A rising tide lifts all ships. That’s the mantra we’ve been repeating since the first Prime Day event back in 2015. It didn’t matter if a brand or retailer sold on Amazon. Steep discounts and promotions enticed consumers to shop during the summer doldrums, reinforcing the impact of ecommerce on retail industry growth.
But times are changing. Online sales declined for the first time this year. Inflation is hitting hard, and consumers are pulling back on purchases amid worries about a recession ahead. This year’s Prime Day provided some midsummer relief, but the event did not outperform 2021. Let’s break down the second-quarter results from our Shopping Index, dive deeper into Prime Day numbers, and look at what it all means for the holidays.
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How did shoppers respond to Prime Day this year?
Capturing the hearts and minds of shoppers in the middle of summer fun is an uphill battle. Prime Day provides a much-needed boost to the retail industry, with its halo effect increasing sales for even sites other than Amazon. This year was no exception — online sales for brands and retailers selling directly through their own sites grew by 8% on Tuesday and Wednesday during the second week of July compared to the same two-day period in July 2021. U.S. online sales grew by 21% over this period. And the fastest-growing region for Prime Day was APAC (excluding Japan, Australia, and New Zealand), with 37% year-over-year growth.
But it’s not all good news for the summer shopping extravaganza. Global online sales for non-Amazon sites were down 12% compared to Prime Day 2021. And last year’s event, which took place in the middle of June, was already soft compared to Prime Day in 2019 and 2020. Is it shopper burnout or oversaturation in several key markets? Our research suggests the latter. High-ticket products like electronics and sporting goods saw meteoric holiday sales growth in 2020 and the first half of 2021 — resulting in a market with too much product and not enough customers.
One key benefit for consumers from this year’s Prime Day? The long-awaited discounting season has finally returned! Discount rates over July 12-13 returned to typical holiday-era levels after a 2021 defined by high demand and low discounting due to inventory scarcity across the supply chain. Global discount rates averaged 16% during this two-day period, up 7% compared to the first half of 2022. This was also a 23% increase over the discount rates during the 2021 Prime Day. France and Italy saw the greatest discounts, averaging 21% over the two days.
Luggage and handbags remained one of the fastest-growing categories this year, but other popular categories changed significantly from last year’s event. Active footwear and haircare zoomed into the top three growers list this year, replacing toys and furniture. Active footwear saw the biggest year-over-year increase at 23%.
With sales for toys and home appliances decreasing the most during Prime Day – and retail buyers chasing demand with oversized purchase orders last year – we anticipate higher discounts and significant margin pressure going into the holidays. To combat margin compression, don’t be surprised to see retailers increase base prices while at the same time increasing discount rates. This tactic is designed to create the perception of better deals at a time when shoppers are increasingly conscious of their budgets and spend.
Are discounts making a comeback in 2022?
This year’s Prime Day brought some much-needed relief to brands and retailers as online sales slow. Year-over-year online sales fell for two straight quarters this year, declining by 6% globally from April through June. Second-quarter sales were essentially flat in the U.S., at +2% year over year, and negative across all of Europe.
The declines come as consumers worldwide continued to see rising prices throughout the quarter. The average selling price (ASP) rose another 4% globally and 9% in the U.S. from a year earlier. Global order volumes decreased by 9% year over year. In Canada, which has one of the world’s highest inflation rates, shoppers placed 31% fewer orders and online retail sales fell 20% from the previous year. The only region to experience significant online sales growth this quarter was APAC (excluding ANZ and Japan), which grew by 13% year over year.
In light of recent economic concerns, consumer loyalty is expanding from convenience and safety to value and experience. In fact, according to our research, half of all global shoppers will switch brands between now and the end of the year due to pricing. After a year of rising prices and low discounting due to strong demand, the return of discounting is welcome news for all consumers. While we anticipate earlier and steeper discounts as we approach the holidays, our data shows this didn’t take hold in the first half of 2022:
- Global average discount rates in the second quarter remained at 15% worldwide, not budging from the first quarter of 2022 or the second quarter of 2021.
