Price Points by Omnia Retail
04.06.2025
How Tariffs Shape Consumer Behavior and Brand Loyalty
Economic headwinds are nothing new in retail, and like past crises, they’re pushing retailers and brands to recalibrate pricing strategies. Today’s market shifts, driven by imposed tariffs, go beyond cost absorption,...
Economic headwinds are nothing new in retail, and like past crises, they’re pushing retailers and brands to recalibrate pricing strategies. Today’s market shifts, driven by imposed tariffs, go beyond cost absorption, signaling deeper changes in consumer psychology and calling for strategic pricing that protects both margins and market share. Tariffs are changing how consumers spend, but not in the same way across the board. While some delay non-essential purchases, others continue investing in small luxuries and wellness. Consumer behavior is shifting, brand loyalty is under pressure, and the key for retailers lies in understanding these nuances and responding with transparency and pricing precision. The Impact of Tariffs on Consumer Behavior While tariffs shift price points, they also reshape how consumers perceive value, necessity, and brand loyalty. This shift goes beyond basic price sensitivity, it reflects changing priorities across customer segments. Current market research provides interesting shifts in spending behavior: More than 8 in 10 consumers are changing their shopping behavior due to tariffs. Price increases are prompting a broader reassessment of brand loyalty, essential products, and perceived value. 23% of consumers are delaying purchases of non-essential items. And around 48% of consumers are actively seeking out discounts to offset price increases. However, more than 68% of loyal customers say they would continue buying from brands they trust, even if prices increase. Also interesting, EU consumers continue purchasing “daily luxuries” despite economic pressures. This includes fitness wearables, beauty products, or appliances like espresso machines. These statistics show that tariff-induced behavior changes aren’t uniform across your customer base. And the question “How will a price increase impact our customers?” has a complex answer that varies by industry, product category, and market position. While economic theory suggests that tariff consumer surplus decreases as prices rise, actual consumer responses are more nuanced than models predict. Brand Loyalty and Trust are Under Pressure Loyalty paradox: When prices rise, loyalty does not always follow. Perhaps the most significant consequence of tariff disruptions is the fundamental shift in how consumers relate to brands during economic pressure. Brand loyalty during an uncertain period faces complex challenges. While there is a large number of consumers willing to switch brands with any price increase or delay purchases of non-essential items, 72% of shoppers say they would stay loyal to brands they love and trust, even if it meant paying more. But that loyalty has limits. Especially among younger consumers like Gen Z, cost-consciousness often wins out. A growing number actively hunt for discounts and promotions, particularly on non-essential items. Want to find out how Dynamic Pricing works for your industry? Schedule demo Transparent pricing can be a strategic advantage during uncertainty The saying “Once trust is broken, it can take a long time to heal” is also true for your customers. Trust erosion can be softened by more transparent pricing communications It is worth noting that a third of shoppers say price increases aren’t communicated clearly enough, and trust is fragile. And with over 60% of consumers unsure how tariffs actually affect pricing, the bar for transparency has been raised. Because of these factors, effective communication of price changes should be a non-negotiable. Communicating how and why prices rise can help brands and retailers offset loyalty disruption, retain trust, and strengthen the brand. The impact of supply chain disruption on loyalty The tariff impact on supply chain operations creates secondary effects that influence consumer behavior beyond direct price increases. When tariffs disrupt established supply chains, consumers experience availability issues and quality variations that amplify their reactions to price changes. For pricing teams, this means price increases may trigger more severe loyalty challenges when accompanied by product inconsistency. In this case, transparency about supply chain disruptions can, again, help strengthen your brand and cultivate loyalty. Spend or Save? Segmented Pricing in a Volatile Market Yes, price sensitivity is growing, but so is intentional spending. Despite many consumers changing spending behaviors due to economic uncertainties, premium segments continue showing remarkable resilience in certain categories. Personal health and wellness, for example, have been more important to customers than ever, as recent data from McKinsey shows. And despite macroeconomic volatility in the first half of 2025 due to tariffs, the wellness category has been resilient. Over 80% of consumers state that wellness is a “top” or “important” priority to them, and with steady yearly growth, the global wellness industry is expected to hit $8.9 trillion by 2028. Besides health and well-being, other products like apparel, beauty, and footwear were among the top “splurge-worthy” categories of consumer goods. However, there are clear generational differences in what European consumers consider worth spending their money on. Source: McKinesey Demonstrating that even during tariff disruptions, some consumer segments maintain or even increase spending on products they value highly. For pricing specialists, this means you cannot implement flat pricing strategies across your entire product range. Instead, you need to develop segment-specific approaches that recognize the different price sensitivities and value perceptions across your customer spectrum. Strategic Framework: Implementing Segment-Specific Pricing Logic As we saw in the above data, consumer reactions vary dramatically by industry, location, and age group. This requires developing segment-specific pricing architectures rather than uniform approaches. Here is an example of how customers can be segmented: Consumer Segment Behavioral Indicators Pricing Strategy Value Hunters Highly price sensitive, will switch with any increase Anchor key SKUs, offer bundles, message savings, and list on price comparison platforms. Selective Spenders Buy fewer items, but prioritize quality Maintain premium pricing on emotional purchases, develop “affordable luxury” options at key price points, and add small-value upgrades. Premium Persistent Continuing high-end purchases Maintain or selectively increase prices, enhance exclusivity messaging, and develop premium service add-ons Brand Agnostic Actively seeking better value Implement competitive price monitoring, develop strong price-to-value messaging, and create switching incentives A segmented approach can allow you to maintain overall margin targets while strategically protecting market share in key segments. An effective implementation requires: SKU-level analysis to identify products with different elasticity profiles Segment-specific pricing rules in your pricing system Tailored promotional strategies for each segment Differentiated communication approaches by segment Develop a Tariff-Specific Price Communication Framework By the time most teams buy pricing software, they’ve already spent a long, long time just getting to the starting line. The internal alignment, data prep, the back-and-forth, and the vendor research. It all adds up. But the buyers who move through this process with the most clarity usually share one thing: they’re not chasing the perfect tool, but looking for the right fit. That means aligning internally before evaluating externally. Asking sharper questions instead of longer ones and seeing the vendor relationship as part of the product, not just the contract that wraps around it. Pricing software plays a central role in how you operate, compete, and grow. The buying journey should reflect that, but it doesn’t have to drag. With the right structure and a clear sense of what matters most to your team, the process gets easier. And the decisions get better. As we discussed, consumers are more likely to forgive price hikes when brands are clear, honest, and empathetic about the reasons. Developing a structured approach to price increase communication significantly improves customer retention during tariff periods. How to implement a price communication framework: Develop a communication template Acknowledge the context: Navigating economic changes Explain specific factors: Impact on materials and production costs Detailed mitigation efforts Connect to values: Staying committed to your core values Provide timing and transparency: When will price increases happen Create Channel-Specific Messaging Sales team talking points for key account discussions Customer service response scripts for inquiries Marketing materials explaining value despite price changes Digital messaging for online shoppers Develop Executive Communication Support Prepare data-driven briefings for leadership Create external communication materials for investor relations Develop industry analyst briefing materials Effective price communication becomes a competitive advantage during times of uncertainty, allowing for better customer retention even when price increases are necessary. Beyond Tariffs: What We Can Learn from Past Market Challenges If the post-pandemic era taught retailers anything, it is that adaptability becomes table stakes. With frequent macroeconomic shifts throughout the first half of 2025, it has been challenging for companies to stay ahead, let alone keep up. However, unpredictable and unprecedented market changes are nothing new, and looking to historical data to strengthen your pricing strategies can help you build a more actionable plan. Key pricing takeaways from past market disruptions Stay flexible and responsive Rigid pricing models tend to break under pressure. In volatile environments, brands that succeed are those that respond quickly to changes in demand, supply chain constraints, or competitor pricing. Flexibility allows pricing teams to protect margins while staying aligned with shifting consumer expectations. Lead with a strong value proposition Even during uncertainty, many consumers are willing to pay more if the value is clear. This means pricing must reflect more than cost; it needs to reinforce what sets your brand apart, whether it’s product quality, customer service, sustainability, or innovation. A well-communicated value proposition builds pricing power. Prioritize transparent communication Price hikes are more palatable when customers understand the “why” behind them. Transparency around cost drivers like tariffs or supply chain disruption reduces friction and supports brand trust. Clear messaging, across customer service, marketing, and digital touchpoints, helps retain loyalty even in tough times. Embrace dynamic pricing to navigate uncertainty Dynamic pricing enables real-time responsiveness to demand shifts, supply-chain disruptions, and competitive movements, factors that become even more volatile during tariff-driven disruption. By leveraging automation, machine learning, and real-time competitor monitoring, pricing teams can move beyond reactive decision-making and implement proactive, high-frequency adjustments at scale. Use cost-plus pricing when simplicity matters During periods of rapid change or supply chain uncertainty, complexity can become a liability. Cost-plus pricing offers a straightforward, reliable approach, adding a consistent margin to cost, that can stabilize pricing decisions internally, especially when inputs fluctuate or data is incomplete. Want to find out how Dynamic Pricing works for your industry? Schedule demo Deepen market and consumer intelligence Effective pricing during market challenges requires real-time insight and data you can rely on. By continuously tracking competitor prices, segment-level demand signals, and evolving consumer sensitivities, pricing teams can stay ahead of market shifts and respond with confidence rather than react in crisis. Deploy penetration pricing to gain share When consumer spending tightens, aggressive pricing in select categories can attract price-conscious shoppers and convert them into long-term customers. Penetration pricing is especially effective for challenger brands or new product lines aiming to break through loyalty barriers and gain visibility. TL;DR: Market Challenges are a Test and Opportunity for Retail The impact of tariffs reaches far beyond short-term price sensitivity, it’s accelerating deeper changes in how consumers perceive value and engage with brands. For pricing and category managers, this creates not only challenges but also strategic openings. The opportunity now is to go beyond reactive pricing. By segmenting their strategies, clearly communicating price changes, and utilizing dynamic pricing systems, teams can protect their margins and even grow, despite market volatility. Tariffs aren’t just a cost to manage; they’re a catalyst to evolve how you price, position, and retain your customers. Want to learn more about how dynamic pricing can be integrated into your business? Schedule a call with our experts. Frequently Asked Questions How do tariffs influence consumer purchasing behavior? Tariffs often lead to price increases, which cause shifts in consumer behavior such as delaying non-essential purchases, seeking discounts, or switching to private labels. However, many consumers still invest in daily luxuries or wellness products, highlighting the importance of segment-specific pricing strategies. Read More How do tariffs influence consumer purchasing behavior? What is the best pricing strategy during economic volatility? There’s no one-size-fits-all answer. During volatility, pricing teams should combine dynamic pricing tools, segment-based strategies, and transparent communication to respond quickly to market shifts while maintaining customer trust and profitability. Read More What is the best pricing strategy during economic volatility? How can brands maintain customer loyalty when raising prices due to tariffs? Transparency is key. Communicating the reasons behind price increases, such as tariff impacts or supply chain changes, helps preserve trust. Pair this with clear value messaging and loyalty-friendly offers to strengthen brand relationships. Read More How can brands maintain customer loyalty when raising prices due to tariffs? Why is segmented pricing more effective than flat pricing during market disruptions? Segmented pricing allows you to match price sensitivity, value perception, and willingness to pay across different consumer groups. This helps preserve margins in premium segments while remaining competitive for more price-sensitive shoppers. Read More Why is segmented pricing more effective than flat pricing during market disruptions? What role does dynamic pricing play in managing tariff-related challenges? Dynamic pricing enables real-time adjustments based on demand, competitor activity, and cost changes. It helps pricing teams stay agile and competitive, especially when tariffs or supply disruptions cause rapid fluctuations in the market. Read More What role does dynamic pricing play in managing tariff-related challenges? Read more about interesting pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What are the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value-Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
How Tariffs Shape Consumer Behavior and Brand Loyalty
05.03.2024
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!
Transparency in e-commerce: Leading the conversation at Price Points Live 2024
14.02.2024
Omnichannel Dynamic Pricing: Competition, Comparison and Consumer Behaviour
Think back to the last expensive product you purchased. Maybe it was a wearable like the newest Apple Watch, a pair of running shoes, or a new TV. How did you go about making your purchase? Did you just buy the item in...
