Price Points by Omnia Retail

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.

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.

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.