Is Black Friday Already Over for Some Retailers?

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JDA’s 2015 Consumer Survey Reveals 50% Of Shoppers Who Experienced A Previous Issue With A Retailer Have No Plans To Return For Black Friday Or Cyber Monday Deals, And No Deal Will Change Their Minds

The omni-channel consumer is here and this holiday season, their expectations will not only affect the impending Black Friday and Cyber Monday shopping rush, but also shape how their purchase decisions are made throughout the year. In the new JDA 2015 Consumer Survey of more than 1,000 U.S. consumers conducted by JDA Software Group, Inc., 50 percent of consumers indicate that they will be unforgiving of retailers who provided less than satisfactory online home delivery experiences, landing some businesses on the “do not shop, naughty list” this holiday season. Additionally, 1 in 3 consumers disclosed that convenience is a major factor when placing an online order. Retailers who can’t meet expectations risk losing 33 percent of shoppers to a competitor that offers a more convenient or streamlined shopping experience – not only during Black Friday and Cyber Monday, but also in purchase decisions throughout the year.

“The biggest challenge for retailers today is finding the balance between keeping customers content while maintaining profitability to meet their needs in an increasingly omni-channel world,” said Wayne Usie, senior vice president of retail, at JDA. “It’s no longer sustainable for businesses to sacrifice profit margins in an effort to deliver customer satisfaction and meet demands. Instead, businesses need to take on a more holistic view of their logistics and fulfillment strategy to make better informed decisions that will not only provide a consistent omni-channel experience to customers, but more importantly, turn a profit.”

Striking that right balance is proving difficult for many retailers, as shoppers’ sentiments throughout the JDA survey were mostly unfavorable of past experiences. These experiences are remembered when customers decide on which retailer to make their future purchases, and carry even more weight during the holiday season.

“Buy Online, Pick Up In Store” may be convenient, but not without issues

Based on the JDA survey, nearly 1 in 4 shoppers have opted to “Buy Online, Pick Up In Store” (BOPIS) as it felt more convenient than home delivery. However, nearly 40 percent of those shoppers experienced an employee-related issue with this service; the most commonly stated issues were that the store staff took a long time or were unable to find their order in the store or store system. These common pitfalls negate the anticipated convenience of the BOPIS services and could land retailers on consumers’ “naughty” list.

Retailers who fail to meet customer needs lose out during peak shopping seasons
JDA uncovered results that are predictive of how businesses may fare this Black Friday and Cyber Monday season, based on the customer experience they delivered during the past year. This includes consumers identifying late delivery as the most common issue related to a poor online home delivery experienced in the last 12 months (45 percent). Among this group, 48 percent would be unlikely to shop with the offending retailer during a peak time, such as Black Friday or Cyber Monday, displaying a lack of trust in the retailer’s ability to fulfill their needs. This ultimately results in a loss in sales for the retailer during such a highly anticipated spending season.

Shoppers want what they, want when they want it, and they don’t want to pay
While shoppers expect convenience throughout the retail experience, most are outright unwilling to pay for it, leaving retailers searching for ways to respond to consumer demand and still remain profitable. For 62 percent of online shoppers, their biggest frustration was having to pay for return postage and packaging. In fact, over 50 percent of all shoppers consider the ease of returning items to retailers “very important” to where they make online purchases, while only about 10 percent view it as “not important.” It’s also significant to note that “Door-Buster Deals” are still a major factor for 50 percent of consumers when deciding where to shop for Black Friday and/or Cyber Monday.

Monday deals, showing cost as a major driver in their purchase decisions.

In today’s world of convenience and options, shoppers have little patience for obstacles from retailers that prevent them from obtaining an item. This sentiment holds true across all channels – whether that obstacle is an out-of-stock experience, late home delivery, or difficulty obtaining a product at pick up. Retailers must create and deliver a consistent, excellent omni-channel experience to avoid any customer frustrations, or they may pay for it during peak shopping season.

