What Brand Manufacturers can learn from OCR Data

Now that the marathon shopping spree of the Black Friday/Cyber Monday weekend is over, it’s time to take a breath and look back at how successfully all those deep discounts offered by both brand manufacturers and 3rd party sellers translated into actual sales on Amazon.

How customers shopped this Cyber Weekend: It’s all about the deals on Black Friday and Cyber Monday

There’s no denying the fact: Amazon’s Friday and Monday sales dwarfed those of Saturday and Sunday. This despite the average discount of 57% on Sunday was greater than Cyber Monday’s 45% average. The deepest discounts on Amazon (which averaged overall at 53%) occurred on Black Friday, which saw an average of 70% off list prices.

Number of Promotions and Average DicountsStill, despite lower discounts being offered on other days, Cyber Monday lived up to its name as the online shopping day, with total Amazon 1st party sales at more than $640M, topping Friday’s $515M+. While this is a sizable 24% difference between these “traditional” rivals, the real drama unfolded between the ones caught in the middle. Saturday’s sales dropped 6% YoY to $190 million, and Sunday’s surged passed $310M (a 49% spike over last year’s sales). Is this the beginning of a new rivalry? And should brand manufacturers consider Sunday as an opportunity for next year’s growth?

Side Note: Another contender may be entering the fray. This year OCR saw a lift in Amazon traffic starting Thanksgiving evening, instead of last year’s traffic increase that began early Black Friday morning.

Direct from the manufacturer… by way of Amazon.com

While 3rd party sellers offered the lion’s share of the promotions, it was 1st party sellers who benefited the most this Cyber Weekend with overall sales growth on Amazon up 18% from last year. It’s true that 3rd party sellers experienced strong YoY growth at around 40%, but because of their vast numbers on Amazon, the increase in sales was substantially diluted across the entire base.

 

Total 1P sales on Amazon by Product Group

The overall top product groups for the Black Friday/Cyber Monday period, including both 1st and 3rd party sellers, were: Apparel, Shoes, Jewelry, Home and Sports.

Apparel and Shoes were the categories most heavily promoted via 3rd party sellers. These two categories saw noticeable declines in 1P sales compared with 2015. Apparel was down by 20% year over year, and Shoes saw a drop of 27%.

Similar to the overall top product groups that saw a YoY declines yet still made the top 5 in terms of total sales on Amazon, Video Games and Home Entertainment experienced declines (on one or both days) but still made the top 10 product groups for 1st party sellers in terms of overall sales.

Keeping with the trend we noted in early holiday season sales in October through Thanksgiving, Home Entertainment sales were down from 2015 by 42%. Video Games sales also continued their decline with a drop of 17% from last year’s Black Friday numbers. Despite the downward seeming trend, Video Games rallied at the end of Cyber Week to more than $160M in overall sales, with PlayStation 4 Slim 500GB Console leading the charge with over $10M in sales on Cyber Monday alone, making this one of Amazon’s top selling product groups despite the YoY decline on Black Friday.

Video game consoles vs crock pots: Yes, the day matters

While everyone could predict that the PlayStation 4 Console would be one of the best sellers during this shopping weekend, Black Friday proved that we love our crock pots. The Instant Pot 7-in-1 Multi-Functional Pressure Cooker raked in close to $15M in sales on Black Friday, propelling Kitchen’s 46% YoY sales increase on Black Friday and taking the 4th spot in total 1st party sales for Cyber Weekend.

Crock pots on Black Friday and Video game consoles on Cyber Monday. So, which day is best for brand manufacturers to drive promotions on Amazon? This year, manufacturers were more selective and the results speak for themselves:

The product groups that chose Cyber Monday as their day this year on Amazon experienced declines in Black Friday YoY sales: Video Games (-47%), Home Entertainment (-42%), Shoes (-38%) and Wireless (-23%). Home Entertainment, for example, which sold 39% of their total weekend sales last year on Cyber Monday, shifted their promotions to Monday this year and subsequently experienced a drop in YoY sales.

Those that chose Black Friday as their day to compete on Amazon and with traditional brick-and-mortar sales saw their YoY sales jump: Toys (+26%), Kitchen (+46%), Home (+30%) and Home Improvement (+105%) indicate that holiday shoppers are no longer just looking for the best deal on their list; they’re looking for the most convenient way to buy them. If they can find what they’re looking for online, then why bother with the madness and mayhem of in-store Black Friday shopping? Maybe this is the reason for the spike in Amazon traffic on Thursday evening: shoppers were deciding whether to buy wish-list items on Amazon or set off at midnight to battle the crowds. This year’s overall 1P sales on Amazon suggest that shoppers are choosing online more than ever over shopping in stores: Total Black Friday / Cyber Monday Amazon sales jumped 18% this year, pulling in over $1.6B.

The sweet spot for brand manufacturers: Where day, discount and desire meet

Once brand manufacturers decide whom they’re competing with (brick-and-mortars, other brand manufacturers or 3rd party sellers on Amazon), it’s time to figure out the discount level that brings in the money.

cyber-weekend-dicounts-vs-sales

While many of the deals offered on Black Friday were in the 20-30% range, most of the sales were on items discounted between 40% and 50%. (Why the 60-80% discount range doesn’t translate in the largest sales on Amazon is a topic for another OCR Insights article, but lack of shopper interest combined with the smallest item prices are factors to consider. Let’s face it, no matter how deeply discounted a PlayStation 3 console is, if PlayStation 4 is what shoppers want, then that’s what they’ll buy.)

For the manufacturers that did choose Black Friday as their Amazon day, the lift in sales from their promotions clearly impacted their YoY sales for both Black Friday and for Cyber Weekend overall.

black-friday-sales-lift-promoted-vs-non-promoted

What did Kitchen and Camera do right? From the total sales this Cyber Weekend, we definitely know that shoppers love crock pots. And from the spike you see above, they still love their cameras. On Black Friday, with a 31% discount and a sales price of $90, the GoPro Hero pulled in more than $3M, making it one of the top selling items for 2016.

Be like the crock pot: Desired and discounted

There is no question that the Instant Pot 7-in-1 Multi-Functional Pressure Cooker is Cyber Weekend 2016’s darling. Traditionally a Black Friday brick-and-mortar purchase, this “little pot that could” rang up nearly $15M in sales, to be Amazon’s top selling Black Friday item. By offering a 47% discount and a sale price of $69, this Instant Pot pulled in 116% more than it did last year.

Key Learnings

Winning on Cyber Weekend requires brand manufacturers to leverage promotions – no question about it. The impact that promotions have on sales range between 10X and 100X, as the Instant Pot demonstrates. But as more and more brand manufacturers compete on Amazon, not just in the US but internationally as well (with 64% of total promotions coming from the UK, Germany, France and Canada), manufacturers must decide which day to focus on – and that decision should be based on a deep dive into each product group’s drivers and setbacks, and the opportunities for growth.

In the next OCR Insights article, we’ll be taking the first of many product group deep dives as we explore Amazon’s performance in Grocery compared to total retail sales, both online and offline. So make sure to stay up-to-date with the latest insights from One Click Retail by checking out www.oneclickretail.com/insights, and following us on Twitter and LinkedIn.