Think back to the last expensive product you purchased. Maybe it was a wearable like the newest Apple Watch, a pair of running shoes, or a new TV. How did you go about making your purchase? Did you just buy the item in one click? Did you see it in-store and immediately hand over your debit card? Or did you first research online via social media and comparison sites, then experience the physical product in-store, then research prices online to decide where to buy? As consumer behaviour evolves and the younger, more tech-savvy generation gains more experience in maximising their value for money, brands and retailers must evolve to meet these shoppers where they are and win the sale. These changes, amidst a wider shift toward omnichannel selling, call for a more thoughtful approach to the interaction and synchronisation of online and offline pricing. Businesses are spending more time and resources on building omnichannel pricing strategies that can succeed – and be implemented – across all points of sale. In this article, Omnia explores the evolution in consumer behaviour and price comparison and how omnichannel brands and retailers can use dynamic pricing to bridge the gap. How Does a Consumer Make their Decision to Buy? Today’s consumer is investing more time and effort in the research stage before making a decision about if they should buy, and if so, when they should buy and from whom. 44% of consumers say they are spending more time planning their shopping trips to brick-and-mortar stores, while about half say they’re spending less time just browsing in physical stores. The retail analyst, Natalie Berg explains: "There's just so many different ways to shop today. And as shoppers, we don't think in channels. We just want to shop and we want a seamless experience across the many touchpoints that exist today. But we're channel agnostic and we're device agnostic. Retailers have had to work really hard behind the scenes to make this a seamless experience." Google Trends has found some compelling insights on these omnichannel consumer behaviours since 2023: About one-third of consumers are spending more time on their decision-making, considering more brands, stores and retailers in the process 65% of consumers are more likely to research a product online, even if they plan to buy in the store And vice versa: 59% are more likely to go to stores to physically see or touch a product, even if they intend to buy online The trend is even stronger around the holidays: Consumers used online search before 96% of in-store holiday shopping trip It’s clear that online and offline are colliding, and as the data above shows, the buying journey can take many paths. Some consumers might research online first – watching unboxing videos from their favourite influencers, searching the product on social media or comparison sites – then go in-store to experience the physical product. Even after all that, they might conduct more price research online to decide whether to buy online or in-store, or whether to buy from a different seller altogether. Others might browse in-store first to get a feel for what they like, then research reviews, prices and other factors online before deciding if or where to buy. There are countless paths to purchase, and shopping behaviour is influenced by a number of factors: Price: The higher the investment, the more likely it is that the consumer will invest more effort and take the time to research Complexity: If a product is more complex, it is more challenging to get a full picture. A technical description does not always reflect the experience; for example, do you know offhand how loud 48 dB will sound in a pair of headphones? Experience: The five senses contribute to emotions, which can lead to consumers making a purchase. Experiencing a product and all its sensory information first hand can be a significant factor in the shopping journey. Returns: How easy is it to return a product? For example, consumers might be more likely to research items that are fragile or those cannot be returned due to hygiene reasons, versus something like a sweater that can easily be sent back. Brand: If the experience and association with the brand is exceptional – for example, the in-store service – a number of shopping behaviours could be impacted. The consumer might be more likely to want to shop in person and to go through with the purchase, and they are likely to be willing to pay a bit more. Competing in the price comparison stage Once a decision is made to purchase the product, the modern consumer is savvy enough to compare prices online. This means sellers across channels are competing on price, and if you’re an omnichannel brand or retailer, you’re essentially competing with everyone. In these highly competitive environments, dynamic pricing is an effective strategy to capture more sales and take control of your assortment. Omnichannel brands and retailers benefit from dynamic pricing in a number of ways, including: Competitive pricing advantage: Dynamic pricing adjusts prices in real time based on market conditions, competitor pricing and predetermined pricing rules. This ensures that prices remain attractive to consumers compared to other options in the market, which is particularly important when a shopper starts researching prices online. Maximising revenue: By dynamically adjusting prices at a higher frequency, retailers can set prices that reflect current demand, customer behaviour and other market variables, boosting revenue over time. Inventory management: By adjusting prices based on inventory levels, retailers can promote products that need to be cleared quickly or maximise profits on high-demand items. This is especially helpful when managing stock for both brick-and-mortar stores and online sales. Seasonal and promotional pricing: As mentioned previously, merging online research with brick-and-mortar shopping is even more relevant during holiday events, with consumers using online search before 96% of in-store holiday shopping trips. Dynamic pricing gives omnichannel retailers and brands the flexibility to respond to seasonal trends, demand fluctuations and promotional events. Real-time market changes: External factors, such as changes in the economy, weather conditions or geopolitical events, can impact consumer behaviour and market dynamics; changes that retailers can more quickly adapt to using dynamic pricing. Agility and flexibility: As online and offline become more intertwined, omnichannel sellers need to adapt and respond quickly to new information and competitor pricing updates. Bridging the Pricing Gap in Omnichannel Omnichannel brands without a cohesive dynamic pricing strategy can face unnecessary losses and fractured pricing between channels. The challenge is this: How do you match your offline store to your online store while still competing with your key competitors? Consistency across online and offline channels is crucial. Omnichannel sellers have to find ways to synchronise both pricing strategies in order to provide a seamless experience for consumers and avoid losing sales or loyalty if a consumer or price comparison site spots a discrepancy. This is a common challenge. Many retailers struggle to align pricing: Their online prices change frequently, while their offline products are far more static. It’s easy to change an online price any time, but the retailer doesn’t want to change in-store prices every time if they are simply printed on signs, tags or stickers. There are a few ways to mitigate this challenge with the help of Omnia Retail dynamic pricing software. Electronic shelf labels (ESLs) This is the easiest way to match online and offline pricing. It requires more financial investment and IT infrastructure, but saves on costs by decreasing the labour and time needed to update prices. Image source If the cost of purchasing ESLs is too high, retailers can rent them (which tends to be far cheaper than buying), either for the whole assortment or just high sellers. One thing to consider with ESLs is timing. You don’t want a price to change on an ESL if a customer is standing right next to it. Imagine you’re shopping in a store, and the price on a product suddenly jumps from €100 to €110. The product hasn’t changed in the last five seconds, so it’s unlikely you’ll think it’s fair that the price has suddenly increased by 10%. To mitigate this, retailers might choose specific hours to change prices, either when the store is closed or during slower hours for foot traffic. Other retailers offer a discount if a customer comes to them after having found a cheaper price online compared to in-store. Fixed price adjustment days Another option is to decide on fixed days when you will align online and offline pricing, and adjust your repricing frequency to match. Compared to the ESL option, this is suboptimal, but it will allow you to synchronise prices at a level that does not exceed your shop floor staff capacity. This option will also decrease the chance of consumers walking out after checking online and discovering that either 1) your prices don’t match your own website or 2) your competition sells it for far cheaper. While providing great in-store service and experience adds value that consumers may be willing to pay more for, they are still likely to leave if the price difference is too large. Gaining clarity first on the following questions will help retailers to set this process up: Which key assortments are your revenue/margin drivers? How can you segment the online competition toward this assortment? Is there a pattern of which days the segmented competition is repricing their products? Answering these questions will tell you which assortments to prioritise, as well as which days your segmented competition is adjusting prices so you can do the same. Dynamic Pricing Made Simpler with Omnia As consumers become more research savvy and the lines between online and offline shopping continue to blur, retailers and brands – especially those operating in an omnichannel environment – will need to adjust pricing strategies to win over the competition. If shoppers are researching on multiple channels, then those retailers and brands must be consistent and competitive across all points of sale. Omnia’s dynamic pricing software enables retailers and brands to bridge the pricing gap in omnichannel. Our customers who utilise ESLs use Omnia’s dynamic pricing software in a number of ways to make this strategy more effective: Understanding which products are more competitive in the market and which are not. For brick-and-mortar sales, only the competitive product prices need to be changed more frequently. Setting up the frequency at which Omnia sends data for their brick-and-mortar products, according to their ESL pricing strategies. This can be done in three different formats: CSV, XML and JSON. Omnia's output can be placed automatically to an (s)ftp location from where your ESL system can pick up the latest pricing data. Using Omnia’s filtering capabilities to decide which parts of the assortments you want to include in the reports used to change the products' prices on the ESL. This means that you can make a differentiation between the fixed-price products and the products that you want to change dynamically. Aligning online and offline pricing (where relevant). Omnia data enables customers to remove discrepancies. For example, one Omnia customer used to do their offline repricing manually – a tedious and time-consuming process. Now, they use ESL software connected to the Omnia output, making it faster, easier and more accurate.
Omnichannel Dynamic Pricing: Competition, Comparison and Consumer Behaviour
18.01.2024
The Future of Retail: Navigating E-commerce Trends and Innovations in 2024
E-commerce had a volatile 2023. From declining sales in luxury to behemoth partnerships to the resurgence of influencer marketing, the last 12 months experienced several changes and surprises that even the analysts were...
E-commerce had a volatile 2023. From declining sales in luxury to behemoth partnerships to the resurgence of influencer marketing, the last 12 months experienced several changes and surprises that even the analysts were not expecting. Reflecting on the performance and strategies of social commerce platforms, brands and marketplaces in 2023 has set the scene for a fast-moving and competitive market for 2024. Omnia looks at how the previous year ended within e-commerce and what industry players and shoppers may expect in 2024, in addition to the innovation that might change the future of retail. Social commerce will show its teeth Within the e-commerce landscape, it was the expansion of social commerce that made the largest leaps and bounds, proving once again how it has become the largest growing sub-industry within retail and e-commerce with an expected value of $2 trillion in 2025. Forbes predicted that social commerce is growing three times faster than e-commerce while the moves and counter-moves made in 2023 mirrored why: Meta and TikTok are not interested in your lunch selfies anymore. They’re interested in your likelihood to shop. With Meta’s new partnership with Amazon, allowing Facebook and Instagram users to shop Amazon ads directly in the app, a new era of e-commerce is forming that further increases Amazon’s control of the market and further drives Meta’s plans to create shopping-first platforms. Other social commerce companies such as TikTok, which is owned by Tencent in China, will also be focusing on establishing itself as a legitimate e-commerce and influencer marketing platform in the West. TikTok Shop’s launch in the US in September is set to disrupt both the social commerce and marketplace arenas for 2024. TikTok and Instagram are each other’s biggest competitors, thickening the hunt for consumer attention and loyalty. Instagram and Facebook are still the world’s top choices over TikTok for buying products, however, the difference is incremental: In Germany, 46% of shoppers use Instagram while 42% use TikTok. In the US, it’s 42% and 40% respectively, and in the UK, TikTok surpasses Instagram as the platform of choice (39% vs 35%). Despite TikTok’s incredible growth and influence, Omnia predicts that Meta’s new Amazon deal will keep them out of the top position for the foreseeable future. The Implications of TikTok's Ban on E-commerce Retailers The potential ban of TikTok in the United States carries significant ramifications for e-commerce retailers, who have increasingly leveraged the platform for marketing, sales, and customer engagement. TikTok, known for its highly engaging short-form videos and robust algorithm, has become a powerful tool for brands seeking to reach a young, tech-savvy audience. Here’s an exploration of the key implications: Loss of a Major Marketing Channel TikTok as a Marketing Powerhouse: With over 1 billion monthly active users worldwide, TikTok has emerged as a crucial marketing channel for e-commerce brands. The platform's unique algorithm promotes content virally, often reaching millions of users organically. For many retailers, TikTok has been instrumental in driving brand awareness and engagement through influencer partnerships, user-generated content, and creative campaigns. Impact of the Ban: If TikTok were to be banned, e-commerce retailers would lose access to this vast audience. Brands that have heavily invested in building a presence on TikTok would need to shift their strategies quickly. This disruption could lead to a temporary decline in visibility and engagement, impacting sales and customer acquisition efforts. Shift to Alternative Platforms Exploring New Avenues: E-commerce retailers would likely diversify and redirect their marketing efforts to other social media platforms such as Instagram Reels, and YouTube Shorts. These platforms offer similar short-form video features, which can help brands maintain some continuity in their marketing strategies. Challenges and Opportunities: Transitioning to new platforms may require additional resources and time to build a comparable follower base and engagement level. However, this shift could also present an opportunity for brands to diversify their social media strategies and reduce dependency on a single platform. Impacts on Sales and Revenue Sales Generation via TikTok: TikTok's "Shop Now" buttons and seamless integration with e-commerce platforms have enabled direct purchases within the app, boosting sales for many retailers. Revenue Risks: The ban would disrupt the revenue stream, especially for brands that have seen substantial sales