“These survey findings speak to the importance of having an omni-channel retail strategy in place, not only during peak shopping seasons such as Black Friday, but also throughout the year. After all, consumers have high expectations on when, where, and how they make and receive their purchases,” said Usie. “In a highly competitive marketplace, it is critical for retailers to intelligently configure their supply chains and how they use their staff, stores and inventory to fulfill consumers’ orders quickly, while also remaining profitable.”

Executive Summary

Some retailers may have already lost the battle for Black Friday and Cyber Monday financial success. That’s one of the striking findings of a new study of consumer shopping intentions conducted by JDA Software Group Inc. In a survey of more than 1,000 consumers, over 50 percent of those who have experienced an issue with home delivery of an online order anytime over the last year say they are unlikely to shop with that retailer during the holiday season. Worse yet, one in four of those surveyed say they had this type of negative issue over the past 12 months.
The rise of omni-channel commerce has given retailers many more options for attracting consumers and converting them into customers. But the stakes are high. Consumers have grown to expect seamless and flawless shopping experiences and they are unforgiving of those retailers who disappoint them, especially during the peak holiday season.
In the survey, 35 percent of those who have experienced a negative delivery issue with an online order say they are not likely to shop with that retailer again—period. That number goes up to 51 percent who say they will not shop during the critical holiday season at retailers who disappointed them. Considering this is when many retailers make a substantial portion of their profits for the year, it’s clear that failing to deliver omni-channel excellence could have a direct impact on many retailer’s bottom lines this year.

The Omni-channel Conundrum

As more consumers are choosing to shop and buy through an ever-increasing list of online and mobile options, the complexity and difficulty in fulfilling those orders is increasing rapidly for retailers. There is a constant tug of war between cost and service issues that is impacting many retailers at both ends. For example, in the survey, almost 35 percent of consumers report that they have used retailers’ buy online / pickup in-store (BOPIS) service within the past 12 months. But almost 50 percent have experienced problems with these pickups.
When you consider that over 60 percent of those who used a BOPIS service said they did so to avoid home delivery charges, you start to see retailers’ conundrum. Home delivery of online orders is expensive for retailers. To recoup these expenses, many retailers charge fees for this service. But that is driving consumers to opt for BOPIS services which are experiencing a high service failure rate. And as mentioned earlier, consumers are unforgiving of service failures for online orders.

On the other hand, avoiding the BOPIS service failures by offering free home delivery has its own problems. Although there is competitive pressure to offer free (and fast) home delivery, this can severely impact profitability. In fact, in a study conducted earlier this year by PwC for JDA Software, only 16 percent of the CEOs surveyed said they were making a profit on their omni-channel fulfillment. Thus, retailers are caught between a rock and a hard place when trying to provide consumers with seamless omni-channel shopping experiences and still make a profit. The solution is that retailers must improve both their home delivery and their in-store fulfillment.
Cost-conscious Consumers

While retailers are struggling with service issues and profitability, consumers are still cost-conscious, particularly when it comes to fulfillment charges that consumers are increasingly expecting retailers to bear. As mentioned previously, 60 percent of consumers who have used a BOPIS service over the past 12 months did so to avoid delivery fees. And, 50 percent of all respondents say cost is a key factor when ordering online for home delivery.
Consumers’ cost-conscious attitude is also seen in their reluctance to pay for delivery convenience. When asked if they would be willing to pay extra to be able to choose a convenient time slot for their home delivery, 64 percent said no. In a little bit of good news for retailers, however, 25 percent said that they would pay extra.
Similarly, when consumers were asked by product category if they would pay a premium for faster delivery or a convenient delivery time, 47 percent said no across all products while 32 percent said they would for Entertainment and Electronics and 20 percent said they would for groceries. All other product categories got affirmative responses in the teens or lower percentages.

