailers and the High Street that shopping is changing

With Amazon Prime Day kicking off this evening at 6pm, shoppers and retailers alike are hoping for an online shopping extravaganza – but Prime Day is more than just a boon for the giant marketplace, it shows us just how much shopping has changed.

According to Fujitsu’s MD, Retail and Hospitality, Rupal Karia 75% say Amazon or eBay would become their go-to store if they had a physical presence – and that shoppers want a digital high street experience with 61% say they choose one retailer over another based on in-store technology.

But traditional shops are failing to bring together the ideas that online and mobile commerce yield, the changes in shopping behaviour exemplified by the likes of Prime Day and the threat that the likes of Amazon [IRDX RAMZ] and eBay [IRDX REBY] foist on the traditional retail environment.

“Consumers want to be able to shop with flexibility – sometimes online, sometimes in-store – and expect the experience to be seamless regardless of the channel they choose, and it seems that Amazon resonates as the retailer of choice across the board,” says Karia. “Our research found that no matter what age, consumers feel that they would prefer to shop with Amazon. 72% of 18 to 24s, 78% of 25 to 30 year olds, and even 73% of over 60s all believe that if Amazon had a physical store, it would quickly become their preferred store to shop in. Retailers need to take note and ensure that they too are providing their customers with the relevant channels for their shopping needs and not run the risk of freezing out customers for failing to do so.”

He continues: “Amazon has been very good at offering services that they don’t even know they want until they become available. As a result this has altered the mind-set of consumers who want to shop how they want, when they want, and that Amazon is the best provider for this on demand way of shopping. We’ve event found that that 8-in-10 consumers would spend more with retailers that have a better technology offering, which means those unwilling to embrace technological advancements will not reap the rewards.”

Going mobile

“Consumers are increasingly turning to mobile for purchasing, and Black Friday 2016 demonstrated this with the tipping point for mobile overtaking desktop for deals,” says Hugh Fletcher, Global Head of Consultancy and Innovation at Salmon. “We saw this even from our own clients, where 51% of Black Friday orders were made on mobile devices, up from 46% in 2015. The same can be expected for Amazon Prime Day which plays on consumers desire to be the first to grab hold of that illusive bargain. The chances are that, if those deals go live at 6pm, most consumers will be on the move and ideally suited to mobile purchasing.”

Fletcher continues: “Our own research indicates that consumers are after ease and convenience in their online shopping experiences. Couple that with improved WiFi and 4G coverage, and consumers are accessing more and more sites through mobile whilst in transit. App users will also have the added benefit of being able to track deals that they are interested in via the app, meaning that they won’t miss out once the deal goes live. Whilst Black Friday uses Christmas gifting as the incentive to purchase, Amazon Prime Day is very much about self-rewarding. With this in mind, browsing and purchasing is likely to be kept more private, and therefore lends itself to mobile purchasing.

And there is everything to play for. According to e-commerce home delivery specialist ParcelHero, Prime Day is likely to top $3.5billion for Amazon if it continues its growth of $1billion every year; and that’s not counting all the other e-commerce sites joining the Prime opportunity. This is becoming a real threat to traditional retail.

Changing shopping patterns

It also shifts buying patterns significantly. ParcelHero’s Head of Consumer Research, David Jinks, says: “Who has money to spare in late November? Christmas will be looming large, and I for one will have difficulties in making the case for a new Nintendo Switch. Prime Day’s timing is perfect and its potential is limitless; not just for Amazon Prime members, but also for eBay and the many other sites who climb aboard the Prime-Time bandwagon.”

Jinks predicts that Prime Day has the potential to easily overtake Black Friday and Cyber Monday, to become the biggest shopping day in the West. It grew from $1.5billion in 2015 to $2.5billion in 2016. At that rate it will top $3.5billion this year: and that’s bigger than Black Friday ($3.34billion) and Cyber Monday ($3.45billion).

Changing shipping patterns too

Prime Day has also had the effect of significantly altering shipping for all retailers. “In the UK, click and collect grew from 8.8% of online sales in 2011 to 22.5% in 2015 and has a projected growth of 64% between 2016 and 2021,” says Christopher Baird, Senior Consultant in retail customer engagement and loyalty at Capgemini. According to our IMRG Capgemini Quarterly Benchmark it had already reached an average of 30% of sales for multi-channel retailers in Q4 2016/2017. Unsurprisingly given all this growth, companies like UK-based parcel collection and delivery company Doddle are having to expand operations rapidly – it reported a 241% growth during 2015.

