Are there fewer bargains for shoppers than in previous years?
It’s a message we’ve repeated throughout this year’s Golden Quarter: COVID-19 presents a once-in-a-lifetime challenge to retail and leisure businesses. The sector has seen challenges including cost, workforce, supply chain and stock issues, differing product demand levels, accelerated changes to consumer behaviour, and even forced closures. As the pandemic continues to affect daily life, these challenges are unlikely to wane any time soon.
This year, national lockdowns have even affected how we check pre-Christmas promotions, with store closures encouraging us to develop a more detailed way of tracking online promotional activity.
To overcome this challenge, we have developed a new tool to collect data on the daily online promotional activity of over 200 retailers, with the help of our Deals Technology team. This allows us to identify promotion patterns and trends more clearly and accurately than our previous weekly data collection. We have also updated our population of online retailers to be more representative of market share in 2020, which has also given us a better understanding of product categories.
Running our research in this new and different way gives us a better, more long-term view of the sector, and it’s also thrown up some interesting findings.
This year, there has been steady, slightly higher promotional participation throughout October and early November, as retailers balance margins with encouraging consumers to spend.
That all changed as we moved towards the Black Friday weekend. Promotional participation rose sharply in the build-up to the event and peaked with 90% of retailers offering a promotion across the Black Friday weekend (vs 85% average 2017-19) as they took advantage of consumer interest in the event and early Christmas shopping.
We saw 90% participation almost across the board for Black Friday, with fashion (91%), general merchandise (90%), and multichannel fashion (89%) embracing activity. It was even more pronounced for pureplay fashion (those with an online-only presence), where 100% of retailers discounted.
For retailers with physical stores, discounting was also slightly higher than the historical average across the timeline. With the closure of non-essential stores in England in November, it wasn’t certain that stores would be allowed to open again before Christmas. The week stores reopened, promotions were higher than the week following Black Friday the year before. Historically, retailers have tried to return to full price to preserve margin, but this year there were extenuating circumstances.
In a trend we’ve increasingly seen over recent years, retailers are wising up when it comes to promotions. Shortly after Cyber Monday, many reined in promotional activity, with participation dropping to 61% on 1 December. The effect this year was two-fold - not only to give shoppers a feeling of value, but also to capitalise on any potential ‘built-up spend’ as lockdown restrictions eased and non-essential stores reopened just in time for Christmas.
However, this year, we don’t anticipate the ‘twin peaks’ trend that we’ve become accustomed to in previous years, where more retailers start to discount in order to clear seasonal stock in the week before Christmas. Instead, current trends suggest that those retailers that are not already discounting will try to remain at full price until Boxing Day.
Source: PwC UK retail promotions tool
This year, retailers are a little less restrained, trying to maintain discounts to attract shoppers while balancing margin. That’s led to higher participation in promotions either side of Black Friday than we have seen historically.
While discounts over Black Friday and Cyber Monday are similar to previous years, fewer retailers returned to full price immediately following the weekend, potentially related to the lockdown in England and increased restrictions elsewhere leading to the forced closure of non-essential stores.
Over the May Bank Holiday this year, we saw record-breaking participation in promotional activity, similar to Black Friday 2019: 81% of online retailers on special promotion or sale (85% for fashion retailers) compared with 88% for Black Friday 2019.
Promotions across October to December 2020 are shallower and broader. In the summer, promotions were deeper and more specific, as retailers attempted to clear specific lines of stock. This is not the case for this year’s Golden Quarter.
This year’s promotional activity has been driven by two main categories: pureplay fashion and electronics.
With no other way to attract shoppers, pureplay fashion retailers often use promotions to get shoppers to spend more time on their website. It has remained the category with highest promotions across October and November, with an average of 83% on promotion throughout the time (only marginally below the peak promotion for multichannel fashion).
Electronics retailers also showed high participation, with an average of 72% on promotion across the period. With electrical retailers using Black Friday as the annual event to encourage consumer interest in the category, this figure might be unsurprising. But it’s still a significant contributor to increased promotional activity.
