Michelle Mone on how retailers can compete against the mighty Amazon
A view from Michelle Mone

Michelle Mone on how retailers can compete against the mighty Amazon

Retailers have become wilful victims of their own demise. Here are solutions that may counter the Amazon-by default attitude.

Sick of hearing about Black Friday? Me too. But given the divisive nature of the sales event last year, I’m still processing the absurdity of it all and what we in retail can learn from it. 

To begin with, retailers were faced with an extremely volatile marketplace. Alongside the niggling undercurrent of Brexit, macro-factors such as poor wage growth, a slump in sterling and increasing inflation led to a turbulent festive shopping period for many merchants. Even the weather put a boot in, thanks to an unseasonably warm start to winter, followed by rolling storms and an icy finish. 

We also saw a growing number of big brand retailers rally behind the emerging subculture of shoppers openly shunning the sales holiday. Yet, any disruption this caused paled compared to the chaos of Amazon’s Black Friday Week campaign, which begun a week prior to Black Friday itself to essentially get the jump on a retail industry already struggling in its wake.

Cue retailers, scrambling to remain competitive and relevant, throwing their sales plans off kilter by offering ridiculous reductions to match. Sadly, this race to the bottom wasn’t matched by consumer spending, which fell throughout the festive season to its lowest level since 2012. The unfortunate fall-out being that 45,000 retailers, including many beloved high street brands, now find themselves in financial distress, 8,000 of which may never recover according to insolvency advisory company Begbies Traynor.

Amazon-by-Default worked for tech-savvy retailers

The press coverage over the Golden Quarter is usually reserved for the ailing performance of the high street at the hands of Amazon. Yet, both bricks-and-mortar stores and online retailers alike felt the sea-change caused by Amazon’s early start. The difference is that while the high street struggled to adapt, those retailers with appropriately nimble digital strategies could make the Amazon-effect work for them.

According to Ve Global’s latest retail report into the Golden Quarter, UK online retailers clocked up over 4 times the number of online sales clocked up in the UK compared to a normal Friday. Even at the beginning of Amazon’s Black Friday Week campaign, which galvanised much of the early consumer interest, online retailers in the UK actually experienced higher website conversion rates than average and even Black Friday itself. 

Online retailers shoot themselves in the foot – repeatedly 

While Amazon’s Black Friday Week campaign skewed the usual calendar, there’s little doubt it had a positive effect on online shopping. The upside of Amazon-by-default mindset is more people than ever are comfortable with online shopping which benefits all online retailers, especially those equipped to capitalise on the rush. This meant that despite the turbulence, Black Friday 2017 was the biggest on record, with online sales accounting for almost a quarter of all non-food shopping.

However, for those online retailers still operating in the Dark Ages, forecasted sales and profit opportunities failed to materialise throughout the Golden Quarter. And I believe this is partly due to something that retailers apparently solved years ago: on-site abandonment.

Despite a surge in online traffic of +122% compared with an average Friday, abandonment rates hit a staggering 85% over the course of Black Friday 2017. These low conversion ratios mean many retailers simply fail to make money, with eight out of 10 customers abandoning their carts at the final hurdle. With more than a third of UK sales being made on mobile and 15% via tablet, the situation only got worse for those failing to optimise their sites for the touchscreen generation.

Amazon offers a frictionless consumer journey, transitioning shoppers from the browsing to the buyer phase faster than any other rival retailer. Customer expectations have undoubtedly been raised as a result and if retailers can’t get their act together and connect with a modern consumer market, they have no hopes of countering the Amazon-By Default attitude or making it work in their favour.

How to compete and win in 2018?

One thing is clear, retailers of all sizes must be light on their feet and develop marketing strategies built around flexibility that allow them to quickly respond to the unexpected. Those who stick to solely the status quo and base their key seasonal category plan around a fixed calendar are likely to be playing catch-up again this year.

Collecting, analysing and awakening consumer data will be a critical factor, here. As too will a retailer’s ability to identify and harness the behavioural insights from their customers, so they can initiate greater levels of personalisation. While retailers focus on tailoring the online journeys for their customers, they should also reinforce existing marketing tactics by introducing automated consumer acquisition tools that help push consumers over the line.

The Golden Quarter should not be written off just yet, with an abundance of lucrative opportunities available for retailers to pursue. First off, the numbers are plain for all to see; online sales, outside of Amazon, are still growing year on year in the UK.

On top of this, Black Friday has broken into new international markets previously resistant to the concept. Finally, programmatic advertising campaigns this year emerged as the route to provide the flexibility retailers sorely require, returning unprecedented success over the entire Golden Quarter.

A final thought 

Simply starting earlier may earn a competitive edge in the short term but, as I’ve previously detailed, this strategy comes with risks of its own. The key lesson from last year’s Golden Quarter is to plan your digital strategy carefully, identify and take advantage of prime days and times in this continuous evolving calendar. Also, expect the unexpected and prepare for it in setting in place flexible strategies that can be switched on and off to move with the whims of the market. 

While the need for flexibility in responding to consumer trends has never been more vital, there will always be a place for pre-emption in business strategy, especially in getting on the front-foot well in advance.

Michelle Mone OBE, is founder of the global designer lingerie brand Ultimo, and the recently appointed non-executive board member of Ve Global