Alice Cooper famously told the world that school’s out for the summer. However, in the competitive world of retail – no one is taking the summer off and everyone is trying to dethrone the schoolyard king: Amazon. From Prime Day to customized shopping experiences, we have identified three ways that Amazon is trying to rule the school and disrupt the traditional back-to-school (BTS) season.
- Amazon is starting early and not procrastinating.
Back-to-school shopping has traditionally been a late summer boon to retailers, accounting for approximately 20% of non-holiday sales. This year’s BTS season is forecasted at $885.2B, a growth of 3.5% from last year. However, the advent of Prime Day – Amazon’s 24 hour plus sale extravaganza – has upended the traditional retail models. In 2017, Prime Day pulled forward BTS spend by nearly a month and this year, despite representing less than 1.7% of U.S. BTS e-commerce sales, the buzz has forced other retailers to react.
Prime Day has become the unofficial kick-off to BTS shopping season, with discounts already in place ahead of the July 16th event. Prior to Prime Day’s arrival, the biggest BTS days were in August and September, just before the school season started. Additionally, 84% of retailers surveyed believe BTS shopping will begin on or before Prime Day in 2018, 54% will run offers to coincide with Prime Day, and 53% will target shoppers in the subsequent days who may have missed out. This means that Amazon is driving new consumer behavior to buy earlier during BTS and is already forcing other retailers to react. For example, Wal-Mart launched free shipping in March and launched a new digital home brand and fashion brand. Kohl’s has begun hiring seasonal employees earlier than ever, at 27% of their stores nationally. Other retailers must react to the earlier BTS season to stay relevant with consumers.
- Amazon is curating its assortment for younger demographics and strategically making friends.
Amazon is redesigning its “back-to-school” store, and also launching “off-to-college” stores. Amazon is allowing teens aged 13-17 to log in through their parents’ accounts to shop, with parents approving orders or setting spending limits. This allows connected teens to shop for themselves rather than rely on their parents, taking the burden off the ever-busy parent – another example of Amazon creating additional buying opportunities that may not have been requested by the customer. This tactic empowers teens to make their own purchasing decisions, and also plants the seed for a future generation of Amazon brand loyalists. Amazon’s continued innovations are driving their existing and long-term sales and should be carefully considered in other retailers’ capability considerations.
- Amazon is playing the long game.
Prime Day is not only a sales generator, but it is a driver of new Prime memberships. More people signed up to be Prime members on Prime Day last year than any other day in Amazon’s history. Prime memberships are also lucrative for Amazon, not only do Prime members shop more, but their plan renewal rates after the first year are more than 90%. Using Prime Day to establish new customer relationships and remind existing members about Prime value is a great way to disrupt other retailers trying to get a piece of the summer shopping spend.
Despite Prime Day disrupting BTS, all is not lost! In fact, Prime Day will drive additional demand for other retailers. Retailers competing on Prime Day saw a 30% increase in online traffic, compared to 4% decrease for those who didn't participate. While Amazon received 4% of visits to RetailMeNot on Prime Day, 96% of consumer website demand was driven by retailers other than Amazon. In addition, 76% of Prime Day shoppers visited a rival to check if they were getting the best price. These findings indicate that Prime Day not only drives sales for Amazon but should be a focus area for other retailers to pay attention and find a way to capitalize on the expanded sales opportunity.
How can traditional retailers catch up in a BTS season where a customer-centric mindset is dominating?
Amazon’s usage of Prime Day and increased Prime Membership strategy is a double-edged sword for traditional retailers. The traditional retailer can benefit from Prime Day through increased traffic, but piggy-backing off its success is not a viable long-term plan. Retailers need to think of innovative new solutions that would differentiate themselves in the marketplace. What do today’s parents value now in BTS? As parents become busier, they may value the convenience of omnichannel shopping capabilities (buy online pick up in store, free 2-day shipping), or an experiential shopping experience of trying on new clothes in a smart fitting room with recommendations, and complete with RFID trackers for inventory. Amazon has shown a resiliency and deep understanding of their customers that keeps them at the forefront of the retail game – how will you remain competitive this BTS season?