“However, a new challenger has arisen as a result of Amazon (and its highly popular Prime Day),” warns Baird,  “same day and even hourly deliveries – and traditional retailers and digital start-ups alike are trying to ready themselves for a future where ‘next day’ is no longer good enough for consumers. Research conducted by Clouder.co.ukshowed that 67% of participants would be willing to spend more for same-day delivery, with 36% suggesting they would pay up to £15.”

According to Baird, this is a potentially lucrative situation for retailers to be in, but it comes with a host of logistical complexities that may simply seem too daunting to pull off. The entire retail operation has to be connected, with real-time stock information and advanced analytics working alongside technologies like RFID and process automation to manage not only the supply chain, but the customer support components of the transaction.

“One option for retailers is to partner with a start-up – like Tesco did with Quiqup when it launched its hourly delivery option last month – but others may choose to build this capability in-house,” he says. “Partnerships with start-ups allow retailers to gain quick first-mover advantages against competitors and have access to the newest technology on the market.  Regardless, it is no longer a case of if customers want click and collect services, but instead is about when and how they can be delivered.”

Halo effect

During Prime Day, this will be a day when a vast majority of consumers’ attention will be heightened and expecting to find a sale no matter where they turn to. “According to a report from ClickZ, during the first Amazon Prime Day, it created a halo effect for other retailers, with online traffic increasing by an average of 21% on Prime Day (July 15, 2015),” says Michael Ross, Chief Data Scientist and co-founder, DynamicAction. “Conversions also rose on average by 57%. Wednesdays are not typically high-traffic and conversion days for eCommerce sites, yet Prime Day was significantly higher.”

This is backed up by data from Criteo. Based on data from Amazon Prime Day 2016, e-retailers experienced total order value increased 55%, total number of transactions increased 45%, total number of add-to-basket events increased 40%, total number of shoppers making purchases increased 15%, total site usage/engagement increased 21% and average conversion rate increased 27%.

For example, last year eBay was swift to get in on the act, promoting bargain prices over several days with digs that you don’t even need to pay for membership. Interestingly Macey’s site had 41% more visits on Prime Day last year, and Walmart’s was up over 20%.

John Gillan, Criteo’s Managing Director for UK and Northern Europe, says: “Criteo’s aggregated data from 2016’s Prime Day shows that online shoppers showed up in droves to buy, not only from Amazon, but from many major online retailers. In fact ecommerce websites last year saw shopper volumes rise by 15% over Prime’s two days. This high volume combined with an increased conversion rate of 27%, is demonstrative of the transformation. Amazon has turned what would have been just another online browsing day into a significant date in the retail calendar – for everyone.”

He continues: “To capitalise, retailers need to ensure they’re maximising from the effects of Prime Day. The day might be named after Amazon, but shoppers are clearly in the right mindset to find deals from their other favourite brands. A prime opportunity for retailers of all shapes and sizes.”

ParcelHero’s Jinks adds: “There’s little doubt that shoppers have swiftly acquired the taste for a Summer shopping extravaganza, and when they can’t find what they want on Amazon, they are happy to go on the hunt elsewhere on the web. And July is the perfect time for us all to be a bit indulgent. Prime Day’s beginning to look a lot like Christmas… in July”

An end to channels?

However, Prime Day may also demonstrate how the line between retail channels may be disappearing altogether. According to Salmon’s Fletcher: “With its aim to own every interface – mobile, desktop, voice etc. – chances are that Amazon will really not be fussed about through which device the sale is made. Instead, the concentration will be on hitting customers at the point at which they are most likely to convert. And with the clock ticking on lightning deals, Prime customers will be ready as soon as the clock strikes 6pm.”

Mentioned in this piece…

Amazon

Amazon

IRDX: RAMZ

Amazon is a market-leading eTailer with global reach and a broad array of product types. (more…)

eBay

eBay

IRDX: REBY

eBay is a multinational business-to-consumer and consumer-to-consumer marketplace. (more…)