through TikTok. Retailers would need to find alternative methods to drive direct sales, such as enhancing their websites' shopping experiences or investing in other social commerce tools. Influence on Consumer Behaviour Consumer Habits: TikTok has influenced consumer behaviour by making shopping more interactive and engaging. The platform's algorithm personalises content based on user preferences, making it easier for brands to target potential customers effectively. Behavioural Shifts: Without TikTok, consumers might shift their attention to other platforms, altering the dynamics of online shopping. Brands will need to adapt their strategies to align with changing consumer behaviours and preferences. Talk to one of our consultants about dynamic pricing. Contact us AI and E-commerce in 2024 Artificial Intelligence (AI) is transforming e-commerce in various ways, and many technologies that retailers use daily are AI-driven, even if not immediately apparent. Here are six of the most common AI applications in e-commerce: Personalised Product Recommendations: Collecting and processing customer data about their online shopping habits is now easier than ever. Retailers rely on machine learning to capture data, analyse it, and use it to deliver personalised experiences, implement marketing campaigns, optimise pricing, and generate customer insights. Over time, machine learning will require less involvement from data scientists for everyday applications in e-commerce companies. Retail analyst Natalie Berg shares: ‘’AI is going to make retailers smarter leaner more efficient. And it's going to make our experience as customers as you can tell. It's going to make it more personalized more relevant’’ Customer Segmentation Access to more business and customer data, along with increased processing power, enables e-commerce operators to better understand their customers and identify new trends. Smart Logistics Machine learning's predictive powers shine in logistics, helping to forecast transit times, demand levels, and shipment delays. Smart logistics use real-time information from sensors, RFID tags, and similar technologies for inventory management and better demand forecasting. Over time, machine learning systems become smarter, building better predictions for supply chain and logistics functions. Sales and Demand Forecasting Especially in times after COVID-19, planning inventory based on real-time and historical data is crucial. AI can help with this. A recent McKinsey report suggests that investment in real-time customer analytics will continue to be important for monitoring and reacting to shifts in consumer demand, which can be harnessed for price optimisation or targeted marketing. These applications highlight how AI is revolutionising e-commerce, providing enhanced personalisation, operational efficiency, and smarter business strategies. Marketplaces will face stiffer competition with less market share Niche marketplaces within luxury such as Yoox Net-A-Porter (YNAP), Farfetch and Matches almost ended in collapse in 2023, however, Farfetch was saved by South Korea’s e-commerce giant Coupang in a last-minute sale, Matches has been purchased by UK retailer Frasers for €60 million, while YNAP is still searching for a saviour to bring them into the black since the sale to Farfetch fell through. According to Vogue Business, Amazon or Alibaba could potentially purchase YNAP, two of the world’s biggest e-commerce platforms, further strengthening their grasp on the marketplace landscape. As mentioned above, Amazon has continued its growth and consolidation by entering the social commerce space with Meta, which was announced in November, and the results of this deal will play out interestingly throughout 2024. How will this affect other marketplaces? In 2024, marketplaces will feel the pinch of the Meta-Amazon coalition as an increasing number of lucrative vendors will turn toward Meta platforms to make sales and grow their brands. As a result, consumers will go where there is variety with a competitive price and an easier shopping experience. However, if more shoppers will be heading toward Meta platforms, marketplaces may be able to take advantage of the increased traffic with new advertising, sales and pricing strategies. Marketplaces other than Amazon will need to incentivise shoppers to choose their platform - whether it is via social media or not - to remain profitable. Although Zalando ended off 2023 with declined quarterly sales, their new partnership with Highsnobiety has led Omnia to believe that they too have noticed the e-commerce success that lies within content. Europe’s largest marketplace has realised that many customers, especially Gen Z and millennial shoppers, buy into content and not products. The new platform, entitled Stories, creates fashion-related video content and provides news of collaborations and interviews with designers. “We know that customers are looking for inspiration and with Stories on Zalando we are doing exactly that: crafting highly engaging formats to show what’s new and what’s next in fashion,” says Zalando’s Senior Vice-President of Product Design Anne Pascual. Brands will restrategise marketing and sales strategies to regain sales Brands in multiple categories, especially in fashion, beauty and luxury, experienced a cooling period in 2023 that lasted longer than expected. For some, this will extend into 2024: Burberry’s shares have dropped 15% after they reduced their profit outlook thanks to a quieter-than-expected sales period over Christmas. Nike is cutting jobs and is set to reduce $2 billion in costs over the next three years amid dwindling sales. Gucci’s brand equity dropped 31% from 2022 to 2023, while L’Oréal and Lancome list 20% and 19% respectively. Overall, the annual Kantar BrandZ report concluded that the world’s top 100 brands lost 20% of their value in 2023, leaving them on the back foot as 2024 gets underway which will see brands moving and shaking to get into a profitable, growthful place again. Despite the overall lookout, other brands in some verticals including sports apparel and performance footwear did well such as Swiss-owned running shoe maker On which saw third-quarter sales increase by 44% and HOKA, which consistently saw growth throughout 2023 and gained in market share. In 2024, On is focusing on building its D2C channel which will cut into market share controlled by Adidas and Nike which have seen declining market share at Dick’s Sporting Goods, one of the US’s largest shoe retailers, while On and HOKA increase. Source: Reuters 2024 trends in sports apparel include a transition from logo-heavy designs, which we saw gain prevalence within “quiet luxury”, to “quiet outdoors”. Brands like North Face and Arc'teryx will be focusing on gaining the attention of luxury buyers who want in on sportswear with a high-end feel. Conclusion As we move into the second half of 2024, the e-commerce landscape is set to become even more dynamic and competitive. The developments in 2023, including the rapid expansion of social commerce, strategic partnerships, and the resurgence of influencer marketing, have laid a robust foundation for the coming months. Social commerce, driven by giants like Meta and TikTok, will continue to evolve, with new features and integrations aimed at enhancing the shopping experience. Meta's partnership with Amazon and TikTok's efforts to solidify its position as a key e-commerce player will significantly shape consumer behaviour and market dynamics. However, the potential ban of TikTok in the US could disrupt these trends, forcing brands to adapt quickly. Marketplaces will face increased competition as the Meta-Amazon coalition draws more vendors and consumers to their platforms. This shift will compel other marketplaces to innovate and offer unique incentives to retain their market share. Strategic partnerships, such as Zalando's collaboration with Highsnobiety, highlight the importance of content-driven commerce in attracting and engaging younger audiences. Brands, particularly those in fashion, beauty, and luxury, will need to re-strategise their marketing and sales approaches to recover from the prolonged cooling period of 2023. While some brands face continued challenges, others in niches like sports apparel are poised for growth, leveraging direct-to-consumer channels and tapping into emerging trends like "quiet outdoors." In summary, e-commerce in the second half of 2024 will be characterised by rapid adaptation, and a focus on personalised, content-rich consumer experiences. Brands will need to leverage strategic partnerships with influential platforms and content creators to stay relevant. The successful players will be those who can seamlessly integrate innovative technologies and data-driven insights to create engaging, tailored shopping journeys for their customers.
The Future of Retail: Navigating E-commerce Trends and Innovations in 2024
26.12.2023
Sustainability: Footwear gains traction in creating a circular economy
Reincarnating the shoe - that’s what some global brands in footwear are attempting to do with sustainability’s latest solution to a mounting climate change problem. A circular economy refers to an ecosystem where...
Reincarnating the shoe - that’s what some global brands in footwear are attempting to do with sustainability’s latest solution to a mounting climate change problem. A circular economy refers to an ecosystem where fashion is designed with its end-of-life state being top-of-mind. Circular fashion and footwear are designed specifically to be recycled into new items made from the old. From the individual fibres of a t-shirt to the type of glue that binds shoe parts together, circular fashion is dedicated to reimagining how garments are made to avoid deeper damage to the planet and its resources. Up to 92 million tonnes of clothing and footwear end up in landfills around the globe each year, making the fashion industry one of the most significant contributors to waste and carbon dioxide emissions. “Circular fashion is a closed-loop system that aims to design out waste,” states the Sustainable Fashion Forum. Europe’s share of footwear consumption in 2022 sat at 14.9% of the global total, equaling 3.58 billion shoe purchases across the continent, and of those shoe purchases, how many can we say once had a life in another home on another foot as another shoe? As circularity initiatives grow for clothing and accessories through resale marketplaces and brand-run programs, shoes have been largely left behind. However, 2023 saw a positive uptick in footwear brands who want to see their shoes live several lives. Omnia delves into why it’s so difficult for shoe brands to create circularity and who’s doing it right. Why it’s harder for shoe brands to create circularity vs clothing It may be harder, but it’s still possible, and brands are proving it. Footwear is generally made to last longer than clothing, especially in the sports and outdoor aisle, with plastic, rubber and leather used for most shoe products. National Geographic reports that 47% of all footwear is made of plastic and rubber, making the 23.9 billion shoes produced globally in 2022 one of the most sustainably challenged products in retail and textile production. Clothing, on the other hand, is a much simpler item to create a circular ecosystem with, as items usually involve one to two materials. “Footwear has up to 200 different parts that go into one shoe,” says Adidas’ Senior Director of Sustainability Viviane Gut. Because of this, some global fashion companies have made concerted efforts to install circularity initiatives including H&M’s goal to become completely circular by 2030 by utilising 100% recycled and sustainability-sourced materials. There’s Farfetch, the UK-based marketplace for pre-owned luxury fashion and accessories, whose second-quarter results for 2023 showed 4.1 million active shoppers and a 40% year-on-year increase in supply growth. In essence, creating a more sustainable t-shirt or reselling a used blazer is less expensive and more seamless than going back to the drawing board of recreating how the shoe is made. However, this doesn’t mean it isn’t being done: In November, the Business of Fashion reported that eight global brands including New Balance, Crocs, Target, Brooks Running, Reformation, Ecco, Vibram and On are banding together under the name The Footwear Collective to share knowledge and resources to expand the circular shoe economy, which is the first of its kind within the shoe market. In addition, Nike debuted its first circular shoe in August 2023 entitled ISPA Link Axis. As the world’s largest sneaker producer, Nike calculated their carbon footprint to be over 11.7 million metric tonnes of CO2 in 2020 alone, equating this impact to what the entire city of Amsterdam, Netherlands may offset in the same period, further proving how necessary it is for global brands to create circularity and end-to-end sustainability. Each component of the shoe is made from recycled materials and no glue, making it the ideal shoe to be disassembled and reinvented once more. Assembling the Link Axis is also more energy efficient, as it does not require time and resources to glue the sole to the upper parts of the sneaker. Nike ISPA Link Axis Talk to one of our consultants about dynamic pricing. Contact us Where does the circular economy begin? Creating a closed-loop ecosystem where garments essentially never become waste is central to a circular economy. However, at the heart of the conversation, the first question brand leaders and retail entrepreneurs can ask themselves is, if we can’t rely on consumers to resell our garments or take part in branded circular initiatives, how do we kickstart circularity from the inside out? How do we at least guarantee that our manufacturing and production practices are low-impact? Allbirds, the shoe brand that’s made a name for itself for its innovation in sustainability and carbon offsetting, has already done more than most to create a greener product when they launched a sneaker in 2015 made out of Merino wool from sustainable farming and recycling. The sneaker’s fame came from the fact that it only had a small carbon footprint of 9.9 kilograms, however, this success only motivated Allbirds to go further. In mid-2023, the brand launched a new sneaker at the Global Fashion Summit in Copenhagen that offsets 0.0 kilograms of carbon dioxide, making it one of the first sneakers to be carbon neutral. For Allbirds, this is all part of their long-term goal of reaching a 50% reduction in their carbon footprint by 2025, culminating in a 0% carbon footprint by 2030. Allbirds The Moonshot In essence, circularity needs to start at the root including materials, manufacturing, transportation, product use, and end-of-life which may include the resale market, return initiatives, brand-run programs, and recycling. New rules for the new world The very first shoe, created approximately 9,000 years ago and discovered in California, USA, was made out of sagebrush bark that simply covered the toes and the sole. Today, the sophistication and variety of footwear are evident from Prada to Nike to Timberland and everything in between. As fashion and footwear brands continue to release new items in the coming decades and centuries, one thing is for certain: The rules for producing, manufacturing and discarding will change. Policy, public scrutiny and changing consumer behaviour will edge and direct brands to revisit their production, distribution and end-of-life methods time and time again to ensure greener products are the end result. Creating and taking part in a circular economy for shoes and fashion is one of the best solutions for brands and consumers to lower their carbon footprint, reduce landfill accumulation and make full use of the materials used. “When you use materials seven, eight, or 10 times over, then the footprint goes down dramatically,” said On’s co-founder Caspar Coppetti to the Business of Fashion, the Swiss shoe brand that’s been backed by Roger Federer. “You have to really go to the source and develop new processes, new technologies, scale them … and then there’s a lot more investment needed.”
Sustainability: Footwear gains traction in creating a circular economy
09.11.2023
E-commerce Shipping: A Guide on Costs, Speed and Environmental Impact
There are pros and cons to every method of shipping, whether international or local, and there’s also no “right” answer. Every e-commerce business is different, and the right shipping strategy depends on factors like...
