Retailers profit drops 28% Thanksgiving weekend

Retail sales may have been down in stores from Black Friday to Cyber Monday, but online experiences and retailers' ability to meet expectations were up, according to the DynamicAction Retail Holiday Index.

Retail profit dropped 28 percent thanks to markdowns and promotions, according to the report. Retailers have sold roughly 21 percent fewer items at full price this year compared to 2014, starting with September and leading up to Black Friday. DynamicAction found markdowns and promotions have had a 9 percent negative impact on retail profit, primarily as a result of markdowns, which have reduced margins by 8.2 percent from last year.

While brick-and-mortar retailers suffered a loss in foot traffic and profits, shoppers are buying more online and merchants are doing a better job of matching inventory to demand, and providing fulfillment.

"When you look closely, there are some key shifts occurring with the most innovative retailers' holiday performance that will help them propel their 2016 success," John Squire, CEO at DynamicAction, told FierceRetail. "The two key shifts for the holiday retail winners were improving efficiency and experience. This means running leaner, with less products on the warehouse shelves. It means they were prepared to utilize their stores as warehouses, shipping from the most profitable location."

And operations isn't the only area where online retailers have shown improvement. "They aren't becoming more operationally efficient at the peril of customer experience," Squire said. Retailers are doing a better job of matching product views with product availability that equates a better shopper experience with less overhead.

"Tomorrow's top retailers are looking at how they manage inventory in a vastly different way than traditional merchants," he said. "They are not simply measuring their out-of-stock ratio, but are rather paying close attention to their views availability and how this correlates to their SKU availability. Simply put, smart retailing equates with carrying less overhead of extra products that customers aren't looking for."

Still, data shows that online retailers are facing dwindling profits as shoppers increasingly utilize free shipping and returns. Orders that utilize free shipping are up 4 percent over last year and returns have increased 9.3 percent. And there's some indication that shoppers are returning some of the more profitable items.

The DynamicAction Retail Holiday Index is an analysis of more than $5 billion in consumer transactions during the holiday 2015 time period.

For more:
-See this DynamicAction report summary

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