During my keynote presentation at the J. Boye 17 Aarhus conference, I shared my thoughts about how slow adoption of digital has catalyzed what analysts and the press refer to as the Retail Apocalypse in the US.

Since 2006, thousands of physical stores have been affected by this slow-motion train wreck, including 6800 closures in the first three quarters of 2017. The eight publicly traded department stores carry $28 billion in debt Incredibly, 50% of the 1,200 shopping malls in the US are expected to close by 2023.
Analysts are still debating the exact nature of the problem, but few disagree that changing consumer behavior around digital commerce and the onerous debt associated with maintaining brick and mortar retail locations are primary factors.

After my week at the J. Boye conference in Denmark, my research on this topic lead me to wonder, what impact will the 2017 Holiday shopping season have? And what can we learn from those results? To find some answers I took a deep dive on shopping data from Thanksgiving (November 23rd, 2017) to Cyber Monday (November 27th, 2017) when 20% of all holiday shopping typically occurs in the US.

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Exploring the data

Interestingly, this year the biggest story was not brick and mortar vs. digital commerce, but rather the impressive growth of sales via smartphone. Another unexpected learning was the exceptional amount of revenue driven by AI-powered product recommendation engines.

According to RetailNext Inc., the number of people visiting stores on Black Friday fell 4% year over year. RetailDive.com reports total in-store sales for the entire weekend was also down. In total, 137 million people went to stores over the four-day Black Friday weekend.

The National Retail Federation (NRF) reported that more than 174 million Americans shopped from Thanksgiving through Cyber Monday, beating their prediction of 164 million consumers. The NRF also says that 33% of Thanksgiving weekend shoppers participated online only while just under 40% shopped both in-store and online. Roughly just 25% of weekend shoppers went to a physical store exclusively.

However, online sales were nothing less than impressive. According to Adobe Digital Insights, Cyber Monday set the record for the most significant online shopping day in history, with $6.59 billion in sales in the US. That’s a $1 billion year-over-year increase for same day sales.

Mobile also had a record-breaking Cyber Monday. Smartphones and tablets drove $2 billion of the total online retail sales. 47% of visits to retail sites on Cyber Monday happened on mobile devices and accounted for 33% of revenue.

According to that same research, online sales from Thanksgiving through Cyber Monday (Nov. 23 through 27) clocked in at just under $20 billion, up 15.2% YoY. Mobile was a key driver in that growth, representing 33.1% of online revenue.
Shopify reports that 500,000 merchants sold over $1 billion during the Black Friday to Cyber Monday weekend. Incredibly, mobile sales for the merchants they tracked represented 64 percent of overall digital commerce revenue.
“At the peak, Shopify merchants also generated more than $1 million of transactions in just one minute,” says Shopify in its release covering the Black Friday-Cyber Monday shopping period.

In other news, Salesforce tracked the impact of Artificial Intelligence enabled shopping on Cyber Monday. They report that 5% of shoppers who engaged with personalized product recommendations driven by AI-powered technology accounted for a whopping 24% of Cyber Monday’s total online revenue.

Who were the winners and losers?

No surprise, Amazon was a winner after they dominated with nearly 33% of online sales on Cyber Monday. Target, captured 6.4% of sales, making them the not-so-close first runner-up. Amazon also got a jump on things this year with their 50 days of Black Friday promotion. Amazon’s stock is up more than 60% this year to above $1,200.

Walmart was also a winner, a clear leader in brick and mortar sales and a healthy online operation with Jet.com. Over Black Friday weekend Amazon and Walmart increased their combined market share by 1.5%. Walmart’s shares have soared 40% to a near record high of $100 thanks to robust growth in its online commerce operations.

The most prominent losers were, no surprise, the traditional department stores. Already in distress, organizations including Macy’s just could not afford a weak showing with in-store sales. Macy’s stuck to their strategy of deep discounts to attract customers to their stores. While this may be appealing to their dwindling base, it is apparently doing nothing to attract new customers to the store.

Retailers with poorly performing digital commerce infrastructure were also big losers this year. Macy’s and Lowe’s experienced significant slowdowns in transaction handling which required hours to resolve. Lowe’s entire e-commerce website crashed for 20 minutes on Black Friday. The Gap and H&M also dealt with performance issues throughout the weekend.

At this point, it’s unforgivable for an organization like Macy’s to deliver a weak digital commerce experience, given how desperate they are. Macy’s stock has fallen over 40% in 2017 and they have recently announced hundreds of new store closures

Unpack what this means for brands

Based on what I’ve learned this year, I think it’s fair to say working e-commerce infrastructure is, as we say in the US, table-stakes. In other words, it is the minimum expected level of effort necessary to be taken seriously by customers today. And, to be effective, minimally viable infrastructure must be capable of supporting traffic spikes. Particularly predictable traffic spikes during events such as Black Friday weekend. It is no longer acceptable to claim overwhelming inbound traffic is a valid excuse for performance issues.

Beyond infrastructure, this year’s data also indicates that customer expectations have moved well beyond simple e-commerce websites. Digital commerce is more than just the latest buzzword; it references the need to meet customers with the right products on whatever device they may be using when they are ready to make purchases.

Digital Commerce is websites, mobile, and conversational interfaces like Alexa. But it’s also personalized product recommendations driven by AI-powered technology.

Based on all this data I feel very comfortable proclaiming that the days of relying upon home-rolled solutions for digital commerce are quickly receding. If your organization does not have professionally built and maintained platforms which offer scale, integration, and personalization as core features, it’s time to start thinking about making changes to your technology ecosystem.

At the J. Boye conference, I talked about the criticality of accelerating digital transformation initiatives in-motion. We discussed embracing digital and all of its challenges and opportunities. This year, I believe it’s time to make a New Year’s resolution for the organizations we all serve. To finally get out ahead of the curve and be the very best digitally enabled businesses we can be.