Price Points by Omnia Retail

Here you can read more about Omnichannel Retail, Direct-to-Consumer Strategies and Retail Trends. Learn about the Implementation of Dynamic Pricing and Pricing Strategies.

Transparency in e-commerce: Leading the conversation at Price Points Live 2024

Europe’s e-commerce and pricing event of the year is returning in 2024, as Omnia Retail gears up for another exciting edition of Price Points Live. As leaders in e-commerce pricing across Europe, Omnia Retail is...

Europe’s e-commerce and pricing event of the year is returning in 2024, as Omnia Retail gears up for another exciting edition of Price Points Live. As leaders in e-commerce pricing across Europe, Omnia Retail is perfectly positioned to bring together experts and leaders in retail, pricing, marketing and branding to share insights and knowledge. Taking place at the modern Capital C building in Amsterdam on 7 March 2024, the building’s majestic glass dome ceiling sets the tone fittingly for this year’s main topic: Transparency. Whether it be transparency in pricing, marketing or e-commerce practices, our panel of speakers bring more than a century of collective knowledge and experience to the table. Joining us is Prof. Hermann Simon, the co-founder and chairman of Simon-Kucher who is returning to Price Points Live for a second visit. Known as the world’s leading expert on pricing and growth consulting, Prof. Simon is an award-winning author. Also on this year’s stage is Natalie Berg - an analyst, author and podcast host - who will add value to the conversation on all things global retail. Dr Doug Mattheus, a business executive and consultant, will be bringing his 35-years of knowledge and experience in marketing, retail and branding. Lastly, Cor Verhoeven is a Group Product Manager at one of Europe's largest marketplaces, Bol.com, specialising in pricing and assortment insights. He’ll be bringing his entrepreneurial spirit and his 10-plus years of e-commerce, product management and marketplace experience to Price Points Live. Our speakers will be brought together by the charming Suyin Aerts, who is also a returning panel member. Challenges in today’s world of e-commerce What are brands and enterprises facing in e-commerce in 2024? From branding to pricing to consumer behaviour, the e-commerce arena has experienced more phases and changes in the last four years that it did in the previous decade. Let’s discuss some of the industry’s key trends and issues as of today. Growing competition and price-war strategies As e-commerce grows and oversaturates each vertical, consumers have more choice and power. This is not necessarily a bad thing, however, it does mean that brands and retailers start employing more competitive pricing strategies that ultimately lead to price wars between competitors and a race to the bottom. This undercuts the value of products and only results in losses for each business involved. This has been evident with smartphone brands like Samsung and Huawei who competitively lower the prices of their smartphones to achieve higher market share. It’s also common between wholesale retailers like CostCo and IKEA or large online marketplaces like Amazon that employ tactics to get their vendors to sell their products lower than on any other marketplace. Increased customer expectations For decades, the relationship between retailers and consumers had been dominated by the former. Customers had only a few options for where they trusted to purchase their groceries, shoes, school supplies, winter essentials and everything in between. Today, that relationship has been flipped on its head as consumers enjoy the pick of the litter in just about every retail vertical. As this trend has developed, consumers have come to expect faster shipping, better prices, higher quality, and more benefits for their loyalty. This will naturally affect a brand or retailer’s pricing strategies as they try to maintain customer retention and even attract new customers with promotions, benefits from loyalty programs and clubs, and bundles that appeal to shoppers. Changing customer loyalty What makes a customer loyal to a brand? At what point does a customer’s loyalty erode? And, what are the factors that could cause this to happen? For most customers, it’s a balancing act between quality and cost. However, in 2024, brands and enterprises must face other factors that could affect customer loyalty: Sustainability efforts. A 2023 McKinsey and NielsenIQ study found that products with ESG claims (environmental, social or governance) accounted for 56% of the total sales growth during the five-year period of the study, from 2017 - mid-2022, showing, for the first time, that brands with some kind of sustainability mention are growing faster than those without. This is all due to changing customer loyalty and the very parameters that shape and shift that loyalty. Social changes may be another factor. For example, in the sporting goods vertical, participation in social sports like pickleball and paddle tennis have increased by 159% while lacrosse, skiing and track declined by 11%, 14% and 11% respectively. Stubborn inflation The issue that has plagued global e-commerce since 2021 is still having its ripple effects on the industry in 2024. In the first quarter of 2024, the EU has already cut GDP growth expectations for the year from 1.3% to 0.9% as interest rates remain high while consumers still grapple with a 40% increase in gas and food prices that peaked in 2023. With this reality, pricing has never been more important nor more sensitive to the consumer. McKinsey’s latest ConsumerWatch report shows that shoppers were buying less items at the end of 2023 compared to the previous year’s period, with personal care dropping 3%, household items dropping 3% and pet care dropping 5% which results in AOV (average order value) loss. The importance of transparency in pricing software The use of dynamic pricing in e-commerce has grown exponentially in the last decade, however, that does not mean every software provider offers the best-in-class platform. Not every pricing tool is made equally. Transparency is something that has not been prioritised as a core tenet of pricing software, which has often allowed for a murky relationship between a brand or enterprise and their own pricing strategies. For a user of pricing software to experience the full potential of a pricing tool, they need to be able to build, test and edit each pricing strategy with clarity and ease. They need to be able to understand how and why a pricing recommendation has been made. They should be physically able to see every pricing strategy simultaneously at play without convolution or confusing coding jargon. While this may seem obvious, some pricing platforms have found that withholding pricing knowledge from a customer is the way to go. How is Omnia enhancing transparency? When Omnia set out to build its new pricing tool, named Omnia 2.0, its main goal was to create a next-generation platform that would enhance a user’s flexibility, user experience and transparency. Why was this necessary? The reason is two-fold: Pricing for SMBs and enterprises can be overwhelming, time-consuming and confusing. For enterprises, as assortments become larger and competitors thicken the competition, pricing may become more complicated. “As the ability to run detailed and complex pricing strategies has become mainstream, it has snowballed into the next level of challenges: Complexity overload,” says Omnia’s CEO Sander Roose. By developing our one-of-a-kind Pricing Strategy Tree™ coupled with information dashboards that give a God-like view of the market and every strategy you have at play, pricing becomes what it should always be: Transparent, flexible and simple. “Omnia 2.0 successfully cuts through the clutter,” says Sander. Another development that enhances transparency for users of Omnia 2.0 is the “Explain Price Recommendation” feature which provides a full explanation of how the price advice of a particular product came to be. This not only enables full control over how and why prices may change but it increases the customer’s pricing maturity. “The ‘Price Explanation’ visually tracks the path through the Tree to show the logic and how the price advice came about,” explains Sander. Join us at Price Points Live 2024 “Although at Omnia we believe it’s still day one in terms of building the ultimate pricing platform we are building towards in the long-term, we are very proud of how the Omnia 2.0 next-generation pricing platform gives our users of and customers ever growing superpowers,” says Sander. Join our exclusive annual event by reserving your seats on our Events page or simply email your dedicated Customer Success Manager who will assist you. We’ll be seeing you in Amsterdam!

Omnia’s work on company culture takes centre stage in Frankfurt, Germany

“Even if you don't manage company culture, a specific culture will emerge. Although it probably won't be the culture you envisioned,” says Omnia Retail’s COO Vanessa Verlaan who presented on the topic of building a...

“Even if you don't manage company culture, a specific culture will emerge. Although it probably won't be the culture you envisioned,” says Omnia Retail’s COO Vanessa Verlaan who presented on the topic of building a strong and healthy workplace culture at the annual World Class Workforce Transformation conference in Frankfurt, Germany in January. In sharing Omnia’s experiences, failures and successes in building a healthy company culture, Verlaan shared that it is not something that can be achieved if only one part of the company is actively trying to enforce it: “I am convinced everyone in the company should be responsible of company culture. Not just HR. It starts with the leadership team and then it can be scaled.” Covid-19 has upended how leaders interact with employees and how coworkers connect with each other," a Harvard Business Review article by Denise Lee Yohn says. "Culture has become a strategic priority with an impact on the bottom line. It can’t just be delegated and compartmentalised anymore,” says Yohn. In many cases, a company’s core values are used to attract and hire top talent and remain a calling card on a company’s website. But what happens when the experience does not match the initial expectation? “People have certain expectations when they start at a company and then when faced with the reality, they are disappointed, and then leave. That’s when companies have to rehire for the same positions. This is why core values need to be implemented from the leadership team and throughout each department,” shares Vanessa. Using this simple yet effective system, Verlaan explains how the expectation-reality gap can be closed if culture plays an unconditional role in every step of the employee life cycle: Professionals from DHL Express, Siemens, Allianz Global Investors and Celltrion Healthcare also shared presentations on upskilling, digital transformation in the workplace, employee engagement, and other interesting topics that affect teams across the continent, making this one of the most innovative and forward-thinking events dedicated to the employee experience. In addition to the case study presentation, Verlaan also participated in a roundtable discussion with professionals from other private companies which further unpacked the topic for employees at corporations, scale-ups and start-ups. In talking to one of the fellow speakers who experienced that her previous leadership team was not supportive of implementing a specific workplace culture throughout the company, Vanessa believes that there are further opportunities regarding the practices for companies that want to achieve a strong and positive corporate culture. “Culture persists only because people act in ways that uphold its principles and codes,” says a Stanford Social Innovation Review paper, echoing the sentiment that Vanessa shared in her presentation. As Omnia has grown over the years, expanded in locations and developed each department, one thing has stayed the same - its core values. “We don’t update our core values because they are the foundation. However, they have become more clear and implemented in various steps,” says Vanessa. Omnia Retail's COO Vanessa Verlaan enjoyed snapping some photos at the event with fellow speakers in between interesting discussions on company culture.

Black Friday sales increase, but holiday spending looks shaky

Consumers showed their resilience once more for Black Friday 2023 amid global economic turmoil as sales increased across multiple channels, categories and markets. Shopify and Adobe all shared positive year-on-year...

