From a brand marketing point of view Black Friday is a disaster – it’s short termism at it’s worst, with little or no regard for the long term damage to reputation and profitability.
Stand back and look at it dispassionately, and it’s crazy that a frantic day of knock down prices and brawls over flat screen TVs was ever seen as holding the key to tipping into annual profit.
A different approach
In truth Black Friday is a not-so-subtle hint that a different approach is required.
But that’s the elephant in the room – rather than cutting prices and relying on flash sales, retail could finally find a way to more effectively monetise vast ecommerce traffic year round.
And let’s be clear, we’re not talking about overnight transformation – the clue is in the numbers.
Shoppers spent £1.1bn on Black Friday in 2015. But, spread that headline-grabbing £1.1bn over a year and it equates to just £21m a week. To put that figure in context, it amounts to an increase of just 0.3% on the sector’s average weekly revenues (excluding the £1.1bn from Black Friday).
Are we really to believe that retail cannot find a way to drive revenue increases of just 0.3%?
Given the relatively low levels of conversion online right now, such a modest gain is eminently doable. Let’s remember that, in 2015, ecommerce revenues of £114bn represented a conversion rate of around 7%.
In fact, despite massive spending on ecommerce marketing and merchandising technologies over the years, conversion rates have stubbornly remained well below the 10% mark since ecommerce’s year dot – and lag well behind in-store rates.
That failure is down to merchandising and the user experience – ecommerce sites have failed to inspire people to buy or made it too hard to buy, or both.
The core problem is a reliance on offline techniques that simply do not work online – a rethink is required. At present, retailers still rely on a manual approach to merchandising that is unsustainably labour intensive.
Unsustainable in terms of resource demand – just look at the sheer number of online merchandising jobs retailers are currently trying to fill.
And unsustainable in terms of results – how long will retailers continue to attempt to prop up results with sticking plaster solutions and promotions rather than address the core issues?
Automation and AI
The truth is, this is the essence of a marketing (well, merchandising) technology problem. Retailers are failing to grasp a nettle that other sectors tackled long ago – automation.
But not just any automation. The automation of online merchandising’s heavy lifting – the vast number of repetitive but vital tasks that are practically made for machines – and automation guided by artificial intelligence and big data capabilities.
This kind of intelligent automation has two immediate virtues.
Chief amongst them is the ability to deliver better, more relevant experiences for each customer, by adapting everything from search and navigation to recommendations and even product display according to individual behaviour and intention in real time.
That would truly be a watershed moment: The moment when retailers finally embrace the full potential of ecommerce – the ability to shape and instantly adapt product discovery and the entire customer experience according to the needs of each and every individual customer.
Doing all that across product exposure, search, navigation and recommendation of course, neatly takes care of both inspiration and ease of use – the twin failings that have to date held back conversion rates.
Meanwhile, merchandisers are freed from the spreadsheet, and enabled to focus on the high level tasks that really require their specialist input.
That could include the development and execution of the holistic product exposure strategies that would be necessary to guide automated merchandising. These high level strategies could be shaped by real merchandising priorities – business objectives like revenue, profit margin, stock oversupply and consumer trends (be they micro or macro).
Kick the habit
When you think about it, an ecommerce operation that brings together marketing and technology to cut costs, create efficiencies and improve sales performance is just what retailers should have been doing all along.
In their defence, of course, the AI-enabled technologies that truly enable it are only just emerging, so the real challenge now is to kick the habits of the past and look to a different future – a future in which ecommerce experiences inspires purchase through absolute, individual relevance.
Viewed through that lens, a revenue gain of 0.3% suddenly feels more like a molehill than a mountain – and, thank goodness, that race to the bottom of which Black Friday is so emblematic would be a thing of the past.
– by Frank Schoutissen