Amazon is schooling the retail industry on how to turn "1+1" into science. Hopefully, retailers are taking notes.
The "1+1" represents the equation of online and offline shopping. The science is how Amazon Prime Day has changed the sum of them for pre-event shopping. Amazon’s annual online sale, which just completed its fourth year, has officially made the back-to-school shopping season earlier.
The marketing technology firm Cardlytics, in its 2018 Back-to-School Spend Report, surmises that Prime Day has pushed up the shopping season by nearly a month. More important: The report finds that Prime Day back-to-school shoppers spend 17% more at brick-and-mortar stores and 16% more at combined brick-and-click stores, compared with shoppers who don’t participate in the event.
A major contributor to the earlier kickoff of the back-to-school shopping season is that other retailers, such as Target, have responded to Prime Day with their own earlier promotions.
In addition to higher sales, however, several studies reveal that how shoppers buy their clothes, backpacks and dorm-room furniture is shifting in important ways that could predict the course of school shopping in years to come.
4 New School Formulas
This is important to retailers because the back-to-school shopping season is the second-biggest spending period of the year. Families with kids in elementary through high school plan to spend an average of $685 each on back-to-school purchases this year, according to the National Retail Federation. College students and their parents are looking at an average of $942 each.
Here are four ways their back-to-school shopping is significantly changing.
1. Crash course.
The fact that Amazon.com crashed repeatedly on Prime Day indicates many back-to-school shoppers aren’t waiting to pull last-minute all-nighters. More are in fact buying exclusively online. From 2015 to 2017, the percentage of shoppers who concentrated all of their back-to-school shopping online rose, to 21.2% from 14.9%, according to Cardlytics. The share of shoppers who combined online and in-store shopping declined slightly in the period, to 5.5% from 6.1%, while brick-and-mortar shoppers slipped to 73.3% from 79% in the same period.
2. Longer equations.
An earlier kickoff of a shopping season often leads to a more lucrative one. Look at it this way: If parents were planning to direct nearly half (40%) of their back-to-school spending to Amazon Prime Day, then they have a full four to five weeks to meet their budgets, and be tempted to exceed them. The logic is that a longer spending period diminishes the effects of that spending on the overall budget. According to Deloitte’s annual back-to-school survey, those who plan to begin their back-to-school shopping before August spend about $100 more than shoppers who get a later start.
3. New stuff.
The added time in which to complete back-to-school shopping also opens up opportunities for new purchase considerations, from coffee shop gift cards to bicycles. This potential tendency to see everyday items as school-life requirements is more likely among college students, as the prospect of dorm-room living looms larger. Previously un-collegiate products, like spice racks, will suddenly take on a campus-life sheen (gotta dress up that microwave popcorn).
4. Uniform spending in style.
Back-to-school shoppers plan to spend most of their budgets on clothing — nearly $237 on average, according to the National Retail Federation. While this line item hasn’t much changed, it implies that big-ticket tech purchases, such as smartphones, tablets and laptops, are no longer saved for back-to-school season. These items have become as much a part of the household as the refrigerator, so deep discounts before school aren’t as necessary. Further, the amount of money earmarked for back-to-school apparel, combined with online school spending, demonstrates an increased confidence in buying clothes online (thanks in large part to Amazon).
As Amazon rewrites parts of the back-to-school shopping list, large and small retailers are learning from it. Some key lessons from Prime Day:
Online shouldn’t subtract offline. There’s a reason even Amazon is opening physical stores. Shoppers still spend most of their school budgets at brick and mortar, but the percentage is slipping. Traditional retailers can boost those in-store features that still matter to shoppers by combining them with digital experiences. Walmart, with its eye on student spending, in June added a 3-D Virtual Shopping Tour expressly for small apartments, living spaces and dorms. In July it introduced Buy the Room, a complete selection of furnishings for dorms or apartments, in five curated looks.
Think outside the desk. If longer back-to-school shopping periods encourage spending outside of traditional school categories, then retailers should be poised to take advantage of cross-sell opportunities. Partnerships with unlikely merchants — think salons that set up pop-up makeover shops, fitness centers that hold pre-college workout consultations and area cooking stores that host healthy cooking classes — would encourage additional visits and spending. Cooking-class students, for example, would be more likely to buy juicers or frying pans on the spot.
Ship to the campus store. Retailers would do well to graduate the buy-online, pick-up-in-store option to an option that lets consumers buy online and pick up at a store near their campus. The choice would make minimal (if no) difference to retailers in terms of shipping, yet save students and their families a lot of packing time and schlepping. Plus, once they are in that near-campus store to pick up those items, the families are likely to buy more. Shoppers who buy online and pick up in a store at least twice in a year purchase more items, once in the store, 51% of the time, according to new research from OrderDynamics. These consumers spend an average of $40 more on unplanned purchases.
For retailers, and students, that’s pretty simple math. But the addition of the online factor makes calculating customer value more of a blend of science and art. Retailers have long kept up with the science; the most creative of them will master the art.
Bryan Pearson a Featured Contributor to The Wise Marketer and is the President of LoyaltyOne, where he has been leveraging the knowledge of 120 million customer relationships over 20 years to create relevant communications and enhanced shopper experiences.