Consumers showed their resilience once more for Black Friday 2023 amid global economic turmoil as sales increased across multiple channels, categories and markets. Shopify and Adobe all shared positive year-on-year increases: Shopify reported a 22% increase in sales from brands using its platform while Adobe Analytics shared a 7.7% increase in e-commerce sales over the total Black Friday weekend. In addition, year-on-year foot traffic for brick-and-mortar stores also saw an increase, albeit a small one, of 1.5% on Black Friday weekend. Adobe’s annual report, which covers 100 million SKUs in 18 retail categories, found five categories to be the largest contributors to this year’s sales - clothing, electronics, furniture, toys and groceries. These contributed to 60% of the €101 billion in sales from 1 - 27 November, which includes pre-Black Friday discounts during the month. By the end of the shopping weekend, discounts climaxed at 31% for electronics, 27% for toys, 23% on apparel and 21% on furniture. Small appliances and electronics like TVs and smartwatches also did particularly well while beauty and personal care saw Black Friday and Cyber Monday sales for beauty saw a 13.3% increase in year-on-year sales, as reported by RetailNext. Performance footwear’s discounts led to high sales Brooks Running was one of the performance shoe brands that reported a highly successful Black Friday/Cyber Monday period, enjoying a 14% record boost in sales on Cyber Monday alone. Omnia researched Dutch pricing data for running shoes to see what could have caused the increase in sales. Black Friday and Cyber Monday offers already began the Friday beforehand but the number of offers increased over time with the peak on Black Friday. Discount offers remain over the weekend and return to lower levels two days after Cyber Monday. Compared to the month before, Black Friday and Cyber Monday are seen as highly competitive days. On selected items, there is an average discount of 18.5%. Where some retailers and brands even go up to a discount of 28.7% on average. During this period we see different strategies of different retailers coming to life. Where some retailers and brands rely more on heavily promoted products, others that maintain their competitive strategies aren't able to discount that much. A trend we detect in the running shoe business is that brands, on average, have higher discounts, showcasing that a D2C strategy could be highly lucrative over this period. What can retailers expect about festive season spending? The state of consumer spending over Black Friday weekend should not fool retail leaders. Stubborn inflation and high food and gas prices are very much a constant monkey on the shoulders of household budgets and, even for wealthier consumers, have eaten into expendable income. Adobe reported a 14% increase in buy-now-pay-later services compared to this period last year. Cyber Monday saw a massive 42% increase in the use of these services as consumers moved to act resourcefully to make purchases. In addition, US credit card debt exceeded $1 trillion in November. Overall, although Black Friday spending was better than expected, a booming holiday shopping season will likely not be on the cards. Retailers and brands expect to see year-on-year increases, but it won’t be because of the usual holiday shopping explosion: Inflation has resulted in all-round price increases, making everything more expensive than last year, resulting in consumers spending more money for the same or less. Single-digit increases in spending of 3 - 4% are predicted, according to the US National Retail Federation, in comparison to 2021’s 12.7%. Average selling price across all categories: 2022 vs 2023: Source: Salesforce data published by Forbes Consumers expect to spend, but this will be largely due to the fact that consumers feel obliged to buy gifts over this period, and not because they want to go all-out on multiple gifts, holidays and treats for themselves. “They’ve been very resilient. They will shop. They have obligations to family and other loved ones that they’re going to fulfil the gift list for," says Michael Brown, a partner at Kearney. In the UK, festive season shopping, which encompasses both November and December, has not started as strong as in previous years: The British Retail Consortium and KPMG report that retail sales in November totalled 2.7% compared to 4.5% in 2022 while non-food items experienced a decline altogether. Moreso, PwC predicts a 13% decline in festive season shopping in the UK market, as reported by the Business of Fashion. As a result, UK retailers are expected to discount heavily in January 2024 to offset sitting stock that should’ve sold during this year’s fourth quarter. How can retailers make the most of December deals? McKinsey suggests that providing value will likely be the best strategy for retailers and brands to get consumers to shop which could mean offering same-day delivery, free shipping, product bundles, or sharper discounts. “People are heading into the new year thinking inflation is bad, interest rates are tough, there’s geopolitical conflict in the world, and that’s why consumers are so negative. They’re in betwixt, and their uncertainty is what’s keeping them from splurging,” said Kelsey Robinson, senior partner at McKinsey. In terms of sales channels, smartphone shopping for e-commerce sales accounted for a 54% majority, meaning an advertising restructure targeting smartphones via social commerce may result in higher sales. Targeting social commerce buyers may also lead to an entirely new stream of customers for future purchases.

Is e-commerce prepared for the EU’s new Price Indication Directive?

After its first introduction in 2021, followed by some delays in implementation, the EU’s Price Indication Directive (PID) is being implemented across the e-commerce and retail landscape throughout European member...

After its first introduction in 2021, followed by some delays in implementation, the EU’s Price Indication Directive (PID) is being implemented across the e-commerce and retail landscape throughout European member states including the Netherlands, Italy, Greece, Poland, and others. However, some countries have expressed concern about how the PID will be implemented, considering how vast and segmented the retail industry has become. How will this affect retailers, marketplaces and online stores, as well as consumers going forward? What are the specifications that retailers need to abide by? Omnia answers these questions and provides a solution for retail clients who may be concerned about how to implement this new legislation in an effective, seamless way. What are the PID’s key changes affecting retail stores and consumers? The PID is part of a larger legislative move within the Omnibus Directive towards bolstering consumer protection and transparency between retail stores and consumers. The PID section, which was a piece of legislation first created in 1998, is being updated with new rules to reflect the times. It focuses specifically on new ways of applying and advertising discounts, while the greater Omnibus Directive includes changes to other aspects of e-commerce such as online reviews, personal data, how aggregator websites display suggestions, and more. The PID focuses on ensuring retailers, online stores and vendors on marketplaces aren’t deceptively creating the illusion of a price decrease. Under Article 6a, a discount must be based on the lowest price within the last 30 days prior to the newly-introduced reduction and not a base price created by the retailer/vendor. In addition, when a trader intends on implementing a price reduction on an item, they must also show the item’s previous price. Price Announcements For example, a price decrease can be displayed as a percentage (“20% off”) or as a specific amount (“€20 off”). This can be shown with the previous price in a crossed-out form. Article 6a does not apply to long-term price reductions that shoppers may get with loyalty programs, cards or memberships, but specifically the price announcements. Here, we see how the PID gives transparency to pricing announcements: Before PID: A discount of 10% is announced. After PID: Discount is in fact 0% because the lowest price in the past 30 days is the same price as today. While a trader may usually advertise a discount of 33% (from 150€ to 100€) because it looks like a higher discount, thus incentivising consumers to buy a product, the PID now forces the trader to advertise either a 9.09% discount or not to advertise it at all. This means that as a retailer with an effective pricing strategy, one has to be able to access the cheapest price of the past 30 days and base their advertised discounts on it. More general price reduction announcements like “Sale now on” or “Black Friday specials” are also subject to Article 6a. Retailers, however, can still use general marketing techniques like “Best prices in town!” without Article 6a being invoked. Retailers The PID defines traders to be “any natural or legal person who sells or offers for sale products which fall within his commercial or professional activity”. In a nutshell, this includes sellers on marketplaces but not the actual marketplace itself or similar platforms like comparison shopping engines and aggregators. An example here would be eBay which acts as an intermediary platform between traders and shoppers. However, an intermediary like Amazon is subject to the PID rules when it is the actual seller of the goods or when it sells on behalf of another trader. In addition, Article 6a applies also to traders based outside the EU that direct their sales to EU consumers, including to traders offering goods via platforms. Across the EU, reactions have been mixed Transposition and interpretation of the PID have not been a seamless or instantaneous process for most EU Member States. In early July, E-commerce Europe, which represents more than 150,000 businesses selling goods and services online, held a workshop to discuss its findings on how the PID is being approached by Member States. It showed mixed reactions and concerns, with each country approaching the PID with varying levels of seriousness. Among the concerns were the technical difficulties of indicating the prior price on price tags; how consumers will understand the various prices; how this affects promotional campaigns on items that need to sell rapidly (like fresh food), and the technical issues of displaying the prior price when selling through marketplaces. The countries experiencing the most difficulties were Italy, Sweden, Poland, Finland and Belgium. A number of survey questions were given to Member States regarding the implementation of the PID, with one survey showing high concern: Question: Have you experienced difficulties with implementing the new rules on price reductions? Answers: 10 Member States - Yes, regarding technical difficulties to indicate the prior price on physical price tags in stores. 9 Member States - Yes, it is more difficult to keep track of the prices and establish the prior price reduction. 8 Member States - Yes, regarding the concerns about less compliant competitors gaining a competitive advantage. 7 Member States - Yes, regarding technical difficulties to indicate the prior price in online selling interfaces. 5 Member States - Yes, regarding technical difficulties to indicate the prior price when selling through online marketplaces. How is Omnia taking action for existing and potential clients? In our Omnia 2.0 product that launched this year, our clients are able to have full insights into price history with a feature called the Directive Pricing Indicator. It shows the lowest selling price in the last 30 days on their dashboards so that brands and retailers utilising our product can easily comply with the Price Indication Directive. As the next iteration in our product development, we will make this data available in the setting of pricing strategies. In addition, Omnia plans to show the history of a client’s competitor prices in the last 30 days so that they are aware of their competitor’s pricing moves too. Your partner in price maturity and transparency The new Price Indication Directive will not only add value to the e-commerce experience for shoppers, but it will solidify trust and legitimacy between brands, retailers, their intermediaries, lawmakers and consumers. Transparency within pricing is a vital part of strategy and pricing maturity. As a client of Omnia’s, implementing these price-centric changes is efficient and simple. There is something to be said about a brand or retailer and their respective leaders wanting to improve their impact on the planet. As we’ve known and seen for the last five decades, it would be easy and mostly inconspicuous for a brand to simply continue the production, manufacturing and distribution tactics that are harmful to the environment. Up until recently, choosing sustainable operations within a business has been viewed as optional or as lacking demand from consumers.

Pricing: An approach to prosperous business development

Isn’t it a scary thought that 75% of S&P 500 incumbents will no longer be listed on the index by 2027? Due to slow or nonexistent evolvement, Standard & Poor’s data show that the evolution of corporate success has been...