There are pros and cons to every method of shipping, whether international or local, and there’s also no “right” answer. Every e-commerce business is different, and the right shipping strategy depends on factors like budget, product assortment, who your customers are, where the business is based geographically and more. Rather than giving tips for which shipping methods are best or which ones a business should use, we’re breaking down some of the most common methods in three key areas: cost, speed and environmental impact. Cost: How much does it cost the seller to ship the product to the buyer? Costs to consider include carrier costs like shipping labels, packaging, fulfilment, insurance and overhead. Speed: How much time does the shipping method take? How long between the customer making the order and receiving their package? Environmental impact: What effect does the speed and method of shipping have on the environment, from carbon emissions to water pollution and more? Delivery methods for e-commerce: Cost, speed and environmental impact Same-day delivery Same-day delivery is becoming more popular and is the fastest-growing segment in the last-mile shipping environment, growing at 36% annually. In Europe, same-day delivery accounts for about 5% of total deliveries. E-commerce giants with large-scale supply chains tend to cover this especially well; Amazon already delivers to nearly three in four customers within 24 hours. The same-day delivery market is forecasted to reach $26.4 billion (USD) by 2027. The term “same-day delivery” can mean different things depending on the seller; in some cases, orders placed by a certain time will arrive by the end of the same calendar day, while others may just mean delivery within 24 hours. Typically, for same-day delivery to work, sellers need to have distance limits or cut-off times for when the order must be placed by to qualify. It’s also worth noting that same-day delivery is not always possible; it’s more likely to see it as an option in large cities or in more populated areas of Europe, for example, compared to the US, Canada or rural regions in other countries. The cost of same-day delivery, both monetarily and to the environment, depends on the carrier and the region. With traditional carriers such as FedEx, UPS or DHL, same-day delivery can be quite expensive and have a higher environmental cost. As Earth.org points out, “when dealing with a one- or two-day shipping window, [carriers] are often forced to send out trucks that are filled at half their capacity, generating more traffic and thus emissions.” However, especially in larger cities across the globe, there are many carbon-neutral alternatives available. For example, there are newer carriers like Budbee from Stockholm whose offer from the start was same-day delivery, with electric vans that are cheaper and carbon-neutral. There are also bike couriers in some markets, like Stuart in London or Cycloon in the Netherlands, that offer same-day delivery directly from stores. In these cases, same-day delivery is fast, carbon-neutral and not necessarily more expensive than slower shipping options. Overnight, two-day and expedited shipping The environmental impact of overnight and other speedy shipping methods like two-day and expedited is highly dependent on the area. Within regions like France and Germany, for example, overnight or two-day shipping may be the cheapest option at many carriers, and the environmental impact is mostly based on context, such as the type of parcel, location and other factors. However, overnight or expedited shipping in regions like North America, Australia and APAC can be expensive, especially when transported by air versus sea or ground shipping. A study performed in China on the carbon footprint of shipping options found that emissions from air shipping were 65 times higher than sea shipping. (Note that sea shipping is simply not an option in certain regions like North America and Australia.) Higher speed can also mean higher costs, in some cases. Air cargo typically costs more because of the need for faster delivery times and high fuel costs. Ocean freight, however, uses larger vessels that can transport more goods for longer distances, which is why it tends to be 12 to 16 times cheaper than air freight. In general, retailers who want to use overnight and speedy shipping options without high cost or environmental impact certainly can do so, as long as they find the right carriers to partner with and take into consideration 1) the region they are operating from and 2) the regions of their shoppers. Two- to three-day shipping Two- or three-day shipping, sometimes called priority shipping, is one of the more common types in e-commerce. It is slower than overnight, same-day and expedited options, but can still get items to customers faster than standard economy shipping in some markets. In European countries, the cultural differences between countries and delivery networks create discrepancies in what is considered “priority shipping”. For example, in urban areas like Stockholm or Oslo, it’s considered normal to offer overnight delivery, while in other parts of Sweden and Norway, shipping times are far longer due to the large distances – hence the offering of priority shipping options in these specific regions. In general, consumers are more likely to complete a purchase when it’s delivered faster than usual: In North America, up to 85% of shoppers are more likely to buy when two-day delivery is offered. The cost of two-day shipping is highly dependent on how far the item is being transported. For shorter distances, ground shipping can be used; this is why sellers with fulfilment centres or warehouses in different regions are more likely to be able to use this option. For longer distances, air cargo is used to guarantee the two-day turnaround; however, this has a higher cost and a larger environmental impact. In some cases, “fast delivery” – which encompasses all shipping options where orders are delivered within one to three days – will require some air transportation, meaning sellers can’t take advantage of full truck load capacities. This results in the need to dispatch more frequently and increases the total cost of transportation and environmental impact. A simulation model run by a team of MIT researchers in Mexico, for example, showed that “fast shipping produces significantly higher CO2 emissions since it imposes a challenge for cargo consolidation.” Their findings indicated that fast shipping increases both total CO2 emissions and costs by up to 15% and 68%, respectively. In Europe and other large metropolitan areas around the world, fast delivery does not necessarily cost more or require air transportation, decreasing the environmental cost. Standard shipping This may be called economy, regular, basic or ground shipping depending on the country or region, but it’s simply the cheapest shipping option available from the courier. Items sent by standard shipping typically use ground transportation and take longer to arrive. Here are some examples of how long standard shipping takes for domestic orders in Europe, the US and UK: Netherlands: 1-2 working days Germany: 1-2 working days France: 1-2 working days UK: 2-5 working days United States: 3-5 working days Costs to use standard shipping vary by country and courier. As for the environment, the typical saying is that “slower is greener.” According to research by Josue Velazquez, a research Scientist at the MIT Center for Transportation and Logistics, e-commerce customers who wait up to five days for home delivery “could help decrease carbon dioxide emissions by about 30% in the last mile of a delivery.” However, as with other types of shipping, this is all dependent on location. International shipping Shipping packages internationally can vary widely in terms of cost. While domestic shipping often has a flat fee, shipping to other countries may lead to additional costs in areas like customs and customs brokerage, as well as ground, maritime or air transportation. Speed also varies with international delivery. Shipping from the US to Europe, for example, can take anywhere from 10-16 business days with economy delivery services, or as few as one to three business days with an expedited courier. All European countries have their local domestic “postal” networks that are now used for delivering parcels. These networks stop at the country borders and therefore companies need international line haul transportation networks to "inject" parcels into the local networks of their neighbouring countries. This may lead to one or two additional delivery days. On the environmental side, international shipping of any speed can have a high environmental impact, as it typically requires multiple legs of transport and at least some involvement of air or ocean cargo. Eco-friendly shipping “Eco-friendly” is not a clearly definable term, and it means different things depending on the e-commerce seller. Generally eco-friendly shipping can involve any of the following: Recyclable or compostable packaging Carbon offset options Smaller packaging size Ground-based shipping versus air or sea Slower shipping An e-commerce sustainability survey by Sifted found that consumers are interested in these options. 91% wanted an eco-friendly shipping option when they checkout, and 57% are willing to pay an additional 10% for eco-friendly packaging and shipping. While the cost of using eco-friendly packaging can be higher, using less harmful shipping methods like ground and standard shipping can actually be cheaper for the seller and the shopper. Alternative delivery (parcel lockers, click and collect) Many e-commerce sellers are choosing to offer additional delivery options. A global survey of supply chain executives found that 44% offer click-and-collect (including products that are not shipped and sold directly from stores) and 11% offer collection points. These options can decrease costs for shippers if they are able to group packages, and may increase the speed of delivery in some cases. Whether delivering to a parcel locker or collection point makes a significant difference to the environment depends on what one considers “significant”. During the last-mile delivery stages, the previously mentioned study in China found that total emissions produced for home delivery were 0.012 kg CO2e higher than delivery to a collection point. Source: AZO Cleantech 2021. Talk to one of our consultants about dynamic pricing. Contact us Which shipping method is best? It’s up to the consumer During a talk at Omnia’s annual Price Points Live event in 2022, Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris, spoke about how it’s really up to the consumer to choose delivery options, not the retailer. With the industry standard set at free delivery, most consumers are no longer willing to pay for shipping; they are, however, willing to wait longer or to “click and collect” their purchase. A study she conducted with colleagues in Belgium – with similar results seen in Netherlands, Bolivia, China and Brazil – found that while 81% of consumers would say yes to free next-day delivery, that number only dropped by three percentage points when offering free delivery within three to five days. When a slower shipping method is used, there is a positive impact on the company’s costs as well as the environment. This study could indicate that consumers are willing to make this trade-off, if retailers use the information to properly motivate them toward eco-friendly delivery options. Customer demands may outweigh shipping costs in the end Since 2010, global e-commerce sales have increased by nearly 800%. That’s great news for all the e-commerce sellers out there and for the customers who want to shop online, but there is a fragile balance to maintain. We all saw the strain put on supply chains during the COVID-19 pandemic: An EY of survey supply chain executives across industries found that only 2% of respondents said they were “fully prepared” for the pandemic. 57% said they were affected by serious disruptions, with 72% reporting it had a negative effect on them. While that situation is not a daily occurrence, the growth of fast shipping, combined with the steady uptick in e-commerce sales each year, is putting its own stressors on the logistical capabilities of our global shipping network. In order to keep the global supply chain from collapsing as e-commerce volumes increase, and to boost environmental protections, it may become more necessary over time for customers to make trade-offs and accept slower shipping times. As data from Sifted showed us earlier, nine-in-ten consumers wanted an eco-friendly shipping option when they checkout, and eigh- in-ten would wait at least one extra day for their delivery if that meant it was shipped more sustainably. Increasing the amount of orders that are shipped slower would have significant positive impacts on the environment, while also saving e-commerce businesses on their delivery costs – but not every consumer will be willing to accept slower shipping. It’s a tricky balance, indeed. Retailers and brands who sell online must balance this need for sustainability with a positive customer experience and reliable and flexible delivery, all of which adds up to customer loyalty over time.
E-commerce Shipping: A Guide on Costs, Speed and Environmental Impact
17.10.2023
How will stubborn inflation impact e-commerce’s 2023 festive season?
If there is anything 2023 has taught retail and e-commerce leaders, is how resilient the consumer can be. As inflation predictions for the year remained lower than real-world inflation, and as food and gas prices...
If there is anything 2023 has taught retail and e-commerce leaders, is how resilient the consumer can be. As inflation predictions for the year remained lower than real-world inflation, and as food and gas prices continued double-digit increases around the globe, consumers still found ways to spend - albeit more consciously and strategically. In the July report of the International Monetary Fund’s (IMF) World Economic Outlook projected that global headline inflation will fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. However, in the US, groceries are up 4.9%, electricity is up 3% and rent has increased by 7.7% as of September, creating the stirrings of a lackluster season of spending as the final quarter of 2023 begins. Despite mixed feedback on factors creating roadblocks for consumer spending, there are some positives that reveal to Omnia that, as the final quarter of 2023 begins, consumers will prove their robustness once more: Stronger spending in the US over the Summer and higher consumer confidence throughout Europe’s biggest economies. Let’s delve into the nitty gritty to find out if e-commerce and retail can expect a prosperous festive season. Festive season 2023: Consumer spending predictions At the start of the fourth quarter of 2023, Mastercard’s SpendingPulse Report found that consumer spending for the festive season will result in a 3.7% year-on-year increase in retail sales - a result that has not been adjusted for inflation. The report, which monitors online and offline payments in retail, gives a nod to continued consumer resilience, despite the aforementioned staggered disinflation and economic growth. Compared to 2022, in which the festive season performed better than expected due to pent-up demand and left-over stock, a rebalancing effect will likely take place in 2023, as brands and retailers do not have built-up inventory and consumer demand to rely on to make additional sales. Steve Sadove, senior advisor for Mastercard predicts that “With numerous choices and tightening budgets, you can anticipate shoppers to be increasingly selective and value-focused.” He adds that “the most effective holiday strategy will be to meet consumers where they are - personalised promotions to in-store experiences will be key in doing so.” E-commerce will see larger growth from consumers than brick-and-mortar The report found that omnichannel shopping with continue to grow, however, e-commerce purchases will experience greater support with a 6.7% increase while in-store shopping will see a 2.9% increase year-on-year. On the verticals side, electronics will see the greatest increase at 6%, groceries at 3.9% and apparel at only 1% increase compared to 2022’s season. Global economic overview: Disinflation slower than expected, advanced economies stagnate on growth “Global economic activity has proven resilient in the first quarter of this year, leading to a modest upward revision for global growth in 2023,” Pierre-Olivier Gourinchas, the International Monetary Fund’s (IMF) chief economist, said in a statement. “But global growth remains weak by historical standards.” The July 2023 edition of the IMF’s World Economic Outlook announced it expects global growth to be 3% in both 2023 and 2024. Compared to the projections made in April, this was an increase of 0.2 percentage points for the 2023 estimate, while the 2024 projection remained unchanged. A number of factors have contributed to the more positive economic outlook. The World Health Organisation (WHO) declared that COVID-19 is no longer a global health emergency, economic activity is steadier and supply chains are flowing better. But even with these improvements, the 3% growth projections are still lower than pre-pandemic levels: Annual global economic growth averaged 3.8% from 2000 to 2019. In 2022, global growth was 3.5%. Inflation in key markets impacts overall growth Looking specifically at the markets that pertain to Omnia’s clients - the US, UK, and Euro zone areas - the same IMF report shows that the slowdown in inflation is more concentrated in advanced economies such as these, which are projected to see growth rates fall from 2.7% in 2022 to 1.5% in 2023 and 1.4% in 2024. Source: IMF World Economic Outlook 2023. In the US, growth is projected to be 1.8% in 2023 and just 1.0% in 2024. The country continues to struggle with some of the worst inflation since the 1980s, with the US central bank raising rates from 0.08% to over 5% since March 2022. However, inflation is progressively easing in the US: In July 2023, inflation was at 3.2%, down from the June 2022 peak of 9.1%. Still heavily impacted by the sharp spike in gas prices caused by the start of the Russia-Ukraine war in 2022, growth in the Eurozone area is set to decelerate, projected to achieve only 0.9% growth in 2023 and 1.5% in 2024. From 2021 to 2022, gas prices across Europe increased by 150% as the continent’s largest supplier of gas, Russia, ceased its supply to the continent. Germany, in particular, is struggling to overcome inflation and energy costs, making it the only advanced economy projected to contract in 2023. Growth in the UK is also trudging through: After achieving economic growth of 4.1% in 2022, the second-highest among the advanced economies, the country is projected to grow by only 0.4% in 2023. In July this year, inflation was 6.8%, the lowest it’s been since February 2022. This improvement is desperately needed, as the UK experienced seven months of double-digit inflation between September 2022 and March 2023. Going into festive shopping, how are consumers feeling? As we move farther beyond the end of the COVID-19 emergency and start of geopolitical tensions in Europe, consumer sentiment seems to be improving globally, but is still in the negative range in many regions. Consumer confidence in the Eurozone is still low this Summer but did increase to -15.1 in July 2023, its highest level since February 2022. This has been fuelled by improvements in the consumer’s view on their household’s past and future financial situations, as well as the expected general economic landscape in their respective country. According to McKinsey, consumer confidence around mid-2023 was at its highest in Italy, Spain and Germany, which is surprising considering Germany’s projected growth rate for 2023 is a contraction and not an expansion, which was discussed earlier. Source: McKinsey & Company. Across the Atlantic, consumer confidence in the US hit its highest level in two years in July 2023 and remained consistent throughout their Summer months at the end of the third quarter. This has led to increased consecutive spending, with retail sales rising 0.7% from June to July, and a 3% year-on-year increase for September. At the same time, the impact of inflation can still be felt: In July 2023, the typical American household spent $709 USD more than they spent two years ago to purchase the same goods and services. The good news is that, throughout the third quarter, inflation continued to decrease. Looking ahead to 2024 Consumers worldwide continue to balance the pressure of higher prices with their desire or need to spend, while their governments attempt to rein in inflation and stimulate growth even as macroeconomic tensions continue everywhere. And, while consumer sentiment does seem to be improving since the close of the COVID-19 emergency, levels remain below pre-pandemic norms. As for inflation, the IMF predicts global headline inflation to fall slightly from 6.8% in 2023 to 5.2% in 2024. The organisation projects that underlying core inflation will decline more gradually, showing a slower decrease than what was predicted in 2022. The results of consumer spending for the 2023 festive season will all depend on a country’s labour market, their disinflation rates, as well as the consumer’s ability to access savings or credit. These are the factors that intertwine to create the pool of possibility for consumer spending. With consumer sentiment increasing (ever so incrementally) and a more robust consumer, e-commerce and traditional retail can look forward to an abundant shopping season.
