Professor Sheri Bridges says Retailers Need to be Prudent with Holiday Pricing

Black Friday, Cyber Monday: 4 SMB Lessons
SMBs should mind these tech-focused takeaways from the annual shopping craze.
Reposted from InformationWeek | By Kevin Casey

For some retailers, Black Friday started on Thursday and Cyber Monday will last the entire week. But regardless of when it starts or ends, this year’s Thanksgiving sales bonanza appears to have paid off.

Businesses raked in more than $59 billion over Black Friday weekend, according to the National Retail Federation. The spending spree continued with Cyber Monday, the online follow-up to Black Friday.

“It’s been a strong day so far,” said ChannelAdvisor CEO Scot Wingo, in an interview on Monday afternoon. ChannelAdvisor’s cloud software helps merchants sell on sites like Amazon and eBay, where Wingo said same-store sales were up 52% and 57%, respectively, from last year. Sales resulting from online searches were up nearly 31%, according to ChannelAdvisor.

That seems to have held true for the rest of the day. Online sales on Cyber Monday jumped 30% from the same day in 2011, according to data from IBM’s Digital Analytics Benchmark. Let’s look at four tech-focused takeaways the annual consumer craze offers small and midsize businesses (SMBs).

1. Don’t Ignore Mobile Commerce.

Consumer-oriented SMBs that overlook mobile may be quickly falling behind the competition. Nearly one in four shoppers used a mobile device to visit a retailer’s website on Black Friday, according to IBM. Further, smartphones and tablets accounted for more than 16% of all online sales. Both numbers represent significant increases from 2011. Meanwhile, 13% of purchases on Cyber Monday were made from a mobile device.

Research conducted by the SMB Group earlier this year found that just 25% of small businesses (1-99 employees) and 34% of midsize businesses (100-1,000 employees) had already deployed mobile-ready websites.

ChannelAdvisor’s Wingo said mobile might be the technology story that comes out of this year’s Black Friday-and-beyond buying binge. ChannelAdvisor’s data showed mobile accounting for 36% of all traffic on its platform this year, up from around 20% in 2011.

“Consumers like shopping with their devices,” Wingo said. “We as an industry need to continue to accommodate that behavior and make it easier for them.”

2. SMB Buyers Can Cash In, Too.

The post-Thanksgiving sales typically feature a wave of hardware and other technology discounts. Even usually-stingy Apple offered modest deals on Black Friday. It can be a good time for cash-strapped small businesses and self-employed professionals who buy retail to go bargain-hunting for necessary technology upgrades.

Some examples: Buy.com on Monday morning featured a 1.5 TB external hard drive for just under $60. HP offered a free Nook e-reader to anyone who bought a PC — also discounted — from its online store. Dell trotted out a slew of Cyber Monday offers specifically for SMBs, under the tagline “We’ve got your IT wish list covered.” Dell’s deals on PCs, servers, and accessories are actually available through Friday, an increasingly common tactic among retailers. (Walmart’s Black Friday events began while most folks were still digesting their Thanksgiving Day meals.) And though Apple’s own promotion was a 24-hour deal, Newegg.com is still shaving a few dollars — 19 of them, to be exact — off of the third-generation iPad. It’s selling the 32-GB Wi-Fi model with retina display for $580 via Google Offers.

The bottom line: ROI and impulse buys don’t typically walk hand in hand, but if you were already planning an upgrade, this is a good time of year to find the best price.

3. It Pays To Prepare.

The Post-Thanksgiving Shopping Spree 2012 has been quiet on one IT front: Website outages. While SMB site outages tend not to generate headlines like those at high-profile retailers like Target, the downtime can be just as painful — if not more so. The good news: Retailers seem to have been prepared for the crush this year.

“Nothing to report — everything seems to be humming along,” ChannelAdvisor’s Wingo said. Smaller merchants might be a bit overwhelmed with order fulfillment, but as Wingo notes, “That’s a high-class problem to have.” SMB retailers that were ready for the rush are reaping the rewards.

“[Experienced SMBs] realize: ‘We’re running on seven-day weeks here,'” Wingo said. “There is no holiday for an online retailer this time of year.”

4. The Alternative Strategy: Don’t Discount.

Running major deals and promotions puts pressure on IT. Downtime during high-traffic periods can be devastating to the bottom line, enough so that jobs are on the line. SMBs that can’t properly prepare for the influx of traffic and transactions might want to consider another path: Don’t discount.

In fact, that strategy might be a prudent pricing tactic for the long term. Sheri Bridges, a professor at the Wake Forest University Schools of Business, points out that discounts eat into margins — which are sometimes claustrophobic to begin with. That means lost revenue that can’t then be reinvested in things that keep customers coming back time and again.

“Innovative products [and] services, improved customer support, enhanced retail experiences — all these and more require adequate margins,” Bridges said via email. Slashing prices can pump up short-term cash flow, but it can also muck up the big picture. “Price-based sales promotions amount to paying people to like [or] buy your brand,” Bridges said. “That’s not a viable long-term strategy.”