Isn’t it a scary thought that 75% of S&P 500 incumbents will no longer be listed on the index by 2027? Due to slow or nonexistent evolvement, Standard & Poor’s data show that the evolution of corporate success has been dwindling for more than 50 years, stipulating that the average lifetime of an enterprise has decreased from 61 years in 1958 to just 18 years in 2011. Adaption and evolution are pertinent to the success of any enterprise, and no case of this being true is larger than the digitization of shopping. From malls to iPhones, the development of e-commerce has been the funnel for the start and the end for countless brands and retailers. As e-commerce experiences its largest growth spurt in the last three years since 2020, creating the most competitive landscape the industry has ever faced, one factor for e-commerce success has remained strong and true: Price is the number-one profit driver. As correctly stated by Prof. Hermann Simon, the world’s leading expert on pricing and the founder of Simon-Kucher & Partners, just a 1% increase in prices can yield up to 10% in profit. In this article, Omnia will discuss the importance of pricing for an enterprise’s long-term success and will display why a pricing strategy, coupled with a pricing software solution, is simply smart business development. In inflationary times, pricing is the cornerstone for enterprise success For decades, as one of the 7 P’s of marketing - a basic blueprint for retail and brand owners to launch successful products - pricing took a comfortable middle-child spot without enough attention being paid to it. The impressive and explosive trajectory of e-commerce in the last five to ten years has changed that. However, it isn’t just the growth of e-commerce that has directed the light onto pricing, but the very nature of its competitiveness and oversaturation. Consumers have become king, experiencing more options to shop and more capabilities to compare. The retailer no longer enjoys the peace of mind of knowing the consumer has to come to them - quite the opposite. As the balance of power shifted to the consumer, brands and retailers began rubbing their hands together to strategise on how they can capture the customer once more. As the other P’s (product, place, people, process, promotion and physical evidence) became less prominent as shopping moved to a web shop, pricing has become the top factor for consumers when choosing or abandoning a particular brand or retailer. In 2023, following the effects of covid lockdowns, supply chain issues and record-high inflation, pricing is more influential than ever: McKinsey reports that price is at the top of the list of consumers’ motivations to change their spending behaviours. US consumers are switching brands and retailers now more than they did in 2020 and 2021 (33% versus 46%). Furthermore, in PwC’s 2023 Global Consumer Insights survey, 96% of consumers said they intend to adopt cost-saving behaviours over the next six months and 69% have already amended spending on non-essential items. With price becoming so pertinent to consumer spending decisions in inflationary times, it becomes that much more vital for brands and retailers in e-commerce to stay ahead of market changes and conditions while driving revenue and profit upwards. On the other end of the spectrum, it’s not simply consumer buying behaviour that has propelled the importance of price: If one analyses the last decade of e-commerce, it is the powerful monopoly of marketplaces like Amazon, Google Shopping, Zalando and eBay, as well as large D2C online stores, that have developed a sense of control and manipulation of pricing in multiple categories. From electronics to personal care and everything in between, vendors and D2C small-to-medium businesses (SMBs) are contending with lower prices on these giant platforms that they feel pressured to meet or beat. And, without expertise and the right tools, how can they? Amazon has 1.9 million SMBs worldwide as third-party sellers on its marketplace, and owns a 38% majority of the US’s e-commerce market share, showing just how influential one marketplace could be over the pricing of multiple categories. It then becomes imperative that enterprises have access to scraping data and robust pricing rules and technology to remain competitive in an industry largely dominated by marketplaces. Mobilising pricing power Considering how competitive and concentrated the e-commerce arena has become, with marketplaces like Amazon and Google Shopping dominating market conditions, while the D2C stream increases by double digits, how does an enterprise create a forward-thinking, data-driven pricing strategy? How does an enterprise know when to action that 1% price increase so fondly spoken of by Prof. Simon? A Bain & Company global study shows that of the 1,700 retail leaders surveyed, 85% say management teams need to make smarter pricing decisions and only 15% believe they have effective price monitoring tools. The gap is considerable. However, as a McKinsey study suggests, incorporating AI-based pricing into retail pricing and promotion can add a valuable Dollar impact of between $106 million - $212 million, which may go a long way in easing the frustrations of the aforementioned business leaders, as well as their margins. In addition, Boston Consulting Group (BCG) shared in a study of theirs that it may take as little as three months to see up to a 5% increase in profit by implementing optimised pricing. As Prof. Simon also said, “Profits are the cost of survival and the creators of new value,” but, are retail leaders ready to maximise this value that’s right in front of them for their brand and their customers? According to the same Bain & Company study, implementing “new pricing capabilities” can increase the average profit by between 200 - 600 basis points: The crux of mobilising pricing power is knowing that it is not a once-off solution to fixing dismal profit margins, high sales team turnover and waning customer loyalty. Leadership needs to view pricing as the relationship is cannot get out of - and that’s a good thing. Developing pricing muscle and pricing maturity is a multi-year journey with an investment in data, automated processes and talent. Building longevity in value When one thinks about the kind of brain power, talent, hard work and almost indispensability a company may possess to reach the S&P 500 list, it seems inconceivable that a concept as elusive as adaption and evolvement could be its downfall. This goes to show how a simple mindset shift could be the deciding factor of stagnation and dissolution or growth and profitability. McKinsey shares that digitization “has less to do with technology and more with how companies approach development” and that when well executed, “it can unlock significant value by compressing timelines and eliminating duplication or inefficiencies.” As e-commerce technology advances and becomes more intelligent, it is unthinkable that one of the most critical and unpredictable factors - pricing - is not maintained manually. However, not only is the automation of pricing informed by competitor data and market insights necessary to demonstrably meet commercial goals, it is the partner in pricing, not just the software, that is needed.

D2C in 2023: What we predict and recommend for brands

In 2019, as a retailer, a D2C brand, or a pricing expert; if you heard the statistic that, in 2022, 64% of consumers will make regular purchases directly from brands, you’d likely wonder what could possibly take place...

In 2019, as a retailer, a D2C brand, or a pricing expert; if you heard the statistic that, in 2022, 64% of consumers will make regular purchases directly from brands, you’d likely wonder what could possibly take place in between those years for D2C shopping to become the majority choice for consumers. Direct-to-consumer, commonly called D2C, has jumped leaps and bounds in the last few years thanks to the traditional relationship between brand and retailer experiencing a reckoning with covid-19 lockdowns and closures that spanned two years. In essence, the new face of D2C e-commerce was born out of a need for survival amongst brands, from tech to fashion, who were staring down the barrel in 2020 with closed retailers, supply chain issues and sitting stock. On the other end, stay-at-home consumers were searching for a way to receive goods directly to their homes. Today, D2C sales, including established brands and digital natives, are estimated to reach $182.6 billion in 2023 and, overall, D2C sales have increased by more than 36% from 2020 - 2022 in the US. Despite these successes, D2C - both online and offline - has also suffered from the global inflation crisis of 2022 that left brands contending with 10.1% inflation in the UK, 6.1% in France and a 31.7% increase in energy prices across the EU. Facing increased competition, residual inflation, and a crackdown on sustainability practices, how does D2C fare for 2023? As we explore this growing sector of global e-commerce, Omnia looks to paint a portrait of its current state, as well as our predictions and expectations for the year ahead. Established brands will dominate revenue in 2023, showing the major shift big brands have made to D2C Despite showing impressive growth over the last few years, revenue for digitally-native vertical brands (DNVBs) will take a backseat to the more established brands that have made the move to D2C in recent years. In 2023, digitally-native brands are expected to earn $44.6 billion in revenue while established brands will earn much larger revenues, taking home $138 billion. In 2024, these numbers are expected to rise to $51 billion and $161 billion respectively. However, that doesn’t mean any less focus should be placed on the digital side of a brand’s sales stream. Although it is notable to see how well digitally-native brands are doing in the retail landscape, it is more noteworthy to see just how many established brands have made the move to D2C while some have circumvented the retailer route altogether at inception. Tech and home appliance brands like JBL, Phillips, Dyson, Bosch, and Miele, and sports brands like Nike, The North Face, Patagonia, New Balance and Under Armour have gone D2C - and these are just a handful of international brands that are making the move. In Europe alone, D2C e-commerce has grown by 23% between 2021-2022, with Germany leading the way as it remains Europe’s most sophisticated nation regarding logistics, infrastructure and a supply chain network. In addition, 57% of multinational companies worldwide gave “significant financial investment” in their D2C strategy, while another 31% added “moderate investment”. In the US, the amount of D2C brand consumers are set to increase to 111 million shoppers in 2023, making up 40% of their population. Globally, D2C-specific shoppers are at 64%, up 15% from 2019. Source: Insider Intelligence - D2C Brands 2022 Why more consumers are choosing D2C over retailers When we see brands experiencing double-digit growth in their D2C channels, we know it’s because consumers have been making a conscious and active decision to go to the brand they love and trust directly. According to Statista, the leading reason consumers choose to shop directly from a brand, at 49%, is better pricing. In second place is free delivery at 47% and free returns at 35% in third place. Free delivery and returns were made industry-standard by Amazon before the covid-19 pandemic arrived, and have become the expectation of most consumers who specifically choose online shopping over a retailer for the reason of convenience and speed. Source: Statista 2023 However, despite what many consumers think that they are getting a cheaper price directly from a brand, this is often not the case, which is why brands need a thorough dynamic pricing tool to offer a better price - not always the cheaper one - for the brand’s consistent growth. As Omnia`s pricing data show, the necessity for a dynamic pricing solution is twofold: Brands have to contend with their entire retailer network. On average, a brand’s product will be sold by more than 1,000 shops on multiple marketplaces and comparison shopping engines in a national market, which the D2C channel must compete with. Secondly, prices are volatile; meaning that on average the lowest market price for a third of all products for any assortment will either increase or decrease on a daily basis. A dynamic pricing tool gives a brand the ability to react to market changes and consumer demands. The need for market insight is, therefore, vital for a brand. D2C in 2023: In the face of increased competition, new brands will need to find a way to stand out Gymshark, a UK-based sports apparel brand founded at first, in 2012, to digital customers only, has been labelled as a “challenger brand” for one simple reason: It’s found success in creating products around neglected areas within sportswear; one of them being the interests of the everyday gym-goer, instead of the successes of famous athletes. Nike, Adidas and Reebok, who have largely encompassed their ethos, identity and marketing around the famous athlete, from Rafael Nadal to Shaquille O’Neal to Cristiano Ronaldo, have peddled the dream of sporting victories to billions of consumers who - for the most part - can’t or won’t achieve that level of sporting success; although it is nice to fantasise. Instead, Gymshark looked to focus their communication and overall identity on the wants and needs of the daily sport-lover and gym-goer who has a 9-to-5, or a family at home. In addition, the brand has focused on creating gym wear that isn’t only for model-like physiques or for fully able-bodied consumers. The online store shows people one would actually be sharing the leg press machine - not Tiger Woods. Now valued at €1.39 billion only a decade after its inception, the lesson that Gymshark can offer longstanding brands with a D2C channel is to not tell consumers to challenge the status quo with sharp taglines (“impossible is nothing”; “just do it”) but to actually do it themselves. By 2025, the sportswear market across the globe will be valued at €395 billion, with a growth rate of 8-10 percent, showing just how much potential there is within the market to rise above the fray. “Activewear start-ups have found success by creating hyper-specialised products and marketing to local communities first,” reports Business of Fashion. Not dissimilar to Gymshark, Off-White, the brand created by Virgil Abloh, learnt to fill an almost non-existent high-fashion-meets-streetwear gap. The creative director sadly passed away in 2021, however, his vision for meeting a misunderstood or neglected part of the streetwear market caught the attention of Louis Vuitton which led to his appointment as the luxury brand’s menswear artistic director in 2018. Off-White is still in production today. “In a large part, streetwear is seen as cheap. What my goal has been is to add an intellectual layer to it and make it credible,” said Virgil. Strategic partnerships are also part of Off-White’s game plan to succeed in this niche, collaborating with both ends of the spectrum - from Jimmy Choo to Levi’s to Sunglass Hut to Nike. Whether a brand is within the activewear or luxury category or not, we see opportunities for D2C players to focus on a niche in their segment or, like Gymshark and Off-White, look at the needs of consumers buying from those categories to see where they aren’t being met. How D2C brands can prioritise long-term success and growth in 2023 Rely less on digital marketing spending for growth In the early years of Facebook and Instagram, it was easy for brands to rely on sizeable marketing budgets to push growth. As consumers consumed content that was both organic and paid for, brands could rely on these platforms for sales and awareness. In addition, digital marketing on these channels used to be more affordable than it is today: On average, the cost per impression (reaching one person equals one impression) on Facebook cost $14.9 in 2021 versus $7.8 in 2019. The cost to advertise also gets more expensive if there are more ads within a segment, making the increasing competition among D2C brands in food, clothing, or tech even more costly. The smarter alternative to funnelling funds into digital marketing is to have an all-rounded approach that involves social media with user-generated content, tips and “how-to” video content; strategic partnerships with brand ambassadors; personalised email marketing and subscriptions; as well as omnichannel in-store experiences. How D2C brands spend money to acquire customers matters over the long term with strategic, disciplined spending being better over the long term. Focus on quality customer data British mathematician Clive Humby said in 2006 that “Data is the new oil”, which is a statement that has proven to be true over the last few years. Research firm Magna Global found in a study they conducted that 83% of consumers are willing to share data - such as retail preferences, location, age, and marital status - to access discounted or personalised services. In addition, McKinsey reports that 80% of consumers want personalisation from retailers, which is a lesson the D2C sector could learn using customer data. Using quality customer data, D2C brands can build stronger relationships with customers, based on their personal preferences, when it comes to new product launches, sales, returns and delivery, and more. D2C can also optimise pricing and product assortment, as well as help brands understand the customer journey online. Hire the right talent Finding and retaining quality talent will be key to achieving long-term D2C success. From branding to e-commerce to digital to customer experience (CX/UX), having professionals and experts in these arenas is a non-negotiable point. Firstly, companies can look to see who, in the team, has the knowledge, credentials and skills to push forward the D2C agenda while offering them leadership positions or promotions. Another way to secure strong talent is to acquire professionals from existing scale-ups that have shown to be strong competitors in the market. First-party data and underserved niche markets will be D2C’s best friends in 2023 Over the last three years since D2C experienced its most growth, we’ve been pleasantly surprised at the sector’s resilience, considering it is up against e-retailer and marketplace behemoths like Amazon, eBay, Bol.com, Walmart, and Target, as well as social commerce marketplaces under the Meta title. Both brands and consumers have shown an almost stubborn competitiveness in forging their own way within retail and e-commerce. However, 2023 will not come without its challenges for D2C brands: Gaining and implementing strategies with first-party customer data will become more vital for growth while Apple and government regulators work to make third-party data a thing of the past. In addition, as the competition increases within D2C, brands will have to find ways to rise above the fray to stand out. In categories like skincare, beauty, or sports apparel where mostly established brands own the customer, new and emerging D2C brands should grab underserved niche markets by the horns.