How will stubborn inflation impact e-commerce’s 2023 festive season?
28.09.2023
The Pros and Cons of Free Shipping for E-Commerce Businesses
Think back to the last time you bought something online: did you pay for shipping? These days, it’s becoming increasingly likely that you didn’t, either because the chosen seller offered free shipping or because you...
Think back to the last time you bought something online: did you pay for shipping? These days, it’s becoming increasingly likely that you didn’t, either because the chosen seller offered free shipping or because you purposefully avoided online shops that didn’t offer it. The practice of shipping products for free has become standard in e-commerce. The Digital Commerce 360 Top 1000 Database shows that 74.4% of retailers offer some sort of free shipping: 20.4% unconditional for all orders, 45.1% with a value threshold, and 14.5% requiring membership in a loyalty program. It’s no wonder that many businesses believe they must offer free shipping to remain competitive in the market. In reality, it’s not right for every seller. This article will cover the historical context of free shipping and some pros and cons to help your e-commerce business make the right strategic choice on the topic. Have we always had free shipping? Unsurprisingly, free shipping was popularised by e-commerce giant Amazon in the early 2000s. After two holiday seasons of offering free shipping to customers spending $100 or more, the company was considering making free shipping available to everyone, but it was cost-prohibitive. According to Brad Stone in his book The Everything Store, this is how the story played out: “Greg Greeley [a finance employee] mentioned how airlines had segmented their customers into two groups — business people and recreational travelers — by reducing ticket prices for those customers who were willing to stay at their destination through a Saturday night. Greeley suggested doing the equivalent at Amazon. They would make the free-shipping offer permanent, but only for customers who were willing to wait a few extra days for their order. Just like the airlines, Amazon would, in effect, divide its customers into two groups: those whose needs were time sensitive, and everyone else. The company could then reduce the expense of free shipping, because workers in the fulfillment centers could pack those free- shipping orders in the trucks that Amazon sent off to express shippers and the post office whenever the trucks had excess room. Bezos loved it. ‘That is exactly what we are going to do,’ he said.” From there, Amazon started by offering “Free Super Saver Shipping” in 2002 on orders over $99, then $49, and eventually $25. Eventually, this turned into the membership program we now know as Amazon Prime. Since then, free shipping has had its grip on the e-commerce landscape, as it allowed customers to demand convenience and speed from online businesses. It’s grown to become a fairly standard marketing tactic, and is often an expectation of customers. “No such thing as a free lunch” – Free shipping isn’t free It’s worth pausing to remind ourselves that free shipping is exactly what we said above: a marketing tactic. There’s no such thing as “free” shipping, since there are costs associated with sending products from businesses to customers, whether for the initial order or a return or exchange. Postage, supplies and even customs fees or import taxes when shipping internationally all have to be paid for by someone. The reality is that either the business pays for shipping or the customer does. If the business offers “free shipping” and pays for it, that reduces their profit margin. If the business wants the customer to pay for the “free shipping”, then the costs of shipping must be added to the price paid for the products themselves. The question for e-commerce businesses isn’t really whether to offer free shipping or not. It’s whether the price of shipping should be included in the display price paid by the customer, or if it will be charged as an extra fee on top. Pros and cons of free shipping This is clearly a complicated topic, so let’s cover some of the pros and cons of offering free shipping as an e-commerce business: Pro 1: It increases conversion rates Since 59% of online shoppers consider free shipping to be a deciding factor in purchase decisions, second only to price, offering free shipping can boost conversion rates for your e-commerce store. Conversely, charging shipping fees can increase cart abandonment: According to Sendcloud research, 65% of European shoppers left a checkout because the shipping costs were too steep. By eliminating visible shipping fees, you remove a potential barrier to purchase and encourage customers to complete their transactions. Pro 2: It brings in new customers Meeting consumer demand is a significant benefit of offering free shipping. When a potential buyer sees that a product comes with free shipping, it becomes more attractive and makes them feel they are getting a better value for their money. To bring in new customers, businesses have to, at a minimum, meet expectations. Since 80% of consumers expect shipping to be free if they hit a certain spending threshold, and 66% expect free shipping for all sizes of online orders, this can play an important factor in attracting new customers to your store. Pro 3: It encourages loyalty and repeat purchases Once you bring in customers, it’s worth doing everything possible to hold onto them. Retention is cheaper than acquisition, after all. Customers appreciate the perceived value they receive when shipping is free, which can lead to them viewing the overall shopping experience as positive. Satisfied customers are more likely to be loyal, returning to your store for future purchases and recommending your business to others. This impact is amplified even more if your competitors do not offer free shipping. Pro 4: It increases AOV In cases where customers need to meet a minimum order value to qualify for free shipping, this can incentivise customers to add more items to their carts, increasing the average order value (AOV) and boosting your revenue. One survey found that 59% of respondents were willing to increase their order size to qualify for free shipping. If you are going to offer free shipping, general industry advice is to set the minimum threshold about 15-30% higher than your AOV to encourage customers to top up their carts. Con 1: It has cost implications Offering free shipping either means absorbing the cost of shipping orders yourself and decreasing your margins, or increasing product prices to cover the cost, potentially decreasing your unit sales. The second option is usually recommended. Shipping expenses, packaging materials, and logistics can become a significant cost for your business, particularly for large or international shipments. Businesses also need to consider how they’ll respond if shipping rates, for example the cost of postage, increases. Free shipping is even trickier if you sell low-cost or low-margin products. In these cases, absorbing the cost is probably not possible if you want to make a profit, but folding shipping costs into the product price can quickly turn a €2 product into a €6 product. Con 2: It creates sustainability issues Sustainability issues are a huge concern when it comes to free shipping, due to the carbon emissions and waste created when shipping higher volumes, faster, to more locations. According to Earth.org: Product shipping and return accounted for 37% of total greenhouse gas emissions in 2020 When shoppers opt for a fast delivery (e.g. 2-day shipping), emissions are far greater than those generated by in-person shopping or slower delivery options Return rates exceed 30% of all purchased goods, adding to the overall environmental impact of the free shipping offer Con 3: It creates logistical challenges To offer free shipping, businesses must be prepared with the proper logistical capabilities. For example, can your distributors handle the volume you will require? How will returns and exchanges work? What speed of delivery is to be expected? How will you ensure the offer is not being abused by customers ordering and returning products often? All of these concerns are amplified even more for small businesses, who may not have the resources or logistics setup available to larger sellers. Our price insights include shipping costs, ensuring you get the most accurate comparisons. Focus on what matters most – the final price! Schedule a call Should your e-commerce business offer free shipping? Whether to offer free shipping, and what the parameters for that offer will be, is a significant strategic decision for any e-commerce business. While it is a helpful way to bring in new customers, incentivise repeat purchases and boost the AOV, there are real sustainability, cost and logistics issues to contend with. Before making a decision, businesses should consider the pros and cons listed above, as well as questions such as: Are there any other options besides free shipping that would incentivise your customers even more? What are the parameters for your free shipping offer? Can you take advantage of bundle shipping, where customers wait a few days longer to get their item so it can be included in a larger shipment? How much does your specific customer base actually appreciate free shipping? What does your market research show about their willingness to pay a bit more to compensate for shipping costs? At Omnia Retail, the prices we scrape online and use to develop insights for users are all inclusive of shipping costs. This is because that’s the price the consumer compares in the end, making it the most important to focus on. Learn more about Omnia ‘s pricing software for retailers and brands here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
The Pros and Cons of Free Shipping for E-Commerce Businesses
26.09.2023
Shopping Experience - What does Shopping Experience mean?
What does shopping experience mean? The term shopping experience covers all aspects of how a customer experiences its interactions with a vendor, at every touchpoint from the first contact through the transaction and...
What does shopping experience mean? The term shopping experience covers all aspects of how a customer experiences its interactions with a vendor, at every touchpoint from the first contact through the transaction and beyond. How customers view their shopping experience is all about feelings and emotions, so it exists on a spectrum: from positive to negative and everything in between. Why is it important to create a positive shopping experience? Ensuring customers have a positive shopping experience is crucial for retail businesses, whether e-commerce, brick-and-mortar or a mix of the two. First, and most obvious, is that customers are unlikely to purchase if they have a poor shopping experience. Why would you buy from a company that made it difficult to purchase, had rude customer service or was generally negative to work with? You probably wouldn’t. Second, just as you won’t win customers over with a poor experience, you definitely won’t win repeat customers. Three in four consumers (including 73% of millennials) say a consistent customer experience increases the likelihood that they will continue doing business with their favourite brand. A great shopping experience also makes it more likely that a customer will join a company’s loyalty program. Creating a positive shopping experience can actually make you more money, too; not only because you’ll win over more customers, but because those customers are willing to increase their spending. A whopping 86% of consumers say they are willing to pay more for a great shopping experience. Finally, a great customer experience can set a vendor apart from the competition, something that is more important than ever in today’s retail landscape. Talk to one of our consultants about dynamic pricing. Contact us What factors can influence a customer’s shopping experience? The e-commerce shopping experience can be influenced by an endless number of factors. Here are some examples: User interface and website design: A well-designed and user-friendly website or application interface enhances the overall shopping experience. It should be easy to navigate, visually appealing and offer intuitive browsing and search functions. Sales channel design: The design and layout of the sales channels, from the desktop website to the mobile app should be consistent across devices and optimised for seamless browsing, product selection and checkout. Product journey and information: Customers appreciate detailed and accurate product descriptions, high-quality images, product reviews and ratings. These elements help customers make informed purchasing decisions and build trust in the e-commerce platform. Shipping and delivery: For an e-commerce business, shipping is one of the biggest factors customers will remember. If everything goes right, they might never notice; but if everything goes wrong, they’re sure to be frustrated and feel they had a negative experience overall. Sellers need to ensure that shipping and delivery processes are reliable and efficient, and can impress customers further with services like transparent tracking or options for express or same-day delivery. Customer support: Talking to a grumpy or rude customer service representative can ruin anyone’s day, while also decreasing the chance of them buying from you again. That’s why prompt and reliable customer support has such a significant impact on the shopping experience. Efficient communication channels such as live chat, email or phone support should be available to assist customers at any time. Personalization and recommendations: Customised recommendations, offers or discounts based on demographic information about the customer or behavioural targeting can enhance the shopping experience by providing relevant and enticing product suggestions. Additional services: Going above and beyond makes all the difference. Offering additional services like gift wrapping, fast shipping options, flexible return policies or personalised assistance can differentiate an e-commerce seller in a crowded field. Assortment breadth and depth: A wide variety of products across different categories increases the likelihood of customers finding what they are looking for. Having a deep assortment within each category also helps cater to diverse customer preferences. However, having an endless supply of products only helps if they are relevant to the target customer base, so this should still fit within the wider retail strategy. Payment options and security: Providing multiple secure payment options and ensuring robust security measures for online transactions adds convenience and gives customers confidence in the safety of their transaction. In Europe, some of the most well-known options that customers expect include Visa and Mastercard, Paypal, Klarna, Apple Pay, Google Pay, iDeal, Giropay and others. Post-purchase experience: The post-purchase experience, including order tracking, order updates and timely resolution of any issues, is crucial to complete the cycle of a positive customer interaction. How to improve the shopping experience 1) Take care of your employees: Happy employees make happy customers. If you aren’t treating your employees well, especially ones who are customer-facing such as service representatives, then customers will bear the brunt of that frustration and have a poor experience. 2) Consider the end-to-end experience: Every touchpoint with your customers counts. With purely e-commerce businesses, this means looking at every interaction your customers have with the brand online. For omnichannel or brick-and-mortar, think about how the in-store and online experiences flow together. 3) Reward loyalty: Make it worth it to be a loyal customer of your store by rewarding those who choose to continue buying from you. It’s no small feat to win a loyal customer, and celebrating them will increase the likelihood of retention. 4) Don’t disappear after the purchase: Post-purchase interactions are still a part of the shopping experience. It’s important to follow up with customers, make sure they are satisfied and request a review or rating if they were, so others can find your store as well. 5) Create community and connect: It can be tricky to create community if your company operates solely online, but having those long-term connections with your customers, and between the customers themselves, can be highly impactful for the business. Read more about interesting pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What are the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Shopping Experience - What does Shopping Experience mean?
