GVA Research
David Garrity on BNN: Amazon Prime To Ignite Share Gains for 2016 Holiday Season, Messaging Key For
Updated: Apr 23, 2021
2016 Holiday Shopping Trends See Broader Sales +3-4% y/y, Online +16-17% y/y:
The 2016 holiday shopping season has been expected to show and is demonstrating solid growth. More broadly, retail sales are increasing +3-4% y/y due to a healthier consumer supported by key factors (i.e. stronger labor & wage market, pent-up post-election demand, more disposable income, etc.). Online sales continue to gain share with a growth rate of +16-17% y/y with key drivers being mobile penetration, Amazon.com (AMZN) outstripping competitors and traditional retailers stepping up online efforts. According to Adobe Digital Insights, online sales in the U.S. totaled $9.36bn from Thanksgiving Day to the Sunday that followed, a +16% y/y gain. On Cyber Monday, online sales were an all-time high of $3.39bn, +10% y/y and slightly higher than online sales on Black Friday2016 ($3.34bn).
AMZN Poised To Continue Online Leadership with Prime Membership:
AMZN has a wide array of advantages over competitors and is estimated by InternetRetailer.com to be capturing 37% of online sales during the 2016 holiday season. First, AMZN enjoys overall price leadership against competitors WalMart (WMT) and Target (TGT) as well as broader retail with competitors’ prices being +3-10% higher than AMZN. Also, AMZN has fewer product stock-outs as it is able to use its third-party vendors strategically to ensure greater product availability. Second, AMZN is employing its scale to offer its own-label devices (e.g. Fire, Alexa). Over the Thanksgiving weekend, AMZN highlighted strong sales with own-label device sales up >2x from 2015 as millions of devices were sold. Last but far from least, AMZN’s Prime program, the $99-per-year subscription service that comes with free two-day shipping on most orders, has succeeded in capturing a growing share of high-income household consumers. Ahead of Thanksgiving weekend, AMZN offered $20 off its Prime membership on 11/18/16, which drove total new Prime member sign-ups exceeding all previous days apart from Prime Day. Already, 43% of consumers surveyed by Astound Commerce indicated they would make more than half of their 2016 holiday purchases from AMZN. Most likely, those consumers planning to do the bulk of their holiday shopping on AMZN are Prime members. Over half of AMZN shoppers are Prime members, a group estimated at over 60mm in the U.S.. Approximately 70% of upper-income households are Prime subscribers, and Prime subscribers tend to purchase more from AMZN than non-members. Telling in this regard is the InfoScout survey indicating that only 59% of Prime members went shopping in person on Black Friday 2016 versus 65% of Prime members in 2015. This represents a decline of -6% and is a strong indicator consumers favor online and in particular AMZN.
Look For Mobile & Messaging Engagement Innovation To Accelerate:
Away from AMZN, mobile is increasingly important. WMT indicates record numbers of visits to its website and that 70% of Cyber Monday traffic came from mobile devices. Also, improved filtering is leading to improved email conversion. Per Network World, approximately 20% of Black Friday emails had a read rate of 20%+ versus 13% in 2015, and roughly 19% of Cyber Monday emails had a read rate of 20%+ versus 12% in 2015. This reflects the rise of Gmail usage, making it easier to filter. So, with AMZN having substantive customer data combined with improved promotion tracking is leading to better open rates. Meanwhile, mobile messaging today is very similar to where traditional social media was in 2007/08. Brands know there are billions of highly engaged users, but these same brands are also still trying to figure out exactly how to engage users effectively. Mobile messaging will allow consumers to have a more intimate relationship with brands and thus further increase conversions into actual sales.This clearly is a space to watch as startups emerge to fill this gap.