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Christmas Promotions - 2021

A fine balance: Fewer bargains, higher margins, but less opportunity for retailers?

The pandemic continues to create challenges for retailers. Many of those we saw last year are still here - workforce shortages, supply chain and stock issues, changes to consumer behaviour and confidence - and are all impacting promotional activity. Our new UK retail promotions tool gives us new insight into that activity: lower participation in Black Friday than expected, fewer and shallower Christmas promotions and a possible end to the Boxing Day sales. We look at what these findings might mean for retailers in the run-up to Christmas and beyond.

New data, new findings

For our Christmas Promotions report this time, all our data has been supplied by the PwC UK retail promotions tool we unveiled last year. With 15 months of daily promotional data now available from over 200 online retailers, we have a more accurate, long-term view of the sector. And from this, we can then identify promotion patterns and trends more clearly and accurately. 

That has thrown up some interesting findings this year: promotional cycles are changing, retailers didn’t embrace Black Friday as expected, pre-Christmas promotions will stay low, and the Boxing Day sales are likely to see fewer bargains.

Promotional cycles in a pandemic - the same as ever or different?

Unlike in physical stores, promotions are a key tool to increase awareness of a brand and drive clicks into websites. And it’s a strategy that’s especially important for online-only retailers, who have less opportunity to entice customers in everyday locations.

Our retail promotions tool shows that over the last 18 months, at any one point, at least 54% of the retailers tracked have some type of promotion on their homepage. This figure excludes “everyday” and “targeted” promotions, such as 10% off for mailing list sign-ups, free delivery promotions, year-round clearance sections, voucher codes or member-only discounts.

Looking back over the last 12 months, we’ve seen significant promotional activity for Black Friday 2020 (which peaked at 90% participation) and Boxing Day (which peaked at 82% participation). There are also generally higher levels of promotions in January and July for traditional end-of-season clearances, with the first quarter of 2020 skewed higher than usual, likely due to the third lockdown forcing a change of strategy due to the closure of non-essential retail stores.

Fewer Black Friday bargains

For certain categories, such as electronics, Black Friday has become a key date in the diary - an annual event and driver of discretionary purchases. And with pent-up demand from shoppers to spend, resilient consumer sentiment, and interest in higher than pre-pandemic levels, we were all set for a bumper weekend

But the promotional activity didn’t quite reflect what we expected.

While promotional activity in October and early November almost mirrored 2020 levels in the run-up, we saw far fewer retailers on promotion across the weekend. With some categories holding back, this year saw only 72% of retailers on promotion on Black Friday itself, with a peak of 75% on Cyber Monday. In previous years, we’ve seen peaks of 85% (2019) and 90% (2020). 

Despite pure-play fashion and electronics holding up, multi-channel fashion didn't need to promote as heavily this year, largely because stores remained open and there wasn’t as much need to attract customers. Elsewhere, general merchandise’s ability to discount was affected by stock shortages and shipping delays.

And it wasn’t just the number of promotions that were lower, but the depth of promotions, too. Although similar to last year, we did see 11% of retailers with promotions of 61% or more, including one online fast-fashion retailer offering a “100% discount” - selling some items for the price of delivery.

Will Christmas promotions follow that trend? 

In previous years, we’ve increasingly seen retailers wising up when it comes to promotions around Christmas. Shortly after Cyber Monday, many retailers rein in promotional activity - to give shoppers a feeling of value and protect margin - only to then build it back up as they head towards the Boxing Day sales.

This year looks different.
 

We don’t anticipate the ‘twin peaks’ trend that we’ve become accustomed to in previous years, where more retailers use promotional activity to clear seasonal stock in the run up to Christmas. And that’s simply because many retailers don’t have the stock.

Supply constraints are hitting promotions particularly hard this December. We saw its impact on Black Friday, and to some extent we’re already seeing that in the slight reduction in promotions for general merchandise. But it’s acutely apparent in electricals and electronics, where the global chip shortage is restricting supply, and forcing retailers to pull back from promotions.

Without the need to clear excess stock ahead of Christmas, retailers are looking to preserve margin, particularly as more consumers are likely to be driven online to finish shopping, due to the latest round of COVID-19 restrictions.

While low promotional activity is expected in early December, we’re unlikely to see the rise in promotions in the run-up to Christmas that we’ve seen in pre-pandemic years. Retailers are hamstrung by a combination of stock shortage and a reluctance to put added pressure on an already stretched supply chain with delivery deadlines.

Bring on the Boxing Day sales...

Perhaps not. The current trends suggest that those retailers not already discounting may not participate that heavily - or at all - in the Boxing Day sales.

Boxing Day sales have been declining in importance for some years - particularly as Black Friday has grown larger - but they will be particularly lacklustre in 2021.

This is further exacerbated by the fact that those categories that are usually the most resonant post-Christmas - and the drivers of the sales to some extent - are struggling with severe stock shortages. Furniture and home, in particular, which are readily promoted across the Boxing Day sales are struggling to fulfil orders in the current, let alone any increased volumes from discounting.

What does this mean for 2022?

The rise of Omicron, continued challenges around Brexit and general global border constraints suggest that stock shortages will last long into next year. Added to workforce shortages and a supply chain still recovering from the pandemic, we’re unlikely to see the frequent and heavy discounts we’re used to any time soon. Promotional activity is likely to follow the trends we’re used to seeing across the year, but with fewer participants and fewer bargains.

Certain retailers will still be keen to preserve Black Friday. It has become the discount event of the year for many categories and a significant driver of sales. But have we seen the end of the Boxing Day sales?

The challenge for retailers will be how they balance stock, manage margin and keep consumer interest. While shallower discounting has the benefit of protecting margins for retailers, it is also likely to impact the volume of sales overall and with it any value or cash margin. 

Fewer promotional events could be challenging for those categories that rely on them to drive interest. For sectors such as electricals or furniture, a promotional event or discount is a trigger to buy for many consumers. Retailers in these types of categories will need to think about how they attract consumers without so many discount opportunities over the year. For others, especially online-only fashion, promotional activity is largely the only way to drive brand recognition and engagement - even post-Black Friday over 90% had some form of promotion on their homepage. 

Join our Retail Briefing 2022 to find out how this year’s promotional strategy affected retailers, see the real trends behind the Golden Quarter and Christmas headlines and find out what that means for the industry going into the new year.

PwC promotions survey methodology - 2021 update

PwC UK retail promotions tool and methodology:

Developed by the PwC UK Deals Technology team, our UK retail promotions tool web collects data each morning from a sample of 207 online retailers. 

It identifies whether each retailer is advertising a promotion on its homepage and the depth of its biggest promotion offered. “Promotion” is defined as a discount off some or all products in the store, advertised on the website landing page.

“Everyday” and “targeted” promotions are excluded - these include 10% off for mailing list sign ups, free delivery promotions, year-round clearance sections, voucher codes, and member-only discounts.

Contact us

Lisa Hooker

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)7880 552726

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