Are there implications of holiday shopping season starting on Prime Day?
Amazon is simultaneously promoting Prime Day (which fell on 13th and 14th October) and Holiday shopping. The rescheduling of Prime Day will trigger a very high level of online shopping - a 10-week "Mega Peak", as well as more efficiently utilise online order fulfilment capacity.
For online shopping, this holiday season will be unique. Here's why:
- Very high online traffic online as people avoid physical stores.
- Three acute sales events (Prime Day to start the season, Black Friday/Cyber Monday weekend in the middle, and shipping cutoff day as the last chance to obtain Christmas Eve delivery.
- An extended season (~10 weeks instead of the usual 4)
Our director of strategy, Alex Brandstetter, and I had a series of conversations on the implications this has for brands.
- Start your holiday routine now (if you haven't already). You know the drill - daily scrums, daily reporting, increased monitoring of competitive offers as well as your own in-stock levels. Increase communications between all levels within the companies so changes to marketing plans and budgets can be made quickly.
- Assess the competitive deal environment early and adjust as necessary. We expect the high demand for online shopping and the proximity of Prime Day to Black Friday/Cyber Monday to result in muted deals and discounts from leading brands on Prime Day. However, this will play out differently within each category. I suspect market-share leaders will be hesitant to have big deals during Prime day and the beginning of the season. Also, consider that discounts on Prime Day may disqualify Black Friday/Cyber Monday deals unless they're prohibitively steep. Knowing that, challenger brands will seize the opportunity. Your promotional approach will depend on your brand's share aspirations and your inventory position. Try to assess early on how this game of chess is playing out for your category.
- Support your deal strategy with coordinated media. Apply media spend to support your promotional strategy. If you're a challenger and promoting early, maximise the opportunity with media support. If you're holding off on deals, build retargeting pools off traffic to competitor deals.
- Flexibly manage budgets for October-December. Be ready to move money from December to October and vice versa.
- Manage for profit maximisation and sell-through. This Q4 can be treated as a time-bound and inventory limited optimisation problem. Look at gross profit return on spend and seek profit maximisation, not just sales growth. For example, if competitors run out of stock or are not promoting, a profit maximisation strategy may call for increased media spending on full-price offers (the media may have a less efficient ROAS driving a full-price offer, but the profit will be higher).
- Be ready to replenish. Unlike other holiday seasons, there is a lot more uncertainty in channel demand this year. Be ready to adjust the supply chain to direct product where consumers are buying the most.