01.06.2023
The Buyer Journey: Where Do Consumers Start Their Product Search?
In 2023, there are approximately 2.64 billion digital buyers, accounting for one-third of the global population; a huge pool of shoppers for e-commerce brands and retailers to sell to. But competition is fierce, and...
In 2023, there are approximately 2.64 billion digital buyers, accounting for one-third of the global population; a huge pool of shoppers for e-commerce brands and retailers to sell to. But competition is fierce, and with the average conversion rate sitting at just 1.64%, it’s crucial for businesses to do whatever is necessary to get more shoppers to the checkout button. Having a better understanding of the buyer’s journey, and how each online shopper starts their product search, is a key step in boosting conversion and sales. In this article, Omnia breaks down the latest statistics on product searches in the buyer’s journey and offers three ways brands and retailers can capitalise on this information. Breaking down the E-commerce buyer’s journey and product search The buyer’s journey framework can be described with a number of stages, but the simplest version has three: Awareness, Consideration, and Decision. Since we’re discussing specifically how consumers carry out their product searches, we’ll be focusing on the Consideration stage, where someone is aware of their pain point and is looking for the right solution. Where do consumers start their product search? According to research from Jungle Scout, a majority of consumers (56%) in the US start product searches on Amazon in 2023. 42% use search engines and over one-third (37%) use Walmart.com, with the other top sites being social media platforms. The percentage of US consumers starting product searches on Amazon, search engines and Facebook has decreased since Q1 of 2022; while Walmart.com, YouTube, Instagram and TikTok have grown their share. TikTok is the fastest-growing source for product searches, with about 36% more consumers using the app for this purpose compared to last year. TikTok’s user base skews younger, and among Gen Z, 43% are using TikTok to search for products. Another study of the EU5 (Germany, the UK, France, Italy and Spain) and the US found that 66% of consumers start their product searches for all categories on Amazon rather than on Google or other search engines. Out of this group of countries, the numbers were highest among Italians, with 74% using Amazon as their main prodct search engine; and lowest with the French, where 61% search most on Amazon. Talk to one of our consultants about your pricing and how it influences product search. Contact us How brands and retailers can capitalise on the E-commerce buyer journey Looking at the e-commerce buyer’s journey statistics above, there are a number of ways brands and retailers can utilise this information to increase sales and use resources more efficiently. Here are a few areas to consider: 1) Traffic and Conversions The statistics above on where product searches originate is a helpful baseline to see which channels are being used most often by consumers in the “Consideration” stage. Companies should certainly use this information to guide their strategy, but it’s also true that the most successful channels may vary by retailer or brand. Each seller should review which channels are bringing the most traffic and which have the highest conversion rate. These should be prioritised when allocating effort and resources for ads and product listings. However, the strategies utilised on the most successful channels can also be imitated on other sites to reach even more potential buyers. 2) Price Elasticity The channels used by your buyers is a deciding factor in the price elasticity of demand for your products. For example, if you highly depend on Comparison Shopping Engines (CSEs) like Google Shopping, the price elasticity is higher for a number of reasons: product availability, the at-a-glance comparability of offers and the intention of users coming to CSEs to find the best price. If your customers buy directly through your online shop, price elasticity is less elastic, because the user may already be a fan of the brand and is making decisions between product lines rather than focusing heavily on price. However, both may be included in your consumer’s journey, if they first research on the direct brand channel, then watch for the price just before the buying decision. 3) Assortment and Pricing Strategy Knowing the importance of the different channels for your business and products, and their price elasticity, should guide your pricing and assortment strategies and how you price versus competitors. Any brand that has D2C sales needs to differentiate their assortment to avoid competition with their own retailer partners. When assortments are differentiated, such as when certain SKUs are only offered through D2C channels, the lower price elasticity can work in the brand’s favour. Our recent blog on differentiating product assortments goes into this topic in more detail. Meeting customers where they are with an omnichannel experience EuroCommerce, an organisation representing the retail and wholesale sector in Europe, put out their 2022 European E-commerce Report and included the following quote from Director-General Christel Delberghe: “The Covid-19 pandemic acted as an accelerator for online sales, as e-commerce quickly responded to the challenges of the Covid pandemic by ensuring continued access to producers and services to consumers. 2021 saw e-commerce sales continuing to grow, albeit at a slower pace as Covid restrictions loosened up. But consumers, many of whom had not gone online before, have seen the utility and convenience of e-commerce, and preliminary results from a study currently being conducted for us expect online sales to make up an average of 30% of retail turnover by 2030. The consumer journey has completely changed: our customers expect to be able to use various combinations of online and offline interaction. Retailers will have no choice but to invest in making their offering a seamless experience.” Omnia has seen this changing consumer journey in action among the e-commerce retailers and brands we work with. As customers grow to expect a more seamless omnichannel experience, it will become increasingly important to win sales on the platforms where the initial product search begins, whether that be Google, Amazon, TikTok or another site.
The Buyer Journey: Where Do Consumers Start Their Product Search?
20.04.2023
Product Life Cycle: Pricing strategies for brands in the PLC
Living beings are not the only ones impacted by the circle of life; products have their own version, from birth (introduction) to death (decline) in the market. The Product Life Cycle (PLC) does not just happen to...
Living beings are not the only ones impacted by the circle of life; products have their own version, from birth (introduction) to death (decline) in the market. The Product Life Cycle (PLC) does not just happen to companies, however; it can be used to their benefit when pricing is strategically aligned with the different stages of a product’s life cycle. In this article, Omnia explores the typical brand pricing mentality and how those brands, especially ones using the D2C channel, can strategically price products based on their life cycle. D2C pricing strategies of brands and retailers Many brands with an omnichannel strategy start selling D2C without having clear goals defined for the channel. If an objective is defined, it is often something to do with getting closer to the end customer; but revenue growth is typically not the main objective of the D2C channel. Why is this? Largely because of retailer relationships and trying to avoid competition with one’s own retail partners. Brands with D2C sales still depend on their retail network, so they need to ensure they are not endangering revenue from those retail partners. Brands take their retail network’s prices into account and will mostly choose to be a late follower, meaning the brand does not follow the cheapest price in the market. Instead, it keeps its price at a certain level for a period of time to give retailers more flexibility and the chance to sell their products first. This strategy also helps brands to earn good visibility in the market for new products. The resulting pricing strategy is not to offer the cheapest price, which could also erode brand identity, but instead to price alongside the market. The role of PLC in brand pricing strategies For brands, the pricing strategy throughout the PLC may look like this graphic: Following the pricing of the market requires brands to be aware of where each product in their assortment is in its PLC and how the pricing should adjust to match. Defining the length of a product’s lifespan can be challenging, and conventional wisdom is often that PLCs are shrinking over time; however, there is no strong empirical evidence of shortening PLCs at the product category, industry, technology, or model level. To weave Product Life Cycle into the “follow the market” pricing strategy described earlier, brands should start by building groups of products according to their stage in the cycle: Pricing tactics can then be assigned to each product group. Brands should define the maximum discount, or price boundary, for each group and define how the market price will be followed; for example, D2C will have the cheapest price, or 5% over the cheapest price, and so on. Depending on the PLC stage a product is in, brands should define allowable ranges for discounts. Usually, the scale of discounts would increase over time, as a product moves toward the end of its life cycle. For example, let’s consider a hypothetical furniture brand called ABC Couches. The brand’s “Super-blue ultra-comfy couch” launches in 2023 and has the following price boundaries. Introduction stage: Maximum discount given in the market is 10% Growth and maturity stages: Maximum discount given in the market is 15% Decline stage: Maximum discount given in the market is 30% Of course, brands cannot base their pricing strategies for D2C products solely on the Product Life Cycle. Other factors, like seasonal promotions, will also play a role. Talk to one of our consultants about dynamic pricing. Contact us The intersection of seasonal promotions and PLC Seasonal promotions are not completely separate from pricing based on Product Life Cycles; in fact, they can work together for a successful brand pricing strategy. The strategic goals of a seasonal promotion can differ by PLC stage: Introduction stage: When a new product launch is timed to coincide with a seasonal sale, promotions could be used to accelerate the launch. Growth stage: Seasonal promotions are used to continue growth of the product. At this stage, brands are more focused on demand-based pricing, so that will be a factor. Maturity stage: Brands trend toward competitor-based pricing in this stage, so seasonal promotions may be used to match or win versus competitor products. Decline stage: A promotional program or seasonal discount can be used to sell off a current item if a new or updated product is launching soon. This may also temporarily improve the sales outlook during the decline stage, but any improvement stemming from a non-product tactic is likely to be short-lived. As mentioned previously, brands will typically take into account the prices offered by their retailers when using seasonal promotions. If their aim is to price alongside the market, then they will want to ensure any seasonal discounts do not drastically undercut their retailer partners. Brands will also need to consider other potential effects of reducing a price: From how consumers and competitors will respond to how it could impact brand identity. Other factors that impact Product Life Cycle and pricing One size does not fit all when aligning a brand’s pricing strategies with the Product Life Cycle. A number of other factors may be at play when setting a pricing strategy. How PLC differs between verticals Finding statistics on the “average Product Life Cycle” is almost impossible, because it is so dependent on the specific product, vertical, category, and other factors. But while we cannot define an exact length of time for the average PLC, it is interesting to look at the difference in PLC length relative to other verticals. For example, fashion is known for having relatively short Product Life Cycles compared to other verticals. Most fashion brands operate based on seasons, releasing new items in preparation for each new season. While seasonality, both holiday-driven and climate-driven, and Product Life Cycles are not the same, some products, particularly those that are part of a “fad” or fast fashion trend, may see their Decline stage (end of life) as soon as the end of the season arrives. Other products, like basics, may have a much longer PLC. And then there are the products that have multiple life cycles; for example, fashion trends from the 90s that went through their Decline stage and have since come back into style, with updated versions increasing sales in the 2020s. Shorter Product Life Cycles mean that fashion brands will have different pricing strategies and may change pricing more quickly and often compared to other verticals. PLC-based pricing strategies across different channels Depending on the channel, pricing strategies based on the Product Life Cycle may need to be altered. Brands could decide that products in the Decline stage, also called End-of-Life or EOL products, might be sold only online rather than in physical stores. While retailers can benefit from the traffic of seasonal sales to sell of EOL products, D2C brands have few or no physical stores, and the ones they do have work differently than traditional retail. Another example would be differences in location. Seasonality is flipped depending on the hemisphere, so the Product Life Cycle and seasonal pricing strategies would be different in Europe versus South America. The PLC of campaign-specific products Consumers are also looking at user-generated content such as reviews, ratings, and recommendations, which can serve as powerful motivators to buy. While influencer marketing is certainly widely used, consumers say they are most likely to take product recommendations from everyday users like friends and family (37%) versus subject matter experts (25%), celebrities (7%), social media influencers (6%) or even the brand’s social media account (8%). Some products are designed and created only for special marketing campaigns, such as promotions run by or through celebrities. These products may only be sold for a limited time, giving them a predefined Product Life Cycle and different pricing strategy. One example of this would be Kyle Jenner’s Birthday Collection that sold out in 30 minutes and was restocked, but only available until her birthday on August 10th. To effectively price based on PLC, brands need Dynamic Pricing Pricing products according to their stage in the Product Life Cycle can be an effective strategy, but this requires the right data and automation to maximise the impact of promotions. Businesses can use dynamic pricing technology, also called real-time pricing, to automatically adjust prices to account for changing demand, competitor prices, market fluctuations, and other factors. This allows companies to capture more revenue by deploying the right price, on the right channels, at the right moment. Source: Hubspot Using a solution like Omnia Retail’s Dynamic Pricing makes it simple to run both planned and dynamic promotions, so brands can maximise sales of the full range of their product assortment from introduction to end-of-life. Try it for free.