From Zara to Adidas, the state of design infringement in the fashion industry

The line between creative inspiration and infringement can be thin, dotted, or invisible at times. This was one of the lessons that Adidas had to learn this month when it lost its $8 million lawsuit against American...

The line between creative inspiration and infringement can be thin, dotted, or invisible at times. This was one of the lessons that Adidas had to learn this month when it lost its $8 million lawsuit against American fashion label Thom Browne over the use of parallel stripes in their designs. The German sportswear giant, who filed the lawsuit in 2021 saying that Thom Browne’s use of the stripes infringed on their trademark logo, believed that the use of the striped design was “confusingly similar” to the one presented in their logo. In 2020, global fashion brand Zara was sued by a smaller luxury label, Amiri, for copying a design of jeans without permission to use the design that included pleated leather panelling and zippers around the knee; after which the two brands decided to settle. And, more recently, French luxury brand Hermes has sued NFT artist Mason Rothschild for creating and selling NFT digital images of their famous Birkin bag, saying that the name of his work, entitled “MetaBirkin”, appropriated the Birkin trademark. At the crux of these lawsuits, along with many others, is a conundrum of creative expression, trade infringement, artistic licence and consumer confusion that affects D2C brands both small and large. As the fashion category within retail is so often pushed forward by something as ambiguous as creative expression, is there a defined lane that brands must stay inside of to avoid causing a fashion collision? Are fashion and beauty brands blurring into a homogenous cauldron of shared creativity? Do fast-fashion brands like SHEIN, Revolve, H&M and Zara get away with copycat behaviour because of their overall size and influence in e-commerce? Copyright and intellectual property laws may favour fast-fashion giants “Designers could not claim protection for any and all sweaters simply because they happen to make sweaters. But they can copyright the creative aspects of their work that make it different from the norm, such as a unique pattern,” says lawyer and Editor-in-Chief of The Fashion Law Julie Zerbo. “The reality is, in most cases, it's perfectly legal to knock off a dress design,” says Zerbo, which is why Amiri’s case against Zara resulted in being settled out of court as Zara made the case that the skinny jeans were “generic, ornamental and not distinctive” enough for Amiri to act on protectable trade dress rights, according to their legal representatives. In a similar instance, Nigerian designer Elyon Adebe found a replica of one of her crochet sweaters on SHEIN, the Chinese fashion brand that is the most-installed shopping app in the US; which seems to have copied the design and the colour scheme. The handmade garment was priced at $330 while the sweater on the e-commerce giant was priced at $17, catering to the Generation Z (aged 11 - 26) market that has largely contributed to SHEIN’s success. The copied sweater was removed from SHEIN’s website after Adebe posted about it on social media. The fact that many fast fashion behemoths are able to infringe, borrow or take inspiration from smaller D2C brands without much financial or social recourse leans toward a point made by Eleanor Rockett, author of the academic paper “Trashion: An Analysis of Intellectual Property Protection for the Fast Fashion Industry” published for the University of Plymouth, who said fashion is an industry “with copying at its heart” but further thickens the grey area when saying, “Intellectual property protection must strike the appropriate balance between inspiring innovation and restricting imitation.” She also references a theory that suggests copying spurs on innovation instead of stifling it, by saying that the more a trend or design goes viral, the faster it becomes irrelevant, in turn making for ripe conditions for more design innovation. European copyright law offers wider protections than in the US Rockett states how lax the intellectual property laws are in the US, which is supported by Zerbo’s thoughts above, and that the openness of them actually encourages copying and hastening the fashion cycle so that new designs can be made. In Europe, however, the requirements needed to be protected by copyright law offer far more coverage in the sense that there are only two requirements to meet: The design’s originality. It must be proven it is the creator’s own intellectual property The design must have the ability to be expressed in an exact and objective manner by an individual American law only offers protection if there are distinguishable features on the garment while European copyright law gives brands and designers wider protection. For example, in 1994, French luxury label Yves Saint Laurent (YSL) sued Ralph Lauren for copyright infringement. YSL’s dress was black, full-length, made of silk, had gold buttons, no pockets and a narrow lapel. The Ralph Lauren dress was black, full-length, made of wool, had black buttons, included pockets, and a wide lapel. YSL still won despite the dresses in question having unique characteristics, and took home €323,000. Are fashion and beauty brands blurring into a homogenous cauldron of shared originality? Shared originality - something that can’t quite technically exist but is tending to spread within fashion and beauty retail. Just this week, Nike sued Lululemon for patent infringement, accusing Lululemon of using some of Nike’s flyknit technology in their lifestyle sneakers. Although both brands produce sportswear and lifestyle shoes and clothing, their markets, branding, identity, ethos and marketing strategies are completely different; however, something that used to be a uniquely Nike product is now - kind of - Lululemons too. In addition, prior to this, Lululemon did not include any shoes as a part of their offering, making the fly knit look-alike their first venture into offering sneakers. In the past, Adidas has been accused of using fly knit technology in their Primeknit shoes too, adding fuel to the fire that proprietary designs and formulas that are used, borrowed or outright stolen make for a market that lacks individuality. While the shoes may not look similar, it is the fly knit technology patented by Nike in 2013 that Lululemonhas allegedly infringed upon, which is a knitted textile used in Nike's running shoes. Credit: @lululemon Instagram Credit: @Nikerunning Instagram Eventually, will everything look the same to consumers? Because branded items are losing their distinctiveness, consumers may opt for an item that looks similar to one they truly want, but is cheaper, thus increasing the competition within pricing. Brands are now not only competing on a product level, but on a pricing level because said products are becoming homogenised. The same can be said within beauty which has seen an explosion in market saturation in the last five years. If Chanel and MAC release liquid concealers within just a few months of one another that both offer pore-blurring technology, the product is no longer bespoke and the consumer can begin to choose a winning product on a price level, pushing forward the snowball effect that stepping on another brand’s proprietary technology only leads to a price war in the market. Although brand individuality is blurring, consumers can enjoy the unintended benefits When it comes to pricing, it works in the consumer’s favour when brands with similar products compete; keeping prices steady for shoppers. If there was no competition in pricing, there would only be monopolies; stifling opportunity and competition for new, smaller brands. When Andrea Saks from “The Devil Wears Prada” was on the receiving end of a scathing monologue from Miranda Priestley, played by Meryl Streep, for making a snarky comment about high-end fashion, she learnt that the “lumpy blue sweater” she was wearing wasn’t an exemption from the fashion industry, but very much a cog in the machine of it. Priestley's point was that fashion is not only cyclical, but shared, easily influenced and even more influential. Fashion is an industry full of brands and trends that either intentionally or unintentionally step on each other’s toes when it comes to designs, formulas or technology; all in the name of attracting and holding consumer demand. This is not to say that trademarks are up for grabs, and brands have the right to protect what they have built. Ultimately, the consumer must decide how they go about navigating the flock of brands that are all starting to look like doves and this is at times where dynamic pricing for D2C brands plays the biggest role for the consumer.

The Evolution of the Beauty Industry in 2023 and Beyond

Consumers who enjoy shopping from the beauty category have long been used to two main pillars to choose from: Luxury brands like Dior or Yves Saint Laurent, and drug store brands like Revlon, Essence and Catrice which...

