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12/11/2016

Report: Big increase in holiday offers — and related costs

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Retailers continue to launch digital deals this holiday season to snag new customers — but these efforts come at a price.



Retailers’ promotional offers are eclipsing 2015 efforts. Customer orders using a promotion are up 34% versus 2015, and up 52% over the holiday season (Nov. 1-Dec. 5) versus 2015 in North America.



However, these promotions reduced product profit margins by 19% year-to-date (YTD) versus 2015 for North American retailers, according to DynamicAction’s “Retail Index: Holiday 2016.”



The report, which analyzes more than $8 billion in consumer transactions globally, said that marketing costs increased 7% YTD versus 2015, and jumped 25% over the holiday season. While these promotions were positioned to drive new customer acquisition, North American retailers failed to get the number of new shoppers they needed in the digital door. Specifically, new customer acquisition was down 12% YTD, and 6% over the holiday season.



“From BOGO offers to 40% off everything, Amazon began this process of training consumers to expect a sale, but nearly every major retailer has now joined in this costly race to the bottom,” said Sarah Engel, senior VP of global marketing for DynamicAction.



“In order to cut through the clutter and answer shoppers’ emotional desire to get a good deal, promotions have become table stakes for the holiday season,” she added. “However, customer-centric retailers, who will also drive profits, are those who understand their cross-organizational data and act on it quickly to provide excellent shopping experiences and promote wisely without destroying profit margin.”