Product Life Cycle: Pricing strategies for brands in the PLC
14.04.2023
The Impact of Social Media on Consumer Behaviour in e-Commerce
In recent years, social media has grown from a simple communication tool to stay in touch with friends and family to a powerful channel influencing consumer behaviour in e-commerce. With the rise of shopping online...
In recent years, social media has grown from a simple communication tool to stay in touch with friends and family to a powerful channel influencing consumer behaviour in e-commerce. With the rise of shopping online coinciding with the popularisation of “social commerce” on platforms like TikTok, Instagram, and Facebook, consumers can now discover, research, and buy products on the social media apps where they are already spending an average of 2.5 hours per day. To compete in the modern e-commerce space, it is essential for businesses to understand this dynamic and adapt their strategies accordingly. In this guide, Omnia will discuss the current landscape at the intersection of social media and e-commerce, discuss its impact on consumer experience and behaviour, and offer some ideas for how brands and retailers can capitalise on the opportunity of social commerce. The growing importance of social media in e-commerce In the early 2000s, the first mainstream social media platforms like Myspace and Facebook focused heavily on text content, with users sharing content with friends or followers in the form of written updates and statuses. With the launch of Instagram and Snapchat, the industry started to trend more toward mobile, images, and video content, and this has only continued with the explosive growth of TikTok. Source: https://www.smartinsights.com/ecommerce/ecommerce-strategy/social-commerce-trends/ In recent years, social media platforms like TikTok, Instagram, and Facebook have increasingly become popular avenues for online shopping and product research, a phenomenon referred to as “social commerce”. According to Accenture, social commerce is set to grow three times faster than traditional commerce in the next few years, reaching $1.2 trillion by 2025. This growth will be driven primarily by Gen Z and Millennials, who will make up 62% of global social commerce spending by the same year. However, purchasing products through social media is not the only way the platforms impact online shopping; in fact, this is a newer development. Platforms are also used to research or gain inspiration: 75% of all internet users use social media to research products 28% use social media to find inspiration for things they can do or purchase 23% use social media to check what content is being posted by their favourite brands Unlike traditional e-commerce giants like Amazon, which excel when consumers know what they want to buy, social media offers a unique browsing experience that allows users to "window shop” online and discover new products through engaging content. Talk to one of our consultants about social commerce and pricing. Contact us What are consumers buying through social commerce? An Accenture report predicted by 2025, the highest number of global purchases through social media would be in the categories of clothing (18%), consumer electronics (13%), and home decor (7%). Beauty and personal care is also predicted to grow quickly in key markets, and fresh food and snack items will be a sizable category (13%), although those sales are almost exclusive to China. E-commerce customer experience on social media The shopping experience on social media can differ from traditional e-commerce. While mobile makes up for approximately 43% of e-commerce activity, social media platforms are used on mobile devices about 80% of the time. This has led to an increased focus on delivering seamless and enjoyable shopping experiences tailored for smaller screens, as well as features allowing consumers to buy products without app switching or leaving the platform. Instagram and TikTok: The leading platforms in social commerce While most social media platforms include some sort of shopping capability, two of the most popular for social commerce are Instagram and TikTok. Instagram’s shopping section, which allows users to purchase directly from the app, took off starting in 2019. By now, users are able to access a shop on the company’s profile and buy via stickers in Instagram Stories, links in photo and video posts, and through ads shown in their feed. Instagram Shop and Instagram Checkout now have more than 130 million monthly users and there are more than 25 million businesses on the app. TikTok is one of the newest large-scale social media platforms, having only launched in 2018, but its rapid growth should make all businesses pay attention to the e-commerce opportunity it presents. Within its first year, TikTok reached 500 million monthly active users, and was the most downloaded app globally in 2022 with 850 million downloads, followed by Instagram and WhatsApp. While TikTok’s user base heavily skews toward Gen Z, adoption is growing with millennials, and these are the two generations that make up the majority of social commerce spending. Two out of three users say they are likely to buy something while on the platform, and 55% use TikTok to research new brands or products. How social media has changed consumer behaviour for e-commerce Even outside of true social commerce, where a customer buys something directly through the social media platform, the advent of social media has dramatically impacted consumer behaviour and decision-making in e-commerce overall: Research and inspiration: As mentioned previously, many consumers use social media to research products and find inspiration for what to buy. 87% of shoppers say they search or consult with social media before purchasing any item and 22% of consumers prefer social media as their channel to discover new products. Research online, purchase offline: This phenomenon, abbreviated as ROPO, is important for any business with an omnichannel strategy to watch. It refers to a consumer behaviour where shoppers research the product online, such as through social media, but make the final purchase at a physical store. Reviews and recommendations: Consumers are also looking at user-generated content such as reviews, ratings, and recommendations, which can serve as powerful motivators to buy. While influencer marketing is certainly widely used, consumers say they are most likely to take product recommendations from everyday users like friends and family (37%) versus subject matter experts (25%), celebrities (7%), social media influencers (6%) or even the brand’s social media account (8%). Discounts and promotions: Just like a funny video or engaging news story, discount codes and flash sales can go viral on social media, spreading rapidly and creating a sense of urgency around purchases. E-commerce social media stars: Brands who get it right Some brands just get it when it comes to social media and social commerce. Below are a few glowing examples of those who have successfully leveraged social media to drive consumer behaviour and sales: Glossier, CLUSE and Snug Glossier is what’s known as a digital native vertical brand, or DNVB, meaning it was born online and is a fully D2C business. Social media helped the company grow to more than $100 million in revenue within four years of launching back in 2010. A self-described content-first company, Glossier has a heavy social media presence with content created by influencers and followers alike, and has the mantra “Glossier is listening”, encouraging customers to help shape products and packaging. Founded in the Netherlands in 2009, CLUSE is a fashion brand that started e-commerce operations in 2014. The brand’s extensive use of Instagram, its social commerce features, and user-generated content has been key to the brand’s growth. Snug is a sofa-in-a-box company based in London. Much of its £31.6 million (about €35.9 million) revenue in 2021 was driven through social media, especially Instagram and Pinterest. Snug’s founder and CEO Rob Bridgman told Econsultancy that “people spend more time researching which sofa to buy than which house,” which is why the company focuses on making the purchase simple and accessible via social media. Social media will continue to play a key role in the customer’s e-commerce journey Using social media to market and directly sell e-commerce products comes back to a basic business principle: Meet your customers where they are. With the average user already spending nearly 2.5 hours per day on social media, giving them the convenience of seeing a recommendation or making a purchase right where they are is powerful. As customers grow more and more accustomed to this convenience, the area of social commerce is only expected to grow.
The Impact of Social Media on Consumer Behaviour in e-Commerce
19.12.2022
Festive season: Omnia sees chances for beverages market gains
Retail is experiencing a first this festive season: This is the first time in 92 years that the industry has had to contend with Black Friday, Christmas and a World Cup all at the same time. In addition, 2022’s...
Retail is experiencing a first this festive season: This is the first time in 92 years that the industry has had to contend with Black Friday, Christmas and a World Cup all at the same time. In addition, 2022’s Christmas period marks the first one with zero restrictions on alcohol and social gatherings since 2019. Typically, these three events lead consumers to spend more in various categories, from food to tech to alcohol, giving retail a much-loved boost. The festive season, which includes Christmas and New Year’s Eve, mostly sees alcohol sales increase over this period as friends and families host parties and dinners. The alcoholic drinks category saw $1,484 billion in revenue in 2022 and is expected to be valued at $393 billion by 2026. However, as unprecedented food and energy costs dominate household budgets and headlines this year, consumer spending and behaviour are changing faster than ever. Will shoppers be grabbing their favourite bottle of gin or red wine this Christmas? Are consumers turning to alternatives? What are the alcohol consumption trends as we enter 2023? We’re looking at this category in particular as the festive season continues. Christmas alcohol sales may get a boost from the FIFA World Cup Although alcohol sales may be banned at all stadiums in Qatar, the FIFA World Cup, which is the first World Cup taking place during Europe and the UK’s winter season, is propelling alcohol sales in some parts of the world. According to Pernod Ricard, which owns alcohol brands like Jameson and Absolut Vodka, found that 45% of consumers are eager to watch the football matches at home with friends and family, which boosts sales for domestic use. Jameson has created a football-themed campaign offering five unique bottles with different football shirts which will cater to the game’s biggest fans as well as those looking for gifts during the festive season. In the UK, the popular brand Westons Cider began off-shelf advertising and offering festive season promotions back in November to make use of the timing of the World Cup. Although retail is facing the overarching issue of high living costs as a deterrent for spending, alcohol sales are often a category that is little affected during tough economic times. Instead, shoppers tend to reduce spending in other areas while keeping items like beer, wine and spirits as a treat after long days or on weekends. What’s new and what’s changing in the alcoholic drinks market? Emerging economies in Asia added significantly to growth The Asia Pacific region (APAC), which includes China, has contributed the most to the drinks market’s growth, with revenue from China alone bringing in $319 billion in 2022. The APAC region, including many countries with emerging economies, saw steady growth from 2021-2022 despite the pandemic, while some developed economies saw a decline. Increasing levels of wealth and new market entrants are fueling this growth in Asia and the US. Niche categories show development The IWSR, which specialises in market analysis for alcohol in 157 countries, is seeing new trends and changes in the global drinks market with the growth of niche categories such as agave-based spirits, sugar-free tonics and aperitifs, non-alcoholic beer and gin, Japanese whiskey, flavoured gins, craft beer. These new entrants are diversifying each segment and are becoming appealing to new, younger buyers. E-commerce alcoholic-drinks sales are growing Between 2020 - 2025, beverage alcohol e-commerce is expected to grow in value by 66%. This is thanks to the impressive growth in omnichannel and pure player e-commerce channels that have sprung up in the last two years, including marketplace apps for home delivery, specialist marketplace web shops (such as a website offering wine from various vineyards and regions), and D2C online stores from brands. In Germany, the majority of online drinks sales is done via marketplaces and in second place, online specialists. In the Netherlands, the majority is omnichannel shopping, with online specialists coming in second too. Christmas may see an increase in low- or no-alcohol beverages IWSR reports that “moderation choices are driven by consumption occasions.” In other words, with events like Christmas and New Year’s Eve typically seeing consumers enjoy more alcoholic drinks on those days in particular, the increase in low- and no-alcohol drinks in the market will see an uptick this festive season. People who are hosting parties, dinners and other festive get-togethers, as well as attendees who don’t want to consume too much alcohol, will be enjoying low- or no-alcohol drinks. Alternatively, there will also be “blenders”, as described by IWSR, who will drink both non- and alcoholic drinks. There is always an opportunity to add value Taking into consideration record-high inflation as well as the increased cost of living, retailers and brands should heed the call to create value for customers. There are many opportunities now - combining Christmas, the World Cup and New Year’s Eve - for themed promotions, discounts, in-store experiences and advertising. If Christmas shopping is expected to decline by 3% in the six weeks leading up to the day compared to 2021, there is even more reason for retail leaders to look at where they can attract consumers and influence buying decisions, especially within a category like alcoholic beverages, which typically revels in popularity at this time of year.
Festive season: Omnia sees chances for beverages market gains
01.12.2022
Christmas Gifts in 2022: A Conundrum of 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.
Christmas Gifts in 2022: A Conundrum of sustainability and capitalism
23.11.2022
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.
Black Friday 2022: Our predictions and recommendations
17.11.2022
Price Points Live: How retailers can benefit from 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: How retailers can benefit from consumer psychology
27.10.2022
E-commerce and pricing take centre stage at Price Points Live
Europe’s greatest minds in e-commerce, pricing, retail, and consumer psychology converged on Saint Olof’s Chapel in Amsterdam on Thursday 13 October 2022 to share their knowledge in an exciting panel discussion event,...