Consumers who enjoy shopping from the beauty category have long been used to two main pillars to choose from: Luxury brands like Dior or Yves Saint Laurent, and drug store brands like Revlon, Essence and Catrice which are found in pharmacies. Recently, a third pillar, made up of new-age makeup and skincare companies such as Drunk Elephant or Fenty Skin, has arisen and shown intimidating potential to the status quo within beauty. However, alongside the wave of new beauty brands aiming to disrupt the industry with reformed ingredients and packaging policies, there has also been an increase in the number of famous actors, singers and social media influencers who have released beauty products and skincare lines, overwhelming the industry as a whole. It begs the question of if there is enough space for all of them to thrive. It also takes us to another point: Do we really need another celebrity beauty product? How are these new beauty brands different? And, are long-standing luxury brands affected by the hype about indie brands? Here is a look at how the world of beauty is doing in 2023 and beyond. The rise of celebrity and “Instagram” beauty brands For decades, the only association celebrities or supermodels had with makeup or skincare brands was the fact that they were the face of it: Kate Moss for Rimmel; Cindy Crawford for Revlon; or Beyonce for Neutrogena. Nonetheless, there was a defining knowledge amongst consumers that this was not their personal brand but simply an endorsement. Since around 2015, however, the rise of brands created and owned by celebrities include ranges from Kylie Jenner, Rihanna, Selena Gomez, Ariana Grande, Kim Kardashian, Jennifer Lopez, Victoria Beckham, Pharrell Williams, Kate Moss, Scarlett Johansson, Hailey Bieber and now even Brad Pitt and Travis Barker have entered the field. With a revenue industry expected to be $571 billion in 2023, endorsements and campaigns are no longer what celebrities want - they’re more interested in owning a piece of the billion-dollar pie that industry leaders like Kylie Cosmetics, valued at $1.2 billion, and Rihanna’s Fenty Beauty, valued at $1.4 billion, have managed to gain. Charlotte Palermino, a qualified esthetician and the co-founder and CEO of Dieux, a US skincare brand founded in 2020 that focuses heavily on sustainable ingredients and packaging, says, “It feels like there is almost no thought to the execution but that the main goal is to simply make money,” in reference to the haul of celebrity beauty brands. This trend has coincided with the growth of platforms like Instagram and TikTok that make for well-oiled machines that directly reach millions of consumers each minute of the day. The Instagram account for Fenty Beauty received more than 45 million engagements (likes, comments, shares) on its posts in the year of 2021 while the account for Kylie Cosmetics received over 64 million. And, remember, this is just one of the many social media platforms that celebrities are using to attract a loyal fan base for growth and revenue. Instead of paying for an expensive TV advert to run during prime time viewing, celebrities simply photograph, film and post from their personal and branded Instagram and TikTok profiles, which is not only essentially free to create but allows the everyday consumer into the lives and beauty routines of the ultra famous. For celebrities, this combination has catapulted their brands into the same stratosphere that long-time brands like Covergirl and L'oreal have existed in for decades in a short period of time. An Instagram beauty brand is not the same as selling on Instagram When we talk about Instagram beauty brands, we’re not simply referring to brands that are sold on the platform. Beauty has experienced a radical surge in new brands being born out of the Instagram era which means aesthetics, beautiful packaging, and even font selection are vital to the virality of a product. Instagram beauty brands are minimalistic, sleek, and colour-coordinated, with a focus on not trying too hard to impress. In addition, how strategic a brand is with their Instagram feed layout adds to the virality and legitimacy of it. Instagram brands have a larger focus on being photogenic so that consumers will want to follow and mimic their page, and ultimately buy their product. There is also a stronger focus on connecting to consumers on a deeper level by posting user-generated reels and tutorials to show how the product can be used by anyone at home. We see here how Fenty Skin, which is part of Fenty Beauty, uses a minimalistic design for the packaging and sticks to a particular colour scheme in their content strategy. Above is Beauty of Joseon, a Korean beauty brand that gained rapid popularity on Instagram between 2020 - 2022 thanks to its simplistic branding and cleanly-curated feed. Here we see Rhode, the skincare line from Hailey Bieber, which remains true to the ‘Instagram brand’ philosophy of uncluttered packaging, post-worthy selfies and lifestyle shots, a modern font, and a dedicated colour scheme. What new beauty brands are trying to get right Clean Beauty For decades, established beauty powerhouses have made little to no effort to improve their sustainability efforts and to answer questions on their animal testing policies. However, in the last five years, the trend of “clean beauty” has skyrocketed like a bullet out of a gun, forcing older beauty houses to contend with new, indie brands that make clean beauty central to their identity, marketing and long-term strategy. To be clear, clean beauty refers to products that are cruelty-free, vegan, sustainably made, and with ingredients that are safe for you and the environment. Beyond that, clean beauty may involve excluding ingredients like fragrance which can be irritating to the skin, as well as toxic ingredients that may be carcinogenic. Sustainable Production and Packaging Outside of the bottle, sustainability within packaging is a large focus for indie brands. However, it’s not as simple as ensuring your packaging is plastic-free or recyclable. Indie beauty brand leaders constantly have to walk the tightrope of creating a product that not only does what it claims to do, but remains within a respectable price range for consumers, all while having to factor in the cost of eco-friendly and ethical production processes, delivery, and packaging. Despite these challenges, new-age beauty brands have much stronger policies on eco-conscious packaging, using materials like paper, glass, airless packaging, and aluminium, compared to the global behemoths that have dominated beauty practices for the last century. Sustainability as a core element of a brand’s identity has also become essential to consumers, as a THG Ingenuity study shows that 74% of consumers are willing to pay for more for a skincare product that has sustainable packaging. Direct to consumer In 2023, the total amount of online sales completed in the beauty and personal care market is estimated to be 27%, and is expected to increase to 33% in 2025. Of that, 63% of online purchases will be done via a smartphone instead of a laptop by the same year. With this growth rate, more consumers are choosing to engage with a brand directly instead of heading to a large beauty retailer. It is no surprise, then, that most new-age beauty brands have started out with a D2C ecommerce-only model before even considering moving to brick-and-mortar retailers. They have bypassed the traditional ways brands would typically get lift-off within a market by recreating the rules for themselves. In this sense, D2C brands can receive first-hand data on what their shoppers like and dislike; they can pick up the pain points of the online shopping journey; and they have full control over their packaging and delivery practices. Should luxury brands be worried? Luxury brands have seen fads within beauty before when every celebrity from Britney Spears to Jennifer Lopez had their own fragrance in the early 2000’s, however, this trend was premised on a cultural obsession with celebrities, supermodels, tabloids and their lifestyles. In 2023, things are different: Two key factors for a successful beauty or skincare brand are transparency and authenticity. Actor Jared Leto told Vogue Magazine that he “has never been interested in beauty products,” and then released a body care line with 12 products. With new celebrity brands popping up at least once a month, consumers end up feeling overwhelmed, confused and frustrated facing a saturated market. As the up-and-down hype of a new celebrity brand comes and goes, consumers will want to turn to something trustworthy and made of quality, and this is where luxury brands have a chance to shine by reaffirming their relationship with consumers. Regarding indie brands such as Drunk Elephant, Dieux, Glow Recipe and The Ordinary, luxury brands may have to step up their efforts to be more sustainable and transparent about their production processes, who make up their C-Suite, how their packaging is made and more. For the most part, luxury brands have thrived on having an air of mystery and exclusivity about them which may no longer work for younger consumers. The more transparent you are as a brand, the more millennials and Gen Z shoppers, who make up the bulk of the consumer pool, will trust you.

Analysis: Prices on Zalando drop by up to 23% over Black Friday

Despite slow performance expectations for Black Friday 2022, retailers and marketplaces around the globe proved once again how well a shopping event like Black Friday can do - even in the face of record-breaking...

Despite slow performance expectations for Black Friday 2022, retailers and marketplaces around the globe proved once again how well a shopping event like Black Friday can do - even in the face of record-breaking inflation, energy and food costs. The small and medium tech and domestic products categories, such as TVs, toasters and headphones, showed the largest price drops while consumers wanting to make good use of the discounts arrived in full force with their wallets in hand. Results in the US showed a 2.3% increase in online sales compared to 2021. In the Netherlands, data from credit card translations and online sales showed a 12% increase in purchases while spending increased overall by 30% in the week leading up to Black Friday. As an event, the most successful retailers and online marketplaces like Zalando have learned how to get the most out of consumers and their vendors using competitive pricing strategies. As Omnia works to provide critical data and information to our clients to better serve their pricing approach and to increase their knowledge of online marketplaces, we’ve taken a look at how Zalando, one of Europe’s biggest online marketplaces, managed its pricing on Black Friday 2022, as well as before and after. Zalando’s pricing before, during, and after Black Friday Our team analysed 10,000 product prices on Zalando across multiple vendors within various categories, however, with a specific date range surrounding Black Friday, which took place on 25 November. As shown below, Zalando’s prices increased by 8% in the three weeks leading up to Black Friday, starting on 25 October. Then, there is a significant price drop by 18% on the 17th, signalling the start of Black Friday week. The decrease in prices reached its highest amount with a drop to an average price level of 85.5 % on Sunday, 27 November. This means that prices have fallen by 23% (compared to a pre-Black Friday level of 108%) in just one week. After Cyber Monday, prices returned to pre-Black Friday numbers which were still higher than prices in October. Price Level on zalando.de over time, Source: Omnia Retail Data Price Level on zalando.de: For the analysis, the prices on the first day of the observation on 25 October mark the reference point (100%). From there our data shows that the price level (on average for all observed products) is increasing until 16 November. A turning point is 17 November: From a price level of 108%, the average price level dropped to 85.5%, which marks a relative drop of 23%. To win the Buy Box, price became the top driver for vendors We have observed additional dynamics in the price-change frequency over the Black Friday period which leads us to believe that Zalando implemented repricing strategies to create a stronger sense of competition for the Buy Box: In our methodology, a price-change ratio of 0% means that the price never changes A price-change ratio of 100% means that a price always changed at any observation time stamp (which was every 15 minutes). A price-change ratio of 1.5% meant that a price would change once per day. Over the Black Friday period, this ratio climbed to 7% on average, meaning that the price would not only change once every 24 hours, but it would change once every 5 hours. Source: Omnia Retail Data Usually, to win the Buy Box, the top driver has never been about price: Over the same observation period, 25% of products had a maximum of one vendor change in the Buy Box and 7.4% of products had no change at all despite 56% of these products showing price increases. Even in the three weeks leading up to Black Friday, the Buy Box owner never changed for 28% of all products. This shows that, historically, price is likely not the main driver for winning the Buy Box, however, during Black Friday, Zalando’s pricing strategies brought pricing to the forefront as a top factor, instigating lower prices and stiffer competition. In the graph below, one can see Zalando’s Black Friday pricing strategy at play: Source: Omnia Retail Data Outside of competition scenarios, the Buy Box is less about price and more about convenience If price is usually not the determining factor for winning the Buy Box, regardless of competition scenarios, what is? Speed of Delivery Our data suggest that delivery times are vital to remaining in the Buy Box. To win the Buy Box, a vendor must have a maximum delivery time period of four days, which becomes even less when the number of vendors per product increases. In other words, the more competition there is for a certain product, the more important convenience becomes for the vendor and ultimately the customer. Availability of Stock As seen below, the Buy Box change ratio when all products are available is at 2.1%. However, when products are unavailable up to 24 hours, the change ratio doubles to 4.09%, showing just how vital availability of stock is to winning the Buy Box. As a vendor, it is essential to have consistent levels of stock, otherwise your chances of losing the Buy Box is much higher. Source: Omnia Retail Data Unlike Amazon, Zalando leaves competitors wondering about their Buy Box strategy As an online marketplace, Zalando’s focus remains within the fashion market, attracting 48.5 million active customers across 25 European countries, earning a revenue of €10.5 billion in 2020. Zalando claims not to have a Buy Box like Amazon in an attempt to distance itself from the image of a platform where prices change within minutes due to the high competition among vendors: “We do not want to enable a price war. Therefore, only one vendor offers a product. If more vendors offer the same product, convenience decides who is listed on the platform. This is calculated by an algorithm on the basis of factors such as shipment speed, trustworthiness and return speed. There is no pressure on price to win any kind of Buy Box,” says Zalando’s VP of Direct to Consumer Carsten Keller. Nevertheless, as a marketplace, Zalando opens its platform to third-party sellers just like Amazon does. According to their website, 800+ partners are active in their partnership model entitled “Zalando Fulfilment Solutions”. This means that, in some cases, more than one retailer, including Zalando itself, is offering a product on the platform. And this, as the above statement indicates, leads to a situation where the platform has to decide which offer is listed and shown to the end consumer. Finally, this is where we can speak of a Buy Box offer similar to Amazon’s, as the principle of a product being offered by multiple vendors on the same platform is the same. If Zalando is not open about its Buy Box strategy, how can vendors benefit from Omnia’s services? A vendor selling on Zalando is able to retrieve all available data from the platform into Omnia’s software as a direct scraping source. As the website does not show competitor prices, the data will nevertheless be useful to run an internal data analysis shedding light on what pricing strategies can be useful on Zalando. With Zalando as data source, the retrieved data can be used within different sets of pricing rules. Vendors need to have a robust pricing strategy for Zalando In times of high spendings, such as over Black Friday and the Christmas festive season, vendors need to prioritise a number of factors, from stock levels to delivery times, as well as competitive-based pricing to make the best of their real estate on Zalando. As seen from the above data, price is not historically the most important factor for Zalando’s Buy Box, however, Black Friday 2022 proved that the marketplace is willing to adjust its commercial values to create an environment where lower prices will result in more spending.