Frustration with Returns

Retailers are well aware that the rise of ecommerce has coincided with an increase in the volume of returns. What many retailers may not be aware of is the degree to which their returns policy impacts whether consumers will shop with them. In the consumer survey, a shocking 88 percent say that the ease of returns is an important factor in their decision on with whom they choose to shop.
The returns problem for retailers is evident in the fact that 30 percent of online shoppers say they regularly order two or more of the same item in different sizes or colors to try out at home with the intention of returning the ones they don’t want. And more than 50 percent of shoppers say they returned at least one item during the year, with 38 percent saying they returned one to two items, while approximately two percent say they returned 10 or more items.
With the increase in returns has come an increase in frustration for consumers on returns policies. Echoing the cost-consciousness of consumers, 62 percent say their main frustration with returns is paying for postage or packaging in order to return items to retailers. Meanwhile on the convenience scale, 31 percent are frustrated with having to return items through the mail or a carrier and 28 percent are frustrated when they cannot return items at their local store. Retailers would be wise to reexamine their returns policies in order to remove impediments to sales.

Black Friday / Cyber Monday and the Bottom Line

Black Friday got its name from the fact that for many retailers it marked the point in the year when they finally turned an annual profit. But the change in consumer shopping behaviors and the costs of fulfilling omni-channel orders may change that equation. In the survey, 58 percent of Black Friday / Cyber Monday (BF/CM) shoppers say they want their orders delivered to their homes, an expensive proposition for retailers, especially since many offer free home delivery during the holiday season.

The shift away from traditional BF/CM shopping toward more online purchases is seen in a number of survey responses. Only 28 percent of surveyed BF/CM shoppers say they plan to do traditional in-store shopping and take their purchases home, while 14 percent say they will order online for in-store pickup.
Other trends are not favorable to traditional shopping, either. For 2015, only 13 percent of consumers say they will shop primarily in stores, down slightly from 14 percent last year. In comparison, 29 percent say they will shop primarily online, up significantly from 21 percent in 2014. And more bad news for traditional brick-and-mortar retailers—while 70 percent of consumers say they will shop in chain stores, 66 percent say they will also shop online only retailers. Unfortunately for local retailers, the percentage of consumers who plan to shop at local brick-and-mortar stores falls only in the mid-teens regardless of whether they offer online purchases or not.
The survey data reveals another factor retailers should consider. With the recent trend of retailers attempting to grab more of the BF/CM shoppers’ wallets by opening even -earlier, with many stores now open on Thanksgiving, it is noteworthy that only 11 percent of respondents indicated that when a store opens for Black Friday has a bearing on whether they will shop with that retailer or not.

In some good news for retailers, one of their cherished Black Friday attractions, door-buster deals, were selected by over 50 percent of Black Friday shoppers as the reason they choose to shop at certain retailers. What’s more, the percentage of consumers who said they intend to shop for BF/CM deals increased to 57 percent this year from 46 percent in 2014. In addition, 37 percent of consumers said they are loyal to the same stores each year.
The JDA Consumer Survey thus indicates several key findings that retailers should consider as they prepare for this year’s Black Friday / Cyber Monday shopping season:

• Consumers are still very price conscious, but not just for product pricing. Consumers also consider the cost of delivery and returns in their purchase decisions.

• Although there are still many loyal customers, they’re frustrated. They are frustrated by service problems both with home deliveries and BOPIS services. And they are frustrated with returns that are costly and inconvenient.

• Consumer choices for how they shop during peak season and throughout the year are changing, with more emphasis on purchase paths like buying online with home delivery or pickup in store that are more complex and costly for retailers to fulfill, putting pressure on margins and the bottom line.

However, the biggest concern retailers should have this holiday season is that consumers who have experienced issues with a retailer’s omni-channel services in the past are likely to put them on their “naughty list” and not shop with them at all this year. For those retailers, hopes of Black Friday financial success may already be over.

Check out the full survey results and infographic – JDA Consumer Survey: Is Black Friday Already Over for Some Retailers?

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