Join us at Entrepreneur magazine’s Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Seats are limited–Register now to secure your spot and receive exclusive reader rate (expires 12/8).
It’s been a good holiday shopping season so far for ecommerce retailers: While there was clear fatigue for in-store shopping on Black Friday, shoppers kept their credit cards at the ready for online purchases all through the weekend. ShopperTrak reported a 10.4 percent decrease in in-store sales over the Black Friday weekend, whereas Cyber Monday punched through forecasts to hit $3.07 billion in sales, up 16 percent from last year.
But, now, it’s time to think ahead. The Black Friday through Cyber Monday weekend used to be retail’s gold standard when it came to holiday sales, but it’s obvious that the rules have already changed. Last year, December 23rd trumped Black Friday as the biggest shopping day of the year; this year, major retailers like Amazon and Wal-Mart have been rolling out Black Friday-caliber deals since November 1.
And consumers now expect these kinds of deals both long before and well after they’ve had their fill of turkey and pie.
But there’s the problem, and I’ll be blunt about it: As of now, the market is largely unprepared for all of this. Yes, there are more and more emails going out advertising One Last Day of Cyber Monday Blowout Deals!, but therein lies the problem. Instead of treating customers acquired over the Black Friday/Cyber Monday weekend as customers with long-term potential value, ecommerce businesses and retailers are taking a “flash-sales”-type approach to try to get more sales for just that weekend (and perhaps a few days after).
Research by Retention Science took a closer look at what kinds of shoppers retailers compete so fiercely for every Thanksgiving and offered some interesting insights. The study analyzed nearly 6 million orders placed by more than 3 million consumers over the holiday season. It found that as a whole, Black Friday/Cyber Monday shoppers (hereafter, BF/CM shoppers) didn’t provide long-term value – which wasn’t much of a surprise — but that was probably the retailers’ fault.
And that was unexpected. Take a closer look at the trends.
1. BF/CM shoppers: fewer purchases, faster churn
The study found that consumers making their first purchase with a retailer on Black Friday were 19 percent less likely to make a repeat purchase and made 20 percent fewer purchases over time overall. Cyber Monday shoppers were even more fickle, with 26 percent less likely to make a repeat purchase, and 23 percent fewer total purchases. Churn rate especially was abysmal: Black Friday shoppers churned 274 percent faster than other customers, while Cyber Monday-ers said goodbye 296 percent faster.
Though these numbers are bleak, they’re hardly surprising. It makes sense that deeply discounted promotions, like those headlined for the BF/CM weekend, bring out the deal-hunter in all of us. By putting the emphasis on prices over value for this one weekend of the year, retailers train their newly acquired customers to (essentially) “dine and ditch.”
2. But, wait: BF/CM shoppers spend more.
Despite the fact that the majority of BF/CM shoppers studied didn’t turn into repeat purchasers, one thing was clear: These people were ready to shop. Customers who made their first purchases over the Black Friday/Cyber Monday weekend spent 12 percent more than other customers throughout the year.
So, let that sink in. These numbers speak to both the potential value of BF/CM shoppers and to the wastefulness of the current holiday-weekend-bonanza strategy. First, it’s clear that BF/CM shoppers are ready to open their wallets. Second, retailers should be trying to think of new ways to extend their shopping habits, past a one- or two-day bounty.
3. Plus: Holiday excitement means faster purchases, longer.
The study also found that people do get excited for shopping over the Black Friday weekend; more importantly, they stay interested well into December.
It measured the time it takes consumers to make an initial purchase after registering with a brand. One month before the Thanksgiving holiday weekend, the time to first purchase, the study found, averaged 23 days. However, this number dropped as we moved closer to the sales weekend, as people got trigger-happy with purchasing: One week before the holiday weekend, the time to first purchase averaged 13 days, which was 56 percent shorter than this period for the previous month.
Most significant, however, was that this 13-day average lasted for at least three weeks after the shopping weekend. One of the key findings suggested that the excitement generated for shopping during the Thanksgiving weekend carried over into the rest of the holiday season, which represented another clear opportunity to score repeat business.
4. What this all means: Switch gears now, or lose customers.
Black Friday and Cyber Monday as the shopping holiday, slashed prices and all, is a hard mindset to shake. Just like consumers, marketers and retailers have been trained the same way. But even as shoppers are changing how they view shopping over the holiday season, marketers must respond, too.
This doesn’t entail just adding on more discounts and promotional campaigns throughout the rest of the holiday season; that’s expected. What needs to change is how marketers view the shoppers who first purchase over the Black Friday/Cyber Monday weekend: not as “holiday shoppers,” but as customers who first engaged with your company over the holidays. It’s time to see their potential for more than a quick sale, and start communicating with them accordingly.
The lesson here? Stop spamming customers with promotions, and start engaging them — as customers. In essence, focus on building relationships even with your holiday shoppers, not making sales. That’s what will bring you the most success, holiday profit numbers be damned.