Christmas Gifting in 2022: A conundrum of efficiency, sustainability and capitalism

A large part of the festive season is buying gifts for friends and family, as well as ourselves, with the November to January period being retail’s most profitable and chaotic time of the year. With inflation and the...

A large part of the festive season is buying gifts for friends and family, as well as ourselves, with the November to January period being retail’s most profitable and chaotic time of the year. With inflation and the increased cost of living causing drawbacks in spending in the European and UK market since February, retailers and e-commerce players alike have been anticipating the gifting season to boost yearly sales and revenue. Something that retailers also have to contend with each year is new gifting trends, basket loading, and increased returns; creating a tornado where retailers try to meet consumer demands as well as keep their heads above water regarding returns and sustainability efforts. Ahead of the festive season, we’re exploring gifting trends, how e-commerce and brick-and-mortar stores can better manage returns, and other aspects of this time period. Gifting trends for 2022 Shopping and finding inspiration on social media Instagram, TikTok and YouTube aren’t just platforms for people to share their holiday photos and video tutorials. They’ve become multi-billion Dollar virtual businesses that push content using algorithms to make sales. Social commerce, as it is now called, is expected to be valued at $1.2 trillion by 2025. Users of the platforms are not only shopping from them, but they are using the platforms for gifting inspiration. The same way people use online reviews as a testing ground for a product, more and more consumers are using social media to research a product or brand. In fact, according to a Sprout Social report on the common ways people find the perfect gift, 40% of consumers are seeing organic posts from brands and another 34% are researching a product on the platforms. Limits on spending This year, the average consumer in the US and the UK will spend roughly €1,100 on holiday gifts, while shoppers in France, Germany and Spain will spend approximately €405 on gifts during this season. These numbers are still considerable, however, it is a far cry from what families used to spend in the years leading up to the pandemic. According to a new survey done by Retail Economics, 51% of shoppers are imposing spending limits on gifts for Christmas this year; while 90% of low income shoppers are setting limits as opposed to 68% of the most affluent shoppers. Personalised gifts After facing and surviving the life-and-death reality of a global pandemic, many people are turning to personalised gifts for loved ones to show how much they care. This includes engravings on jewellery, imprints of initials on leather items, sandblasted champagne flutes, handmade gifts and more. The personalised gifts market is set to grow by 7.8% per year over the next five years, reaching €36.9 billion in 2027. Who’s offering extended return policies over Christmas 2022? Because retail is so reliant on the festive season for hitting targets, moving inventory and making profit, shoppers have more power than ever when it comes to returns over Christmas and New Year’s; enjoying extended return policies. And, what many retailers and consumers may not know is that leniency on time actually reduces returns more than any other returns policy factor. Here are just some of the companies offering extended return policies: ASOS, an online clothing and accessories retailer, is giving shoppers up to 2 months and 10 days to return an item. If you shopped between 14 November - 24 December 2022, you have until 24 January 2023 to make a return. Amazon’s Christmas returns extension is from 7 October - 31 December 2022, offering shoppers up to 31 January 2023 to return. H&M allows purchases between 14 October 2022 - 3 January 2023 to be returned until 31 January. GHD, a global hair care brand, allows purchases between 1 October - 24 December to be returned until 14 January 2023. Patagonia has no deadline for purchases being returned. Banana Republic allows returns for purchases made between 1 November - 31 December 2022 to be returned until 31 January 2023. Ralph Lauren’s extended returns policies allow purchases Investing in technological upgrades can reduce the rate of returns The process of a shopper returning an item has never been an easy and affordable part of the logistical chain. For many years, the industry-standard of offering “free and easy returns” has fulfilled consumer demands, however, it has left an ever-increasing hole in the pocket of D2C brands and retailers; so much so that global brands are ushering in a new era of limited or charged returns. In recent weeks, Zara, J. Crew, LL Bean and Dillard’s in the UK began charging a fee for mail-in returns, while Kohl’s in the US has stopped paying for a return’s shipping costs. CNN Business reports that some retailers are considering refunding shoppers for their return and letting them keep the item because the cost of a return is too much. In addition, these same retailers don’t necessarily want returned stock because they have mountains of excess inventory already, from gym apparel to home decor. In the US alone, the cost of shipping returns amounted to $751 billion, according to the National Retail Federation, while the number for online shopping alone is $218 billion. Although free returns remain a top factor for choosing a particular retailer, some consumers are enjoying the Black November discounts and the extended returns policies so much that they’re ordering one item in various sizes or colours, such as a coat in medium and large, and then logging a return on the size that doesn’t fit. This practice is called “Bracketing” and it is the result of shoppers taking advantage of free returns; not trusting sizes online; or opportunistically buying an outfit for a single event and then returning it (which is also known as wardrobing). If every shopper did this, retailers would be paying for one return on every order with their free returns policy. On average, the returns process costs twice as much as the delivery process, making bracketing and wardrobing unsustainable for a business and even more so for the environment. So, how can retailers minimise the cost of returns? The obvious reason would be to start charging for returns, which would cut down on bracketing and wardrobing significantly. However, the less obvious choice that also improves the customer experience would be to invest in technological and informational upgrades on products online. Dr. Heleen Buldeo Rai, an author and researcher at the Vrije Universiteit Brussel in Belgium, who has researched and written extensively on the topic of sustainability within e-commerce, shares in a literature review entitled “Return to sender? Technological applications to mitigate e-commerce returns” that using internet-enabled tools and data analysis to improve product information may result in fewer returns. For example, some D2C beauty brands are making use of an AI tool that allows a buyer to take a photo of their skin tone in real-time to match it with an exact shade of foundation. A case study Dr Buldeo Rai references sees online clothing stores in China make use of virtual fitting rooms where you can try on an item of clothing using an AI model with your personal measurements. In this case study, returns decreased by 56.8%. Other technologies include colour swatches, video product reviews, and zoom technology, which has shown that just one unit increase of zoom usage leads to a 7% decline in the odds of a consumer logging a return. By focusing on improving the customer experience with technological upgrades and features, fewer returns will result in lower overhead costs and a lower impact on carbon emissions. Christmas spending may be lower in 2022, while a better returns system is on the horizon Christmas shopping in 2022 is not expected to be as abundant as previous years due to ongoing inflation and increased living expenses, however, retail can still expect shoppers to make good use of discounts, extended Black November sales, free shipping and free returns. As a pull-in for customer loyalty, it is understandable why retailers would want to keep free returns as an option. However, unless retailers and e-commerce pure players prioritise a new customer experience to reduce returns, it will continue to be an expensive headache, totalling $642 billion per year as it currently stands. Overhauling the returns process will also improve retailers’ environmental impact. A study conducted by Dr Buldeo Rai shows that just under 80% of consumers are willing to wait longer for a delivery or to collect their own purchase. With this kind of information, retailers can offer better delivery and returns options that are easier on their pocket and the environment.

Black Friday 2022: Our predictions and recommendations

Each year, avid shoppers look forward to the annual Black Friday shopping event, which kicks off the holiday gifting season, where brands and retailers reduce prices on items from electronics to jewellery to levels that...