Europe’s greatest minds in e-commerce, pricing, retail, and consumer psychology converged on Saint Olof’s Chapel in Amsterdam on Thursday 13 October 2022 to share their knowledge in an exciting panel discussion event, hosted by Omnia Retail. As the leaders of pricing software across Europe, creating the annual event for Omnia’s clients allows a way for each client to remain on top of their pricing strategies, e-commerce trends, as well as the ability to meet consumer demands. Find the full event recording below. Event Recording The event included six keynote speakers from various sectors in retail who shared insights and valuable knowledge in economics, inflation, e-commerce, pricing and consumer psychology. The speakers included Professor Hermann Simon, the leading pricing consultant who founded Simon-Kucher & Partners, and the author of over 40 books on pricing and business. David Sloff, the Commercial Director of Northern Europe at Diageo; Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris; Patrick Fagan and Dan Thwaites, the founders of Capuchin Behavioural Science; and Aline Schuiling who is Senior Economist Eurozone at Group Economics of ABN AMRO Bank. The event was moderated by Suyin Aerts and Omnia Retail’s Founder and CEO Sander Roose took to the stage to welcome event attendees and also took part in the concluding roundtable discussion at the end of the event. Aline Schuiling discusses current and future inflation This year, inflation across Europe has been the top issue on the minds of ordinary citizens, making it an important topic to delve into when discussing pricing strategies. Schuiling, who, as mentioned above, specialises in economics, shared an eye-opening statistic: “In Europe, energy prices are 40% higher than they were a year ago.” However, European consumers have not been left alone to deal with price increases. ”The good news is that European governments are contributing to offset the cost of gas to protect households and businesses,” says Schuiling, with Germany in the lead contributing 6.5% of their GDP. “Earlier this year, France already capped the cost of electricity and gas, and although their inflation is not zero, this shows you how governments can help,” says Schuiling. Despite high inflation being the order of the day today, Schuiling and her team of economists have positive predictions for the next two years: “From now and until 2024, the European Central Bank aims to anchor inflation at 2%, which is a steady decline from 10.1% in 2022.” How retailers can use consumer psychology to increase sales Speaking on the intersection of data, consumer psychology and e-commerce, Dan Thwaites and Patrick Fagan, co-founders of Capuchin Behavioural Science, took the stage to share how they help clients achieve commercial goals by influencing the minds of consumers. To showcase how specific, data-driven and science-backed their work is, Patrick shared how people who have a shorter name or nickname are viewed as more cheerful and popular. Another study they shared on how you can manipulate perceptions of yourself is wearing glasses, as studies have shown that people who wear glasses are viewed as being smarter and more reliable. So, how do these behavioural effects result in increased profits for brands? “Guiness, the beer brand, saw an increase of sales by 25% just by creating the Guiness beer glass and having large cardboard signage in the aisles. These act as slight nudges to influence a consumer’s purchase behaviour,” says Patrick.”Even products that are the colour orange see an increase in sales around Halloween time, like Reese’s peanut butter cups, because people are seeing orange everywhere and this acts as a subtle nudge,” he continues. “A study was done to show the influence of incidental cues on our perceptions and behaviours when a bottle store played different kinds of music while a consumer looked for wine. The amount spent on wine was more than double when classical music was played versus pop music,” Patrick shared. Other tactics to increase sales is to add phrases like “special purchase” or “everyday low price” next to the price to insinuate that this is a good deal. Capuchin’s strategies are based upon proven studies that have shown how consumers can spend more or less under certain conditions. There is empirical evidence for an intertemporal substitution effect, where people spend more money today because they expect goods to be more expensive tomorrow. Another study was shared on the anchoring effect which shows how prices may look more attractive when placed to something more expensive. For example, a luxury car is seen as more affordable when placed next to a luxury yacht. Another study based on the decoy effect allows retailers to place a decoy product that’s expensive next to the product they actually want to sell. Suddenly, the price of that product doesn’t seem so high when compared to the decoy. Lastly, an interesting study on numerical cognition shows how consumers see prices with lots of zeros as being higher. So, retailers could price a product at €4,655.00 instead of €4,000.00 and the lower price with the zeros may be perceived as being higher. Can e-commerce become fully sustainable? Dr Heleen Buldeo Rai, a researcher at the Universite ́ Gustave Eiffel in Paris, is interested in sustainable e-commerce and urban logistics and how online retail can work toward a greener industry in the future. Her keynote included 10 insights that retailers and brands would find interesting. “By 2025, about 30-50% of everything we buy will be done online. And so, it is time for us to look at ways to organise the e-commerce supply chain in a more sustainable way,” says Dr Buldeo Rai. “Online shopping produces 4x less carbon dioxide emissions versus traditional store shopping,” says the researcher, but home delivery still remains the most impactful part of the e-commerce journey on the environment, meaning retailers should consider offering new delivery options like collection points to lower their environmental impact. Dr Rai and her team found through an experiment that 59% of online shoppers would opt for a slower delivery method if the website had a “did you know” information box sharing that if they are given more time to group parcels, the environmental impact of delivering this parcel will be lower. Brand and retailers share more than they think, and shouldn’t be arguing with one another, says David Sloff As the Commercial Director of Northern Europe at Diageo, David explored the different perspectives a brand and retailer can have on the term “price”. He opened up about the complexity of different definitions of pricing, depending on the lens you are using to look at pricing. In his role as a brand owner for various consumer brands at P&G, such as Ariel and Braun, he stresses that it’s important to distinguish which price we are taking and, secondly, what goals one has when setting prices. On the topic of how brands should approach the Goliath that is Amazon, David recommends that brands shouldn’t fight the “Amazon-machine”, but sit and write down a strategy on how to control variables and keep them all consistent and fair with other retailers. Lastly, when talking about the intersection between brands and retailers, David says it’s all about the question of “How much value do we share?” And now, more specifically, “How much of the inflation do we share? We see more fights between brands and retailers but it's so important not to forget the goal of serving consumers,” he says. More good advice from David included focusing on value creation thinking in the mid-to-long term. Prof Hermann Simon explains the importance of goal-setting and true profit The last keynote speaker to present was Professor Herman Simon who is the Founder of Simon-Kucher & Partners and is the leading pricing consultant. He began by posing the question, “What is true profit?” In addition to defining it as the money made after all overheads, debts and contractual obligations are paid, Prof Simon goes on to share what the true profits are of food retailers, e-commerce platforms like Amazon, and tech companies. True profit for food retailers remained between 2-3%, while tech companies like Apple had profits in the mid-20 percentages and up. The point, for Prof Simon, is that the gap between “winners and losers” is growing “as some companies are getting it right and some aren’t” when it comes to choosing the right goals. According to Prof Simon, “profit orientation is the only meaningful goal because it is the only one that observes both the market side and the cost side. Elimination of profit killers is the most effective way to profit improvement. This especially applies to price wars and overcapacities, since they are the most dangerous profit.” When a profit driver is improved by 1%, Prof Simon surmises that the result is that the profit multiplier of price is 10, the cost is 6, for volume is 4. On the topic of inflation, Prof Simon says that it is essentially the decreasing value of money and for companies to survive and grow, they need to “get the cash in as quickly as possible and then spend it as quickly as possible.” The event concluded with all speakers joining Suyin and Sander on stage for further discussion on some of the key points made. “We know that these are very challenging economic times, but the exciting thing is that we really believe that pricing matters more than ever and can really help you win in the market, and we’re happy that you’ve chosen Omnia as your partner to achieve that,” concludes Sander. Stay posted for more business and commerce content or follow us on our LinkedIn page!
E-commerce and pricing take centre stage at Price Points Live
20.10.2022
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.
As retail awaits higher spending this festive season, brick+mortar enjoys a comeback
19.10.2022
After rising inflation, consumers turn to credit and more debt
Inflation is not a new phenomenon that consumers, businesses, banks or e-commerce giants have had to deal with. The first time the term was used to describe an inflation of a currency was in Latin in 1838; after which...
Inflation is not a new phenomenon that consumers, businesses, banks or e-commerce giants have had to deal with. The first time the term was used to describe an inflation of a currency was in Latin in 1838; after which it became a term and a practice often used and implemented by governments. To the consumer, hearing that inflation is increasing is simply a sound call that their cost of living will increase. To businesses and e-commerce players, it’s a sign that their overhead costs and the prices of their product may have to climb the ladder too. It’s safe to say that inflation isn’t the favourite of most - consumers and businesses alike. Fast-forward to 2022 and many countries in Europe, Asia and the US are experiencing some of the highest inflation levels in decades as a culminating effect of the Covid-19 pandemic and Russia’s invasion of Ukraine. In August, the UK reached a staggering high of 10.1% inflation, a number they haven’t reached in 40 years, while the Bank of England predicts that it will increase to 13% later on in the year. It was the same for France, who reached 6.1%; a 37-year high. In the same month, the EU reached 9.1% inflation. It’s been a year of much stress for the average consumer, which begs the question: With inflation on the rise all round, will people expand their debt limits? Will credit pose a risk to markets? Do inflation expectations mean anything for consumers? We’re looking at the relationship between rising inflation and increasing credit debt, and if shoppers are turning to credit to offset the sting of rising living costs. How rising inflation results in higher credit card debt It is well known that each time inflation increases, governments turn to interest rates to offset the effect on economic growth and unemployment. It’s almost as if rising inflation and increases in interest rates go hand in hand as a solution for fiscal departments the world over, and it is no different today. To sum up the chain reaction into one sentence, supply chain issues coupled with rising inflation causes higher prices in gas, food, utilities and clothing to pressure consumers into using their credit cards to make ends meet, resulting in more consumer debt and a higher dependency on borrowed money. Let’s break this down a little further: Supply chain issues. Once the pandemic began to slow down, the surge in demand for anything from Korean skincare, Italian bicycles and Swiss watches outweighed the global supply chain’s ability to meet the demand. Something as obscure as a lack of shipping containers caused massive delays on a global scale, which resulted in businesses having to find other (more expensive) ways of shipping their products. And even if they didn’t find another way, the cost of a shipping container in 2022 rose nine times the price it was in 2019 from $1100 to $9200. Following this, Russia’s invasion of Ukraine sparked massive increases in inflation around the world. Russia is the world’s number one gas exporter, and with the instability surrounding the Russia-Ukraine conflict, markets became unsteady, sending inflation sky-rocketing. As gas prices rose, so did food, home essentials, utilities and more. Salary increases cannot match this speed, so consumers turn to credit cards to assist with the monthly bills. In the US alone, credit card balances rose by $52 billion in the last quarter of 2021 alone, showing just how dependent consumers can become on credit. This is the largest quarterly increase in 22 years. UK credit card debt is set to increase by 8%, reaching a 5-year high, and it is expected to climb another 5.5% in 2023. European banks are tightening up In July, the European Central Bank conducted a survey asking banks across Europe if they had seen a loosening or tightening of credit standards, which include their internal guidelines and approval criteria. Speaking specifically about the second quarter of 2022, 153 banks responded saying that they had considerably tightened credit standards on loans to businesses and home loans due to a decrease in risk tolerance in a time of low confidence in the markets and a shaky economic outlook. However, the demand for loans increased in the second quarter and is expected to do so in the third quarter too, thanks to the increased prices of production, continued supply chain disruptions and high energy prices. Consumer credit was also tightened during the same period, with higher risk perceptions as the main reason. At the same time, the European Parliament’s Internal Market and Consumer Protection Committee has approved new rules on credit lending, credit debt, overdrafts and loans that are unsuitable for consumers’ budgets. The new rules are part of the Consumer Credit Directive (CCD) that was created 14 years ago. Quite notably, the current state of the EU economy is the first to instigate Parliament to make changes in the 14 years the CCD has been around. Creditworthiness, pricing rules and information regarding requirements have all been amended, with more restrictions to combat overwhelming debt. For example, consumers applying for a credit card or a credit increase will have to give more information regarding their financial obligations and living expenses. Banks can now use and ask for information from non-financial entities like a consumer’s smartphone contract provider or utilities companies to obtain information on their accounts. Although these changes are mostly positive for the long-run financial health of consumers, it may be stressful in the short term while they are reaching for borrowed money to get them through the month. Do inflation predictions mean anything to consumers and businesses? An essay written by Veronique de Rugy and Jack Salmon at George Mason University in the US touched on consumer expectations regarding inflation. They surmised that inflation expectations matter. Why? Because if it is known that price increases are coming tomorrow, it affects what is being spent today. If businesses can see increasing overhead and wage prices for next year, they’ll increase the price of their products this year. This is how an economy stays in the black. This sentiment is shared by the European Central Bank who published a report trying to understand consumers’ expectations of inflation, how sociodemographic factors influence those expectations, and how the role of uncertainty affects a higher or lower prediction. The report, entitled “Making sense of consumers’ inflation perceptions and expectations - the role of uncertainty”, published in the ECB Economic Bulletin of 2021, found that higher expectations of inflation and a negative economic outlook mostly came from young females that belong to lower income and educational groups. People with a more positive outlook on the economy and a lower expectation of inflation reported having more financial comfortability. Overall, the report concluded that inflation predictions and expectations from consumers are in fact important for “the monetary transmission mechanism” - In other words echoing what de Rugy and Salmon stated above, that predictions influence today’s consumer behaviour. Inflation: A necessary evil? With the EU’s tightening of credit approval processes to combat overwhelming debt, and with the understanding that inflation expectations play an important role in the present and future economies of countries around the world, we can remain hopeful that the rise in inflation is not all that bad. However, inflation is not predicted to decrease for the rest of 2022 or even into 2023, bringing rise to the fears that consumers will rely on credit more often. Understanding and dealing with inflation - as a consumer or a business - is like walking a tightrope on the edge of a mountain. As a brand or a retailer looking for space in a shopper’s cart, you’ll have to compete just that much more to get their attention and their hard-earned money. For example, a shopper will have to choose between their favourite brand of cat food versus the cheaper, maybe less nutritious brand. Or, if a consumer receives a bonus, are they going to spend it on having the latest iPhone (even though they already own one) or buying a much-needed washing machine for the very first time? This is where consumer behaviour and price elasticity meet. Learning how brands and retailers can better navigate through times of high inflation using Dynamic Pricing is something our CEO Sander Roose is passionate about. Stay posted for more business and commerce content or follow us on our LinkedIn page!
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