iBusiness and blackbee uncover a discounting myth on Amazon

Black Friday and Cyber Monday are no longer a novelty to established online retailers. During this period, online retailers earn one quarter of their total annual turnover. The one-week discount war attracts many customers to higher-priced purchases. But our latest study in collaboration with iBusiness shows that many articles at the beginning of sales season are as expensive as rarely in the months before.

High discounts fuel customer appetite for spending

Special sales or discount campaigns are highly attractive to consumers and also promote strong sales in retail. And so it is hardly surprising that precisely during Cyber Week online retailers hand discounts out like confetti. In our evaluation, however, one thing above all is clear: the highly coveted products are only cheaper when compared to the previous week. Prices, therefore, rise shortly before the start of Cyber Week as if by chance. In the decisive calendar weeks 46 and 47, however, they again fall to their previous price levels.

Discount is merely a perception

Black Friday, Cyber Monday and even the entire Cyber Week are no more than clever sales campaigns at regular prices. The consumer can thus only save compared to the particularly expensive previous week. And so Cyber Week not only marks the end of the regular pricing level, but also introduces the Christmas season: For calendar weeks 49 to 51, price levels continue to rise.

Discount is merely a perception

Black Friday, Cyber Monday and even the entire Cyber Week are no more than clever sales campaigns at regular prices. The consumer can thus only save compared to the particularly expensive previous week. And so Cyber Week not only marks the end of the regular pricing level, but also introduces the Christmas season: For calendar weeks 49 to 51, price levels continue to rise.

  • Toys
  • Wellness and Beauty
  • Fashion (Jeans)
  • Pet supplies
  • DIY
  • PC & Video Games
  • Electronics & Computers
  • Home & Living
  • Sport & Fitness

The individual products had to meet the following criteria:

Representativeness: The articles are among the top sellers and are representative of their product group (niche products are distinguished from the general price trend if applicable).

Continuity: The products are available throughout the whole monitoring period.

Seasonality: The products are subject to only minor seasonal fluctuations. In addition, to exclude seasonal products, they have been listed continuously among the top 100 products in their category over the past twelve months.

The aim of the study was to measure the general price level of the articles, which was decisive to the respective category. As a result, the price index attained determines the actual prevailing price level and excludes bargains, as well as special offers and also decoy offers.

Price fluctuations within the product categories

As interesting as a glance at the general price level may be, it says very little about the development of the individual product categories. It became apparent that each product category followed its own pricing pattern. Products that are gifted particularly at Christmas display a significant price rise shortly before Cyber Week.

Striking here is that the prices for Cyber Week themselves fall, yet still remain above the average over previous weeks. Above all, the prices in the category of Electronics and Computers rise considerably again following Cyber Week. The category of Beauty also behaves similarly: In this sector, the prices rise particularly sharply just before Christmas. The reason is plain to see, since electrical and beauty products are particularly suited to last-minute Christmas gifts.

We have generally established that product groups with a high Christmas price index (apart from the Beauty sector) display a pronounced price increase during Cyber Week. The peak can be explained by the fact that products already in strong demand in the hard-fought sales period offer visibly high discounts. And this despite the current selling price floating well above the long-term average.

Pet and DIY items particularly cheap during Cyber Week

Product groups whose price index runs below average, however, also exhibit special features. Articles from the categories of Pets and DIY are actually relatively cheap during Cyber Week. The price index of these two product groups, however, does not fluctuate too strongly.

Completely unperturbed by Cyber Week is the Games sector. After a decline in prices during the summer months, most probably seasonal in nature, their prices then rise in the autumn and eventually reach their peak during this period. Equally unimpressed by the discount wars is the Fashion sector. Its price dynamic is particularly noticeable by its fluctuation scale of over ten percent, and yet a clear tendency cannot really be detected. The price index deflects evenly upwards and down devoid of any recognisable system.

Good prices fluctuate strongly

The data from our long-term study fundamentally shows that good prices are subject to strong fluctuation. Products whose prices are developing better than the overall market are thus characterized by strong price swings. Over the monitoring period, all product groups with above-average price developments were also subject to above-average price fluctuations of ten percent or more. In particular, the categories of Sport & Fitness and Toys are characterised by price dynamics of around 18 percent each. We assume here that the market is testing its prices in the case of high-demand products.

The worse the price development, the lower the dynamics

This assumption, however, does not apply in reverse, since among all product groups with average or weaker price development, the prices fluctuate significantly less strongly. Only the Fashion sector is the exception, with its significant swings upwards and down. It otherwise applies that the worse the price development, the lower the dynamics. The trade has evidently discovered its prices in these product groups, or the price pressure from new products may be lower. For online retailers this means implicitly that those offering products profitably can no longer do without professional price management. Price dynamics have adopted such a rapid pace among these products that an incorrect pricing policy could cost the entire margin.

Intelligent price management with blackbee

A good online retailer knows when they can ask whichever price. Our analysis shows that price swings are particularly sharp for top products. This is why market observation is the ultimate in online retailers remaining competitive over the longer term. Innovative solutions, like the blackbee Business Intelligence Suite offer the essential transparency here. It facilitates a reasoned pricing and product-mix strategy, whereby markets and competitors are extensively monitored and trends become apparent.

This article first appeared in original at iBusiness.

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