Each year, avid shoppers look forward to the annual Black Friday shopping event, which kicks off the holiday gifting season, where brands and retailers reduce prices on items from electronics to jewellery to levels that inspire crowds in their thousands. Around the world, shoppers who may not be able to afford certain products, or feel that they are getting a better deal than the usual price, can now make a purchase, or a consideration at least. Consumers who find shopping for items like dishwashing liquid a tedious task may buy in bulk on Black Friday to avoid it being on the shopping list in future, which is also known as pantry loading. Whichever category consumers fall into, Black Friday attracts people from almost every socio-economic background, making it retail’s favourite day of the year. As we await Black Friday in 2022, which officially falls on 25 November, it takes little effort to see that this year’s event may be quite different to that of previous years, considering record-high inflation has hit Europe in the jugular since the start of the Russia-Ukraine conflict. Despite mixed reports on how this year’s Black Friday will go, Sander Roose, CEO and founder of Omnia, predicts there will still be many retailers and brands who are aggressive in their discounting strategy for the fact that they are holding excessive stock and, quite possibly, because they feel inclined to discount heavily as they know they are dealing with inflation-stricken consumers. However, some studies are showing consumers to be spending more now than before the arrival of Covid-19 as people grapple with surviving a life-and-death reality. Let’s take a look at this year's Black Friday predictions in comparison to previous years, and if high inflation is a strong enough deterrent for consumers. Market predictions for Black Friday in 2022 London-based e-commerce researchers IMRG have found unimpressive results in their data collection. Previously, over the years, IMRG has found that Black Friday is the pinnacle of retail’s fourth quarter trading period. In 2022, it is estimated that not only will Black Friday not be as abundant as previous years, growth estimates are at -5% in comparison to 2021. The clothing, home, beauty, garden and electrical markets are not expected to see any growth this Black Friday. Other than inflation and low confidence in the economy, there’s another factor influencing Black Friday spend this year - the FIFA World Cup. Some retailers predict that a global focus on the games may negatively impact shopping on Black Friday weekend, with 34% of 118 retailers thinking it will reduce shopping, according to an IMRG survey. However, if retailers and e-commerce stores are smart, especially those in clothing, sporting apparel and electronics, they should see this global event as a golden opportunity for them to curate their marketing, deals and the customer experience to include the World Cup theme. Regarding the general feeling towards Black Friday from consumers, a survey from Zendesk gives a more positive outlook, showing that 4-in-5 consumers are more excited than ever for this year’s Black Friday and that the increases in living costs are propelling them to bigger deals and discounts. This behaviour isn’t new, suggest Dan Thwaites and Patrick Fagan, who are the founders of Capuchin Behavioural Science. "A rise in stress, or mortality salience, has been equated with a rise in purchases of ‘escape products’ such as beer or status products like luxury watches, reflecting the thought, often ascribed to Epicurus, ‘Let us eat and drink, for tomorrow we die,’” says Dan. However, consumers should be wary of spending brashly, as a new investigation by consumer watch group Which? found that 9-in-10 Black Friday items on special were the same price or cheaper in the six months prior to the shopping event. Comparing the EU, UK and the US Despite inflation and higher living costs, Europeans have experienced an overall increase in their purchasing power-, or expandable income, since 2021 due to the reopening of economies, businesses and tourism. GfK’s study on the average purchasing power per person per year in Europe sits at €16,344 - an increase of 5.8% compared to last year. However, there are giant differences between some countries regarding their spending abilities. For example, Liechtenstein’s purchasing power per capita is €66,204 while Ukraine’s is €1,540, so although spending abilities have improved, not every European may be seeing or feeling it. This is evident in the year-on-year decrease in holiday spending in specific European countries, which includes Spain, whose purchasing power was below the continental average: Source: Statista 2022 Filip Vojtech, a geo-marketing expert at GfK predicts that the increase in purchasing power amongst Europeans may not necessarily translate to retail purchases this Black Friday and the festive season, as the uncertainty regarding inflation and high energy prices is keeping many Europeans conservative with their money. In Germany, for instance, Horizont reports that Black Friday shopping is expected to be low this year, as consumers are more interested in saving. If bargain hunters do shop, 76% of them want to place a larger focus on planned purchases and price-centred campaigns, instead of hurried buying for the sake of buying. In the UK, the same IMRG study found that 47% of retailers believe that the stress of increased cost-of-living is enough to deter shoppers from eagerly shopping on Black Friday weekend. However, another 43% of retailers said that today’s higher bills will actually pull consumers into Black Friday spending so that they can make good use of heavily discounted products. Nevertheless, the spending will be less spontaneous and more considered. In this instance, we could say that the state of consumer spending on Black Friday in the UK may look similar to Europe. Source: Statista 2022 US consumers provide a unique - albeit complex - case. McKinsey reports that, although they are concerned about inflation and have historically low confidence in the economy at the moment, American shoppers are also showing eagerness to spend and have remained robust and confident spenders in the last few months, as retailers like Home Depot and Walmart have reported. American consumers are also expressing a higher sentiment for the holiday season this year than they have in a few years. The Consumer Pulse Survey conducted by McKinsey shows that 55% of US shoppers are excited about holiday shopping, which traditionally begins with Black Friday, and have the savings to spend. In addition, consumers across the Atlantic are so excited about holiday spending that their usual wait for Black Friday specials is creeping back a few weeks with 56% starting their spending in October. Black Friday: What’s selling, who’s taking part and who’s not in 2022 Lower volume sales means bigger discounts As Sander predicted, certain categories have experienced lower sales this year than they had planned. This is due to an overwhelming global demand starting in 2020 that retail leaders thought would spill into 2022. However, global demand for items from e-bikes to washing machines has slowed down, and retailers will be ambitious to discount considerably. Products in the luxury small domestic appliances (SDA) category, like a Nespresso coffee machine, and products in the luxury major domestic appliance (MDA) category, like a SMEG gas stove, will likely not see major sales this Black Friday, which is not surprising since their popularity this year has been lower and in decline compared to 2021. However, because their volume sales have been low this year, these are the items that retailers will be desperate to get rid of and will likely have the biggest discounts. GfK says that standard and basic SDAs like TVs and cordless vacuum cleaners, which have already received a 15%-plus price cut this year, will be the biggest targets for larger discounts this Black Friday. Products in the tech and electronics category, such as headphones, smart watches, bluetooth speakers and more, will also see the biggest discounts, as reported by the New York Post. High-income earners won’t feel the pinch Despite 43% of global consumers believing now is the time to pull back on non-essential spending rather than jump straight in, high-income earners who aren’t necessarily affected by inflation and high living costs will still continue to enjoy Black Friday spending like previous years. Premium products in the luxury domestic appliances category mentioned above will still be supported by premium buyers. Gen Z has higher demands for Black Friday discounts Black Friday is retail’s favourite day of the year to get rid of stock at drastically low prices, however, some age groups, like Gen Zers (born 1997 - 2012), require retailers to offer a minimum of 41-50% of a discount for them to want to participate. The other, older age groups - Millennials, Gen X and baby boomers - require between 21-30% of a discount to consider shopping. This may be so for two reasons: The more obvious reason is that Gen Z shoppers are often in high school, in university or have recently entered the working world, meaning their expendable income is lower than the older age groups. The less obvious reason, which took some research on our behalf when looking at Gen Z’s buying behaviour, is that Gen Zers are far less concerned with fitting in when it comes to shopping, and prefer choosing a brand that separates them from the crowd, unlike Millennial shoppers. They are also more likely to spend money on a brand that values authenticity and sustainability. Typically, it is large-scale retailers and global brands that dominate Black Friday offerings, and not the smaller, lesser-known companies who are not focused on pushing inventory and creating a product at the cheapest price possible. A product would, therefore, need to be heavily discounted for the average Gen Z shopper to consider buying it. FOMO (Fear of missing out) and ego-boosting behaviour From a psychological point of view, Dan and Patrick share that events like Black Friday trigger emotionally-charged consumer behaviour. We may still see confident spending from consumers who are simply shopping because they feel they might be missing out if they don't. "The thought of deals disappearing triggers this fear of loss, making us feel we have to act,” says Dan. “Simply making something look like a sale can be enough to trigger the behaviour,” Dan continues, such as using the colour yellow which has been studied as being an influential colour for discount offers. “Even though the product is no cheaper, people buy more. This is due to representativeness bias. If something looks like a duck and sounds like a duck, we think it’s probably a duck. Same with discounts - even if they’re actually not.” When one does in fact find a good deal after doing some research online, consumers tend to feel as if they have “gotten one over the store,” as Mark Ellwood says, author of Bargain Fever: How to Shop in a Discounted World. “And it's also really fun. You didn't know it was dopamine surging through your brain. But you still come out of the store, and you're grinning, and you're thinking, 'That was amazing.' We should have that moment all the time,” continued Mark to CBS News. This sentiment is further expressed in the academic paper “The Excitement of Getting a Bargain: Some Hypotheses Concerning the Origins and Effects of Smart-Shopper Feelings" by Robert M. Schindler from the University of Chicago who says that “Just as ownership of a product may have many different types of consequences, so also there may be different types of consequences resulting from the price a consumer pays. This includes the implications which a price may have on the consumer's self-concept. Paying a low price for a particular item might lead a consumer to feel proud, smart, or competent.” In the name of sustainability, some brands are giving Black Friday a miss In an effort to sway shoppers from shopping in excess or to encourage them to focus on recyclable materials, some global brands are not offering Black Friday sales, while some have created their own spin on it. Ikea launched a campaign called #BuyBackFriday which asks customers to bring their used furniture for resale instead of throwing it away. Fjällräven, a bag and outdoor apparel brand, uses the event to remind people who long-lasting their products are, instead of hyping people up to buy another coat. Shoe brand Allbirds actually increased their prices on Black Friday in 2021 by $1 and gave the money from each purchase to Fridays for Future, an organisation focused on climate change. Monki, which owns H&M, will not be offering Black Friday specials at all. Black Friday becomes Black November To lure in foot traffic or to get rid of stock volumes; either way, global brands and retailers (both online and offline) have extended a one-day event into days and weeks of Black November specials. Globally, we see that the annual shopping event began changing years ago, with the introduction of Cyber Monday at first, and then the rapid move to online shopping during Covid-19 lockdowns. For the first time ever, in the US, during 2021’s Black Friday event, there was a decline in year-on-year growth by $100 million. This may be because 49% of consumers took advantage of the earlier specials on offer throughout the month of November, according to the America National Retail Federation. In addition, the total number of Black Friday weekend shoppers fell from 186 million in 2020 to 179 million in 2021, showing again how consumers are choosing to enjoy discounts and deals earlier on. Specifically, Target launched their Black Friday sales in mid-October - more than one month before the official event. Amazon teased shoppers with its October Prime Day, a warm-up to Black Friday. Adidas and Nike launched their strategies more than a week before the event, offering between 15-50% off. How can retailers make the most of this year’s Black Friday? Start your Black Friday deals earlier As mentioned above, the Black Friday festivities are beginning in early November and sometimes in October. According to a PwC study, 43% of shoppers choose the earlier Black November deals to ensure items are in stock. Another 37% shop earlier to make sure their purchases are delivered in time for the festive season; and 31% do it to avoid the large crowds. Introduce dynamic promotions With dynamic promotions, you are constantly (and automatically) surveying and evaluating your competitors’ prices and your volume sales, even throughout the chaos of a sale, so that your promotional strategy maximises revenue, maintains competitiveness among the sea of Black Friday sales, and better moves inventory from warehouse to consumer. Treat this year’s event as a test one can learn from Although each year is proving to be different, it would be wise for brands and retailers to look at their marketing and promotional strategies to see what worked in 2021 and what didn’t. Going forward, each year should be treated as a study that can be learned from. Optimise the in-store and online experience In-store digital media, additional discounts for shopping online, multiple delivery options, email sign-up discounts, stock volume and delivery updates… There are many ways to help consumers enjoy their Black Friday shopping experience even further. Consumers tend to remember the brands that went the extra mile in creating a positive shopping experience. Take the opportunity to cross-sell to increase revenue Specifically for retailers in clothing, sports apparel and electronics, creating bundles of products that compliment each other may drive up revenue and entice shoppers to spend. For example, creating a Black Friday bundle discount on a smart watch with wireless earphones; running trainers with exercise equipment; winter coats and boots; and so on. Lessons for Black Friday 2022 Although there are remaining questions on shopper turnout for this year’s Black Friday weekend, one thing stands firm: Retailers and brands are ready to offer big discounts on sitting stock, with the largest deals taking place in the tech, electronics and domestic appliances categories. This strategy rings true across all major markets, including the EU, US and UK, despite the US showing the highest levels of consumer excitement around Black Friday shopping. In the EU and UK, inflation and high living costs remain a potential blockage for retailers to experience the shopping rush of Black Fridays in the past.

Price Points Live: How retailers can benefit from understanding consumer psychology

In the last few months, the EU has experienced inflation at a high of 10.1% as well as a slight economic recession, as predicted by ABN AMRO Bank’s Senior Economist Aline Schuiling. So, with unprecedented inflation...