Other retailers have shown much less participation in promotional activity. Sports and outdoor retailers have participated the least (at an average of 48%), with multi-channel fashion and general merchandise similarly low (with averages of 57% and 61%), suggesting there’s little evidence that multi-channel retailers are offering more promotions to clear through the stock, particularly as a number of these categories recovered strongly coming out of first lockdown.
Elsewhere, as expected, fewer retailers were on promotion in physical stores than online (at those times where retailers were permitted to open their stores). As we saw last year, more promotions online allow retailers to preserve full price sales in store - often, if people have made the effort to come out, then they're probably willing to pay full price.
Source: PwC UK retail promotions tool
Shallower, broader discounts and fewer blanket promotions suggest that this Christmas, retailers don’t have stock surplus issues that many assumed there would be.
While the highest promotions of 61%+ increased for Black Friday this year, they were driven by pureplay online fashion retailers, who also offered a similar depth of promotions in 2019. This Black Friday, however, the higher discount category also included a handful of distressed brands, slightly inflating the results.
The depth of discounts over summer was greater, but across more selected lines and with few blanket promos. This demonstrated that they were trying to clear specific lines of stock only, for example, Spring/Summer clothing that they were unable to sell during the first lockdown in March and April, when even online fashion retailers were trading below normal levels.
Black Friday 2020 saw half as many general merchandise blanket promotions (25% in 2019 v 13% in 2020). Retailers are not only being smarter about their promotions, but they also don’t have the overstock issues many thought they did.
Elsewhere, by contrast, fashion continues to pursue blanket promotions. Similar to last year, it is still significantly higher than summer (15% v 46%) suggesting that fashion continues to struggle to convince consumers to spend.
We will continue to track retailers promotions across the festive season and beyond, but this year we’re expecting fewer promotions and bargains than usual.
We expect an increase in promotions as we head towards Christmas (and Boxing Day sales), but they are likely to be planned, targeted and not as heavily discounted as we’re used to seeing. Retailers are learning to use their approach to promotions more effectively, and this year it’s important that they hold onto as much margin as possible. Reports of excess stock, for example, seem to be wide of the mark, which means retailers aren’t desperate to offload overstock at margin-eroding discounts.
This is particularly prevalent in general merchandise, which has been affected by stock delays and reported shortages. It’s only likely to be further exacerbated by current port congestion as well as any impact of Brexit.
In other areas, such as fashion, for example, the most significant promotions will likely be led by clearance sales for retailers in administration. The level of promotion - and participation - will depend on further distress.
Generally, and in a trend we’ve seen for some years now, retailers are getting smarter about how they use promotions to attract consumers. With no sign of big sales and mountains of stock and no uptick in the run-up to this Christmas, we’re unlikely to see the twin peaks that we have in previous years, as retailers balance consumer interest with protecting margins. And that means fewer bargains for shoppers before and after Christmas.
Methodology for Christmas 2020:
Surveyed stores on Oxford Street the day before the November lockdown, the day following the November lockdown and the second and third Mondays in December
Automated web scraping tool developed by the Deals Technology team collected data daily from retailers’ website landing page from the end of September. Updated population of online retailers this year to be more in line with current market share. Manual data collection in line with prior years on Black Friday.
Sample of 111 stores on Oxford Street and 206 retailers online, undertaken by PwC teams in London and Northern Ireland
Methodology for pre-Autumn 2020:
Surveyed stores on Oxford Street and retailers’ websites every Monday in November and December, in addition to every Monday following the reopening of stores this Summer in June and July
We have been tracking in-store promotions every Monday in November and December since 2010 and have been tracking online promotions every Monday in November and December between 2016 and 2019, in addition to every Monday following the reopening of stores this Summer in June and July
Sample of 118 stores on Oxford Street and 167 retailers online, undertaken by PwC teams in London and Northern Ireland respectively
“Promotions” defined as discount off some or all products in the store, advertised on the storefront or internet landing page
Excludes “everyday” promotions such as student/ club discounts, newsletter sign-up discount, free delivery, year-round clearance rail not advertised on storefront or internet landing page, etc.
Also excludes email, newsletter, voucher code and member-only promotions
“Blanket” promotion is a promotion across the entire store e.g. 25% off everything