Almost every online retailer makes changes in their pricing in preparation for Black Friday and Cyber Monday. But how significant are those price changes? And what changes do the retail ‘Giants’ such as Amazon, Walmart and Best Buy make during this period? Research by analysts at Jefferies & Co. and other firms showed that many discounts this year were at least as good as last year's and maybe even more. The research indicated that the average discount at Best Buy on Black Friday was nearly 45 percent, versus about 34 percent last year. The average discount at Walmart was about 47 percent, better than last year's average of 43 percent.
Did these leading retailers really discount as aggressively as the holiday hype tends to portray? Using our own proprietary pricing software at Upstream Commerce, we decided to find out.
Instead of taking a look at a small set of specific heavily-discounted products – a tactic retailers often use to promote sales during the holiday season – we took a look at the overall average price of entire product categories. We chose TVs, and Toys/Games and sampled a total of around 600 products in both categories. We compared them at Amazon.com, Walmart.com and Bestbuy.com, noting the price changes over three dates, Nov. 15, 2011, Black Friday 2011, and Cyber Monday 2011, showing the percent of increase or decrease in price on those days.
Television Sales Price Graph - Data from Upstream Commerce
Toys & Games Sales Price Graph - Data from Upstream Commerce
We wanted to find out how much Amazon, Walmart and Best Buy actually discounted on Black Friday and Cyber Monday 2011. Examining this data, we made several interesting observations:
No consistent strategy among retailers. Looking at the graphs, it becomes immediately apparent that each retailer had its own pricing strategy for this critical period.
Amazon discounted the most on Black Friday. For both the TVs category and the Toys and Games category, Amazon discounted the most for Black Friday, but then raised prices for Cyber Monday. This goes a bit against Amazon's strategy of trying to price lower than most other retailers throughout the year.
Walmart's average prices were actually HIGHER in both Black Friday and Cyber Monday. In both TVs and Toys and Games, the average prices at Walmart where higher than on the 15th. This surprised us, so we analyzed further and found that average prices went up on Black Friday and Cyber Monday because many of Walmart's less expensive products were out of stock (and had not been restocked). This of course makes you wonder – did Walmart prepare properly for these two critical days of the year? It seems that they might have left money on the table, or, conversely left consumers unable to buy goods at the usual, expected low Walmart prices.
Best Buy’s discounting depends on the product category. Unlike Amazon, Best Buy seems to be more discretionary with its discounting. Although it provided discounts in the TVs category, it actually raised prices slightly on average for the Toys and Games category.
The bottom line
What does this mean? The media hype that builds on the assumption that retailers, especially the ‘Giants’, provide huge discounts across the board during the holiday season does not seem to hold water. The erroneous hype seems to come from a focus on a smaller set of products that are actually being discounted, than from a broader look at the actual price changes of the products in entire product categories. On average, the changes are only a few percentage points -- and not the impression most of us have that retailers are slashing prices across the board. We recommend that this be examined more closely, minus the mass media and public's assumption that just because it's expected, the big retailers are making significant changes in their prices at these critical sale times.