In the last few months, the EU has experienced inflation at a high of 10.1% as well as a slight economic recession, as predicted by ABN AMRO Bank’s Senior Economist Aline Schuiling. So, with unprecedented inflation following a global pandemic, how can retailers tap into new ways of understanding consumer behaviour? This is where Dan Thwaites and Patrick Fagan, co-founders of Capuchin Behavioural Science, come in. Influencing the consumer’s mind to choose one product over the other, or to spend more money instead of less, is a tricky tightrope to walk on. In this article, which forms part of our in-depth view on each topic discussed at our Price Points Live event last month, we will discuss how data-driven and science-backed techniques regarding consumer psychology can benefit retailers and e-commerce players. Strategies for success: How small but impactful moves can influence consumers There are a number of ways to influence buying decisions and, under certain conditions, retailers can actually get consumers to spend more. Certain nudges and strategies, which are simple and easy to implement in nature are referred by Dan and Patrick themselves: The Decoy Effect This is a technique used by retailers to push consumers toward two product options that are similar in value (such as a microwave) by introducing a third one as a decoy that is much more expensive. Adding a decoy is considered “a violation of rationality” by introducing cognitive bias against it. Consumers are pushed toward the other two options without even knowing it. Academic Dan Ariely shared in his book Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions a study he did to show how well the decoy effect works. In his experiment, he presented three options for a subscriptions to his students to choose from: Online-only access for $59.00 a year Print-only access for $125.00 a year (the decoy) Online and print access for $125.00 a year 16% of the students chose the first option, none chose the second option, and 84% chose the third option. Ariely then removed the decoy option. Even though no one selected the second option in his earlier experiment, this time with only two options, the results showed a considerate shift. When given only two options, 68% of the students chose the online-only access for $59.00 a year, and only 32% chose the online and print access option for $125 a year. The Anchoring Effect This is a little more complex than the decoy effect, however, it is still geared towards creating cognitive bias by steering a consumer to a certain product or brand or price based on the belief that it is the best option. Certain information is presented to the consumer to which they become anchored to. This is done intentionally. For example, if a retailer was conducting research and asked how much a consumer would pay for a smoothie that had collagen production ingredients in it, the only information the consumer would have to go on is their previous experience with buying smoothies, because they wouldn’t know what the cost is for collagen-inducing ingredients. Or, perhaps a retailer is wanting to push sales for a new waffle-making machine and it is marketed as having cutting-edge technology for perfectly shaped waffles with new mechanics to prevent spills or messing. Consumers may latch onto the idea of something being “new and improved” versus previous experiences with older machines. The Precision Effect Does €4.99 look less expensive than €4.00? A number of studies and papers have been written about this theory, including the journal paper entitled “The Price Precision Effect: Evidence from Laboratory and Market Data” in Marketing Science by Manoj Thomas, Daniel H. Simon and Vrinda Kadiyal from Cornell University. These academics coined the term “the precision effect” which ultimately suggests that prices with rounded numbers, such as €20.00, look larger - or more expensive - than €25.55 for a product. In addition, one of their studies found that homeowners spent more money buying houses when properties were listed with rounded numbers. The precession effect can be used by retailers to increase sales and ultimately improve turnover. Nudging consumers means understanding buying behaviour During times of economic difficulty, retailers need to dig deep into the pockets of creativity to connect with concerned consumers and to sustain profit and growth. Consumers are the beating heart of retail and e-commerce and understanding how they think, feel and spend during times of financial success as well as financial stress is pertinent to e-commerce’s survival. Using these strategies shared by the Capuchin co-founders, as well as many other nudging tactics, can be a game-changing move on the part of the retailer in surviving inflation or any other global phenomenon. The entire recording of the event can be reviewed here.

Price Points Live: Inflation is set to decrease to 2% in 2024

With inflation being the number one issue on the minds of business owners, economists and consumers alike, it was no surprise that the topic was first on the list during Omnia’s annual Price Points Live event, which...

With inflation being the number one issue on the minds of business owners, economists and consumers alike, it was no surprise that the topic was first on the list during Omnia’s annual Price Points Live event, which took place in Amsterdam a few weeks ago. In a series of articles, we will share an in-depth view of the event’s topics, starting with inflation, and then including consumer behaviour and psychology, sustainability in e-commerce, and pricing and profit. Sharing her knowledge and predictions regarding current and future inflationary trends, Aline Schuiling, who is the Senior Economist Eurozone at Group Economics of ABN AMRO Bank, explained how the ECB (European Central Bank) predicts and calculates inflation and what the EU can expect in the coming years. Trajectories for inflation show a confident decrease Aline’s inflation predictions for the next few years show that Europe can expect a decline in inflation and will rest at 2% again by 2024. This prediction is supported by a study conducted by Statista, which shows that inflation will remain at 2% from 2024 - 2027. In addition to a positive outlook regarding inflation, GDP growth for 2022 had a better result than expected: Annual GDP growth is expected to sit at 3.1% and in 2024, it’s expected to sit at 1.9% growth. Thanks to a resurgence of tourism, the easing of bottlenecked supply chains and the lowering of energy and food prices, these short-to-medium term projections should instil more confidence in the markets and the economy. When calculating inflation, Aline assures that numbers are derived from comparisons to the previous year. “For example, in the first few months of the pandemic in 2020, inflation was actually in the negative. Then you see prices start to go up later on and then inflation starts to increase. Why? Because it is compared to the year before when inflation was actually in the negative,” says Aline. In the table below, we see Aline’s point, in addition to the contribution of food and energy price surges, as mentioned above. Despite support from governments, recessions in the EU and UK are likely At its worst time, inflation in the EU reached 10.1%, which has had a detrimental effect on consumer spending and behaviour, confidence in the markets and overall GDP growth. Due to this, a number of European governments have tucked into their coffers to support economies (households and businesses) affected by the energy crisis. Notably, Germany leads by spending 6.5% of its GDP on energy support, while the Netherlands has spent 4.8% and Italy has spent 3.3%. France has capped the prices of gas and electricity to 6%. Despite these efforts, Aline reports that consumer confidence has been the lowest ever since the financial crash of 2007 - 2008: Source:Source: Refinitiv, ABN AMRO Group Economics Inflation & central banks by Aline Schuiling, Price Points Live, 13.10.2022 In addition, a slight recession is expected in the third and fourth quarters of 2022 and the first quarter of 2023 in the EU and UK, despite decreasing inflation. However, the US will experience a slightly stronger economy as well as a larger bump up in 2023. Source: Refinitiv, ABN AMRO Group Economics Inflation & central banks by Aline Schuiling, Price Points Live, 13.10.2022 For price setting behaviour, these predictions matter Although some of these expectations don’t look overwhelmingly positive, central banks, businesses, retailers and e-commerce players rely on these predictions for setting prices in the near and far future. This, in turn, affects the consumer. It is vital for all businesses to be aware of these changes and on top of what the ECB expects for the Eurozone economy. Retailers who have a quick and confident response to high inflation not only survive but thrive in the years to follow: “The most resilient retailers were able to drive 11% annual growth in total return to shareholders”, McKinsey reports, between the years of the Great Recession of 2007 - 2009. This number was five times higher than their peers through to 2018. Within e-commerce and retail, there is an opportunity here to test one’s robustness. After all, if brands and retailers want to ensure long-term success, they must develop sound strategies for difficult periods and inflationary challenges. The entire recording of the event can be reviewed here.

As retail awaits higher spending this festive season, brick+mortar enjoys a comeback

Inflation may be the top-of-mind issue for retail and e-commerce players alike, but a new and surprising trend that should maintain morale and a robust attitude is seeing the sharp decline in store closures in the US...

Inflation may be the top-of-mind issue for retail and e-commerce players alike, but a new and surprising trend that should maintain morale and a robust attitude is seeing the sharp decline in store closures in the US and UK. In addition, the holiday season is set to bring increased spending compared to 2020 and 2019, despite an increase in the cost of living and a decline in confidence in the markets. Adobe Analytics expects global holiday season shopping to reach €938 billion this year, making the festive season retail’s favourite time of year. Omnia takes a look at why brick-and-mortar is experiencing a smoother ride versus previous years, and what we can expect for 2022’s holiday spending. 2022 is the year brick-and-mortar rallied Two years into the global e-commerce boom that has been predicated on Covid-19 lockdowns and stay-at-home restrictions, e-commerce players have been taken aback by the sky-rocketing growth - and matched demand - for shopping online. However, now that most of the world has opened up and lockdowns are a thing of 2020, pent up demand from consumers has resulted in another trend: Brick-and-mortar stores are seeing more openings since pre-pandemic levels in 2019. Today, store openings in the US and the UK are higher than store closures, showing a surprising reversal in the years leading up to 2020. Coresight Research has tracked retail store openings and closures in the US and has seen a year-on-year 55% decrease in store closures from September 2021 to 2022. Some of the factors include overwhelming demand from consumers to get out and shop; higher demand for premium real estate spaces, such as in Manhattan, and financial incentives for tenants during the pandemic when real estate was floundering. In the US alone, 2022 has seen 5,000 new store openings, including brands like Hermes, Gap Inc and Deichmann. In the UK, PwC reports that store closures have significantly slowed down since 2020 and 2017 with an average of 34 closures per day in the first half of 2022, compared to 61 per day in 2020. Despite the successes of brick-and-mortar stores this year, the reasons and conditions for its success can’t be expected to last. As consumers return to normal, pre-pandemic life, the desire to shop won’t last, especially since inflation is the highest it's been in the US, UK and the EU in decades. In addition, since demand for high-end retail spaces has reached bidding war levels, rent will increase and financial incentives won’t be on offer anymore. For the upcoming holidays, e-commerce and brick-and-mortar will receive a welcomed boost among inflation Retail’s favourite time of year is around the corner, and festive season decorations, deals and promotions are already filling Instagram timelines, shopping aisles and Bol.com carts. With a whirlwind last two years dealing with unpredictable markets and evolving consumer behaviour, one thing remains a sturdy, reliable bench for retail to rely on: Holiday spending. Consumer spending is expected to see an increase in 2022, which bodes well for brick-and-mortar stores as well as e-commerce shops. PwC reports that consumer spending for the upcoming holidays in December will increase by 10% when compared to the same period in 2019 - the very December that saw some of the very first cases of Covid-19. Spending will increase by 20% versus spending in 2020. What else can we expect from consumers this festive season? An average of €1,472 will be spent this holiday season, which includes gifts, travel and entertainment An average of €777 will be spent on gifts; €465 on travel; and €230 The highest spender is expected to be a young male living in the city Consumers will spend more money on themselves this year as well as their families compared to previous years In terms of age groups, millennials (approximately 24 - 40-years old) will spend the most, at an average of €1,878 while Brands with loyalty cards, programs and credit cards can expect 79% of millennials to use them for their associated brands Household annual earnings more than €123,000 will likely overspend on their holiday budget by 15%, taking their holiday spending to an average of €2,840 - double that of the average mentioned above A majority of of consumers, 41%, will wait until late November for the best holiday deals The ever-surprising consumer If there’s anything retail can learn from consumer behaviour this year, it’s how resilient and robust shoppers are, despite rising living costs and a changing retail landscape. One of the attributes of the improvements and predicted successes discussed in this article are the attitudes and motivations of consumers, which remain unpredictable in the best way possible. As retail heads into the holiday season, and brick-and-mortar store openings remain steady, consumers will be watched closely for the next trend in offline and online shopping.

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