School has now started and everywhere – from the boisterous kindergarten classroom to a scholarly college seminar – valuable classroom lessons are being learned. There are other school-centered lessons being learned as well, in a totally different environment, in which e-retailers analyze the 2015 back-to-school shopping season that served as a run-up to the current school year. In this post, I share the five key lessons about this year’s back-to-school (B2S) eCommerce season.
These five lessons about back-to-school eCommerce resulted from research that Profitero conducted as we prepared our recently-released whitepaper, Back-to-School Shopping: 2015 eCommerce Trends. The learnings, which prompted press coverage of the whitepaper in Forbes, Fortune and Internet Retailer, consist of the following:
1. The importance of seasonal events in retail—like back-to-school shopping—continues to grow.
For the just-completed 2015 Back-to-School season, the projected total of eCommerce B2S sales is $56.25 billion, which accounts for a whopping 70.1% of total Q3 retail eCommerce sales, and 16.5% of full-year e-retail sales (Source: eMarketer).
That’s a lot of laptops, backpacks, pens, and boys’ and girls’ clothes and shoes—totaling, on average, more than $700 in spending per U.S. household (Source: National Retail Federation). More to the point, it’s an extremely high proportion of quarterly and annual sales, and it points to the ever-increasing importance of seasonal events in the business models of today’s e-retailers.
When you look at B2S—and its “big brother,” the winter holiday season—you see shopping seasons that are on an upward sales trajectory, and that feature increasingly aggressive retailer promotions that are generating earlier and earlier starts to the seasonal shopping period. For example, according to Google data, searches on B2S items in 2014 peaked on August 9, compared to August 17 in 2013, August 18 in 2012, and August 20 in 2011.
This calendarized seasonal trend is clear, and will continue into the future. But it’s not the only direction in which the marketplace is moving. Consider the launch of “contrived” signal events such as Amazon Prime Day this past July, designed to drive incremental revenue for Amazon, shift demand away from competitors, and serve as a blueprint for establishing new peak buying periods or events that are spread throughout the year.
2.Amazon and Walmart featured the lowest back-to-school prices in the research we conducted.
For our whitepaper, we conducted head-to-head comparisons of identical items on Amazon.com, Target.com and Walmart.com. These comparisons extended across six back-to-school product categories: Computers, Office Furniture, Office Supplies, Office Technology, School Supplies, and Storage & Organization.
In total, we analyzed 3,829 exact-matched products and arrived at the following conclusions:
The prices on Amazon were the lowest of the three sites, but Walmart came in a close second—only 1% higher than Amazon.
The prices on Target.com were considerably higher, coming in at 25% higher than Walmart’s.
Amazon’s prices were lower or equal to Walmart.com’s prices in five of the six categories, the only exception being Storage & Organization
Based on the results, it’s tempting to say “Amazon and Walmart are the clear winners.” But such a statement would miss the nuanced approach one must take with a pricing analysis, and points to the differing strategies and value propositions among leading e-retailers, as detailed below.
3.A value proposition is not based on lowest prices alone, as evidenced by Target.
Sure, Target came in third in the pricing comparison. But the competitive pricing doesn’t take into account that Target was offering value in other ways, such as the 5% discount received on all purchases by its Red Card holders, and the free shipping on all purchases until August 15.
It’s a case where a retailer has to make a conscious decision whether they can compete across the board on price, or whether they need to find other ways to entice customers. Clearly, in this case, Target chose the latter.
That said, I was still a bit surprised there was such a big differential between the Target prices and those of Amazon and Walmart. At Profitero, we did a study approximately one year ago—and while it didn’t cover the same categories as back-to-school, Target was much more competitive. We can attribute this, in part, to its investment in a differentiated assortment of exclusive or private-label furniture and household storage products that were featured in the earlier study—a product set that was much more compellingly priced.
4. Aggressively pushing a private label can provide big dividends, such as with AmazonBasics.
Speaking of private label, our research indicated Amazon is doing a good job in this area, at least in terms of back-to-school purchases of its AmazonBasics line. This no-frills option accounted for Fast Movers (our monthly reports that rank top sellers) in four B2S categories:
2 in Office Supplies
2 in Storage & Organization
3 in Office Furniture & Accessories
9 in Office Electronics
It’s worth noting that among these products, ratings and reviews were a key to success. On average, the products cited above had 1,839 reviews each—clearly a sample size large enough for prospective buyers to draw firm conclusions.
5. Targeting college-age shoppers is vitally important—far beyond the scope of their current buying power.
For e-retailers, it’s critical to reach out to older students during the B2S period. These students, particularly ones in college, are at a critical milestone in their lives. By specifically targeting them with programs such as the Amazon Student discount, e-retailers can lock in shoppers with a huge potential lifetime value, and create loyalty for many years to come.
Even if these students are eating a lot of pizza and Ramen noodles at the moment, there will come a time when they complete their studies, get a job (hopefully), and grow their incomes and buying power. Those are the customers any e-retailer would want.