The online shopping space has become a complex paradox that fluctuates immensely between overstocking, price inflation and reactionary, constricted sales — a method that few retailers and brands have mastered. This has created a market that’s left even the heaviest hitters posting huge losses — and in some cases shuttering hundreds of locations.
Though some are undeniably focused on how to navigate the future, there’s a resounding, collective whiplash regarding how the retail market dug itself into this fiscal hole in the first place. Adobe’s May 2017 Digital Price Index for the apparel category draws a picture of the e-commerce space not only as the go-to for consumers, but also one that bloats prices and then constricts quickly. It’s a crash diet of pricing and consumers are eating it up, much to the detriment of merchants that are facing a gap between online and in-store sales that’s taking on black hole levels of enormity.
“With retail chains closing stores at a record pace, we’ve been closely watching the impact on the e-commerce world,” said Mickey Mericle, vice president of marketing and customer insights at Adobe. “For the first time, we’re seeing that apparel sold online is clearly developed with a specific velocity in mind and an incredibly high turnover rate, compared to other categories we track.”
To configure the Digital Price Index, Adobe tapped its artificial intelligence functionality Adobe Sensei in its analytics cloud. The software tracked seven dollars and 50 cents out of every 10 dollars spent online with the top 500 U.S. retailers and over six dollars out of every 10 dollars spent online with the top 100 European retailers, resulting in the review of billions of digital transactions, a company spokesman said. Adobe analyzed 15 billion U.S. web sites, one billion U.K. web site visits and online transactions and over 2.2 million products sold online.
For the first time, Adobe included the apparel category in its analysis. Nearly half of the 7,000 new apparel products available online fell within the women’s wear segment (3,150 items), one-quarter (1,750) were men’s wear and the remaining products were children’s wear and footwear.
The Digital Price Index revealed that online apparel prices drop faster than in-store inventory, luring consumers to ongoing digital patronage. What’s more, Adobe’s analysis found that the biggest digital discounts are within high-end, luxury and conversely, low-priced apparel. “High-end apparel, the top 25 percent most expensive items online, show a 5.5 percent drop in prices year-over-year while low-end apparel, the lowest 25 percent, saw prices decrease by 7.5 percent over the same time period,” a company spokesman said.
This points to the fact that consumers are bargain hunting and conducting deep product research before completing purchases. “Shoppers are prepared before they shop as never before, as more than three-quarters (80 percent) of shoppers research products before purchasing them online,” said Salesforce’s 2016 “Connected Consumers” report. This requires retailers to slash e-commerce prices, quickly.
Much of this research is occurring in real-time and in-store, particularly by Millennials and Generation Z shoppers. Comprehensive strategies to promote purchases from brick-and-mortars calls for deliberate methods to capture shoppers’ attention. “The challenge for retailers is to move away from selling products and toward creating experiences and telling stories – finding innovative ways to participate,” said Accenture’s “Digital Dust” report on Generation Z shopper behavior.
Oscillating prices and product have been a cornerstone in fast fashion’s business structure – luxury categories have adopted similarities as Millennials’ increasingly search for high-end items. “The time to make a purchase is decreasing, with younger customers taking one-third less time than older customers to make decisions,” said FarFetch.com and Bain & Company’s report, “The Millennial State of Mind: Digital is Reshaping How Luxury is Purchased Across Generations.”
Appealing to deal-hungry shoppers with reduced products will boost online sales, however in-store requires a different approach. Here’s where playing to consumers’ emotions — and tech-savvy tendencies — will benefit brands. Consider cross-pollination like sending mobile push notifications for flash deals of in-store products. This calls for personalization, but instills a sense of urgency required to motivate in-store consumers.
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