February 2, 2018

Shoppers Rewarded Retailers this Holiday Season

For retailers, the 2017 holiday season felt like the end of a long winter and the beginning of an exciting new era.

Depending on a retailer's point of view, holiday is either the end of the year (and for the weaker ones the end of the world) or the start of it. When things are bad, retailers typically like to view it as the end, but when things are good, they view it as a beginning.

This year they are universally seeing it as a beginning.

Shoppers rewarded retailers who had survived the decade since the recession with revenues and profits, giving them hope and expectations for the future.

Online shopping showed enormous growth, with an increase of 18.1 percent compared to 2016. There were 412 million online transactions during the holiday season, and on Black Friday, Americans spent 17 percent more online than they did in 2016. It's no surprise that Amazon was the top retailer by transaction share, with 69.5 percent. Amazon also succeeded in loyalty, as more than 4 million people started an Amazon Prime free trial or began paid membership during the holiday season. There were 750 million packages delivered between Thanksgiving and New Year's Eve, approximately 40 million more than last year.

All of this contributed to a total holiday sales increase of a record 5.5 percent in 2017, which is the largest year-over-year increase since 2011, according to a Mastercard SpendingPulse report.

And just when analysts predicted physical store traffic would falter, 27 percent of retailer emails drove customers to physical locations, indicating the emphasis retailers are putting on omnichannel strategy. In fact, Target reported comparable sales growth of 3.4 percent in November and December, with physical stores enabling approximately 80 percent of that sales growth.

2017 was a successful holiday season for all of retail, but some won bigger than others. So, who did it right? And how did they succeed?

Sephora, the fast-growing cosmetics retailer, continues to show what it takes to win in this market.

Sephora has invested in developing innovative and proprietary technology to make its stores more welcoming and engaging for customers. It has invested in data as a competitive advantage rather than simply as a means to bombard customers with messaging, and in the process, it has created a community platform for customers that provides insight and drives engagement, and thus more sales.

Sephora replaced its holiday catalog with a digital campaign, which reached 20 times more people than the print version and enabled it to literally look over its customers' shoulders in real time to see what was grabbing them and what wasn't, then adapt its strategy accordingly.

Although the majority of Sephora's sales were online, the brand still took Retail Dive's 2017 Store Concept of the Year award by cracking what "experience" in beauty means in a digital world. And it wasn't just contemporary brands like Sephora that were able to pull this off. More traditional broader-based retailers like Kohl's and Walmart also showed success this holiday season. Kohl's same-store sales surged above the market at 6.9 percent during this period. Walmart attracted more shoppers by throwing 20,000 "parties" across its stores, hosting in-store toy demos, personal shopping list guides and even visits from Santa Claus.

"Above the cloud line" and eying the summit.

The beauty of Sephora's playbook is that it is available to any retailer to adopt and make their own. As our colleague Bryan Gildenberg, Kantar Consulting's chief knowledge officer, has noted, we are now "above the cloud line" in digital commerce and communications.

This means that we are through the era of multiple unknowns in digital commerce and communications. We now understand the effect of mobile, the importance of near-immediate delivery and the effects of these forces on our business models. We have a clear view of the relationships among sales, insights and engagement across devices and in the full variety of digital and physical contexts.

Gildenberg's analogy is instructive. Just as climbers know their goal (summiting), they also know that for large periods of the climb they will be in the "cloud line" -- often unclear on which step to take and where it might lead. This makes making long-term decisions and investments hard. There are so many variables and experiments going at once. Now though, the common threads of successful digital commerce and communications are visible. The clouds have cleared and retailers still on the mountain can plot their next steps with increased confidence. The challenge hasn't eased, but the routes to the top and to success are now more readily apparent.

The fastest-moving businesses in the world have a clear vision of how far they are from the summit and how to get there. Marketers that sit "above the cloud line" see the opportunities to create a meaningful experience and be intentional with shoppers.

Brands know they must capture their data and turn it into insights to engage customers in a way that they can easily consume and do something with.

Brands that won the holiday season this year streamlined how and where they're communicating with shoppers across channels to create a connected experience, telling a clear and consistent story from mobile to web, third party and in-store.

As with climbers clearing the cloud line, it's not an end but a beginning, and one they can take with renewed purpose and optimism.

Andy Heddle, group channel director, ecommerce, contributed to this article.