- Some regions – such as ANZ, Canada, France, Germany, and the Nordics – even saw a decline in second-quarter discounts compared to 2021.
- Eastern European countries, likely impacted by the war in Ukraine, saw the largest discount growth rate at 19% year over year.
Why have online sales fallen in 2022?
Many hypotheses have surfaced recently to explain this year’s decline in digital commerce. One popular theory is shoppers are ditching digital in favor of the bricks-and-mortar store. Rather than pitting one against the other, it’s critical for retailers and brands to merge the shopping experience across both digital and physical spaces. In fact, we predict this holiday season, 60% of digital orders will be influenced by the physical store – whether demand is being generated or fulfilled.
That said, our data suggest that there may be a fundamental flaw in the online shopping experience – a disconnect between the browsing and add-to-cart part of the funnel. In fact, the number of unique online shoppers remained flat in the second quarter from a year earlier. In other words, volume stayed the same; few people have actually shifted from digital. So consumers aren’t simply ditching digital stores for physical stores. In fact, online traffic volume declined only 2% this quarter compared to 2021, making traffic volumes essentially flat. This means that people were still shopping online at nearly the same rates as in 2021.
So where is the disconnect in 2022? If traffic and unique shoppers stayed the same, why are digital sales down? The story unfolds when we look at online shopping cart behavior. The number of online carts created in the second quarter fell 8% from a year earlier. But even as shoppers created fewer carts, they also abandoned fewer carts. The number of abandoned carts declined by 1.2%, indicating that more shoppers are not dabbling once they add an item to the cart. If they filled a cart, they did it to buy.
The number of loyal shoppers is growing, too. Orders from repeat buyers (those returning to buy more in the second quarter) grew by 8.3%. This indicates that the disconnect is happening at the point of inspiration. Economic concerns are top of mind for all shoppers these days. The declining add-to-cart rates are likely associated with shoppers doing more research before converting. Connecting consumers to the right product at the right price is now more important than ever.
How can you better engage these uncertain shoppers in the 2022 economic climate? Here are our top suggestions:
- Embed personalization across the shopping journey. Intelligent audience segmentation, search, product recommendations, and offers are all key opportunities to put the right product at the right price in front of the right consumer. As consumers become more discerning, personalization will be key in making sure your messaging is reaching the right market.
- Reduce taps to discovery. The majority of all online traffic comes from mobile devices (71% in Q2). Ensure that your mobile product detail pages load quickly and are optimized for the small screen. And reduce the taps to product discovery via predictive product recommendations.
- Skip the cart. As more shopping journeys are mobile-first and as consumers lean into alternative payment methods like mobile wallets and buy-now-pay-later, enable one-click checkout directly on the product page via a “buy now” button. This clever option drastically reduces the conversion funnel, especially on mobile devices where shopping sessions are quicker and less likely to convert through traditional methods.
- Increase site speed. Research shows that improving site speed by just 1 second can improve conversion rates by nearly 6%. Monitor your site speed consistently, review caching to ensure unused content doesn’t prevent popular pages from being stored, and keep an eye on third-party integrations.
New margin pressure heading into the holidays?
With Prime Day in the books, and rumors that another Amazon shopping event will occur in October, the industry now begins to make its way to the winter holiday shopping season. With looming economic issues and a weary global consumer audience, this year creates margin pressure for so many different angles. Check out our predictions for the 2022 holiday shopping season here. And when you’re done, read our holiday planning guide to begin prepping for peak shopping season.
Powered by Salesforce platform data, the Shopping Index uncovers the true shopping story with a look at the previous nine quarters to uncover a deep understanding of how consumer behavior is evolving and how the market is moving. The Shopping Index analyzes the activity and online shopping statistics of more than 1.5 billion unique global shoppers from more than 64 countries. This battery of benchmarks covers both the recent history and the current state of digital commerce. Several factors are applied to extrapolate macroeconomic figures for the broader retail industry, and these results are not indicative of Salesforce performance.