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Nine Predictions for the 2016 Retail Holiday Season

November 23, 2016
Keith Anderson
Written By
Keith Anderson
Keith Anderson

With Black Friday just around the corner, we list the 2016 holiday predictions from Profitero’s SVP Strategy and Insights Keith Anderson, previously published in Chain Store Age. Keith’s prediction on Amazon driving its ecosystem has already proven to be true, with the e-tailer announcing a $20 discount on Prime membership this Black Friday.

1. Shifting Demand Forward
While Black Friday once marked the official beginning of the holiday season, retailers have begun merchandising and promoting giftable items as early as October. Many shoppers still wait until the last minute, but some retailers are already trying to lock in sales with the shoppers that start their shopping early.

Still, shoppers’ overall attitudes towards the encroachment of the holiday season earlier and earlier in the year (and on holidays themselves) seem to be mixed, however. 

Expect most retailers to follow the herd (starting the season early), while those that buck the trend will try to get credit for helping their associates to enjoy the traditions too. 

2. Amazon Drives Its Ecosystem
Of course, everyone will be watching which items Amazon promotes and how competitive its prices will be. But what really makes Amazon such a force is that it competes asymmetrically.  Amazon won’t just promote individual items, it will promote sticky programs and products that lock shoppers into its ecosystem. 

Don’t be surprised to see temporary savings on Prime memberships; discounts on Alexa-enabled devices like the Echo, Tap, and Dot; the Kindle family of tablets, media streamers, and e-readers; giftable subscriptions; or even new programs and services in high-potential categories like Augmented or Virtual Reality.

3. Exclusivity
In a transparent world of infinite selection, exclusivity continues to be a strategic priority for many retailers. For instance, 20% of Walmart’s 2016 top toys are exclusive to the retailer.

While superficial versioning of products to create perceived (versus actual) differentiation is still a common tactic, some retailers are pushing their suppliers release real, unique differentiation. Whether these exclusive arrangements are worth the added cost, complexity, and self-imposed constraints remains a key, open question. 

4. The Retailer / Shopper Arms Race Continues
On everything that isn’t exclusive, expect retailers to compete intensely on price. It’s no secret that retailers have been investing aggressively in analytics and technology to give them visibility into competitors’ prices and promotions and help them maximize profitability with more dynamic pricing.

Competitors’ prices will be one key input, but the more sophisticated retailers’ algorithms will consider other factors like unit economics, demand elasticities, on-hand supply, and more.

As the arms race between retailers has escalated, consumer-oriented technologies have also emerged to help put consumers on more even footing. Platforms like MyAlerts notify shoppers when items on their watchlist drop in price or come back in stock. 

5. The New New Things
Barriers to entry for new companies and brands have never been lower. Crowdfunding platforms, precision marketing vehicles like mobile and social, online marketplaces and direct-selling platforms, and new product discovery engines like Product Hunt are making it easier to create, distribute, and market products than ever before.

Retailers like Best Buy (through its Ignite initiative) and Amazon (through its Launchpad) are showcasing new products from start-ups in a range of consumer categories.

Expect heavy promotion of high-potential categories like VR and AR and connected homes, along with innovative new products in mature categories across the board.

6. Online-to-offline (ROPO, BOPIS)
Almost a decade into their meandering “omnichannel journeys,” many store-based retailers continue to invest disproportionately in digital capabilities that have the potential to help them increase or retain shoppers, trips, and baskets in their brick-and-mortar businesses. 

Programs that let shoppers see local inventory and promotions online (or better, buy or reserve online for in-store pickup) continue to flourish. Helping accelerate retailers’ implementation of capabilities like these are 3rd-party platforms like Curbside.

7. I Need It Now
The continued growth of services like Amazon Prime Now, Google Express, and Deliv continue to reset shoppers’ expectations for convenience.

Expect many of the holdout retailers that haven’t yet picked a partner to do so, and don’t be surprised to see fast and cheap delivery used as a strong incentive to capture holiday shoppers.

8. Gift Discovery & Recommendation Re-Imagined
Most online retail marketing and merchandising tactics are optimized for shoppers who already know what they want.

But gift-giving is a unique and different dynamic; givers want to surprise and delight their recipients.

Visual social networks like Pinterest and Instagram have already helped inspire millions of shoppers, whether buying for others or themselves. Expect more retailers to engage with shoppers via these platforms as a way of helping them discover interesting and new gift ideas.

Also look for retailers to launch or re-launch gifting guides, like this interactive guide from Amazon. Shoppers first identify the gift recipient’s basic demographic, then select a category, then see a list of popular products (seemingly based on sales rank and reviews), with results sortable by price point.

Despite over a decade of experimentation, nobody has really cracked the code on gift recommendation engines that are easy to use and magically relevant. On the back of perhaps 2016 is the year. 

9. Low(er) Friction Commerce
We’re not quite to frictionless commerce yet, but retailers are absolutely experimenting with ways to make buying easier and more enjoyable.

Mobile is one area where retailers are likely to focus. Mobile accounts for more than half of all online retail traffic, according to IBM’s 2015 Black Friday Report, but just 36% of sales. 

While the 2016 holiday period may be too early to expect fruit borne from a new consortium initiative on modernizing mobile payments, expect a lot of experimentation from retailers eager to optimize the experience on smaller screens.

New interactive models like chatbots and voice assistants will play a role as well, though these are are nascent and not widely understood or adopted by mainstream shoppers. Still, considering the hype surrounding them in 2016, odds are good that several retailers will offer experiments.

Visit Profitero’s Holiday 2016 microsite for the latest eCommerce data, predictions, and insight for the holiday season.

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