The Sale Phenomena: E-commerce and its impact on the market

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Written by Angela Acorda and Dani Capinding

Nothing feels better than scoring a good deal for an item that you’ve been eyeing for the past couple of months. But with it being harder to go out to stores to find these bargains, clicking “add to cart” has become the online alternative. E-commerce platforms love to play with this idea as seen in their several online sales: you scrolling through your phone and unwittingly increasing your wishlist for the next big online sale. Just like that, these platforms use this situation conveniently and as a marketing opportunity.

With the ongoing pandemic and stay-at-home mandate,  e-commerce sales have increased by 93% in May. In the US alone, online groceries’ sales also increased by 110% between March and April.  E-commerce has become the ideal choice because of the lack of risk it poses to consumers. As such, these e-commerce platforms have now become household names. Shopee, Lazada, Alibaba, and Amazon are some of the biggest names in online shopping. E-commerce is now the preferred option because of its convenience and simplicity. 

However, what’s striking about these e-commerce platforms are their low prices. E-commerce stores are known for having big sale events. We often see slashed deals through  advertisements online.  With repetition and creativity,  these ads become easier to remember and add to their hype. Tactics include naming their events after dates, like  9/9, 10/10, 11/11, 12/12 and so on. 

Impact of Online Sale Events 

While sale discounts are commonly seen in retail stores, e-commerce is creating its own game with the rise of online sale events. According to the Digital Commerce 360,  e-commerce is currently surpassing sales of physical stores in the US. As such, sale events have made e-commerce websites become a more prominent marketplace.

In 2019, Alibaba.com did their annual 11.11 sale, or their  “Singles Day” sale, which was also replicated by other e-commerce platforms.  A specific component to its success was that the 1’s represent single sticks or single people celebrating the day together. As a result, Alibaba outdid their gross merchandise value record from 2018, which was 213.5 Billion Yuan (30.3 Billion Dollars,) and reached the value of 268.4 Billion Yuan (38.2 Billion Dollars) due to the sale.  The 11.11 sale even overpassed the famous Cyber Monday and Black Friday as stated in a CNBC report.

Lazada, another e-commerce platform under the Alibaba Group, has also shown great success with  their 12.12 sale, with 6.6 million items sold within  the first 24 hours. It was also noted that 12,000+ sellers have joined Lazada’s Millionaires Club, which is their celebratory group of sellers who have reached the 1M pesos sales mark. Indeed, e-commerce is both beneficial to its sellers and buyers.  E-commerce therefore is a critical case to study because of its impact in the economic playing field. 

FIRST AD, FIRST CLICK

E-commerce relies on a lot of paid online advertisements. Online ads depend on the strategic bids that they get from each company.  Lazada uses the “target outranking share bid strategy” by Google, which is essentially companies having the ability to outrank competitors through their bids in order to maintain the first online ad spot.  In an interview with Google, Baptiste Le Gal, Senior VP of Search and Display Marketing of the Lazada Group explains that the strategy has gained them much success as they were able to outbid competitors, triple the position above rate, and  expand the outrank share by more than 280%. 

Online ads are effective because of the direct solution it gives to consumers. Due to its placement, it is able to provide familiarity to consumers when they look for a store or product online. The International Journal of Research in Marketing states that paid search advertising has had a significant effect on short-term firm performance on sales. Although one may say that online advertising is not effective because it is easy to ignore and to just scroll on; the strategy still remains active because of the “recall” factor that it gives to consumers. Furthermore, surveys show that search engine advertising is the most preferred way of online advertising by entrepreneurs because of its ability to target large and specific groups of consumers. 

“FOMO” RHYMES WITH PROMO

Another reason why online sales events have generated massive sales and traffic for many e-commerce companies is because these events do not last forever. In fact, the majority of these internet-wide events are only held for a day. Because consumers are only given a limited time to avail of special discounts, the deals offered by Lazada and Shopee during their online sales become that much more valuable. The “fear of missing out” or “FOMO” experienced by customers during large sales events largely reflect what the “scarcity principle” dictates. 

Dr. Robert Cialdini’s “scarcity principle” states that people tend to want more of a product or service if it is less available. One thing sellers can do to apply this concept is to make it clear that customers may lose opportunities if they do not avail of the product or service immediately. In the case of large online sales, this can be done by reducing the sale period. This way, customers will certainly not want to miss out on the amazing deals offered by the company.

Truly, this principle explains why the online sales events held by Lazada and Shopee during the latter half of 2019 have successfully generated traffic and sales for these companies. During Shopee’s 9.9 Sale in 2019, the company would generate a peak sales volume of 187,000 orders per minute, while in the 2019 11.11 Lazada Sale, one million items were sold during the first hour of the sale. Later that same year, during its 12.12. sale, Lazada sold 6.6 million products during the first 24 hours of its sale. 

ACHIEVE SALE SUCCESS 

Over the past few years, online sales events held by large e-commerce sites have accomplished so much for the industry. However, these achievements come with a lot of costs. To accomplish this kind of success, thousands of paid online advertisements for these events are shared all over Facebook, YouTube, Twitter, TikTok, and other paid acquisition channels many weeks before the event. Additionally, these large e-commerce companies also take advantage of their existing user database by engaging in email marketing campaigns. Furthermore, all the online ads distributed by Lazada, Shopee, and other large ecommerce platforms also feature backlinks to company websites where large banner ads can also be seen promoting their online sales events. 

Through aggressive marketing strategies, these companies are able to promote their online sales events and bring in millions of customers to their websites. However, companies can ensure the success of their own sales events by holding it at the right time. For example, Filipinos often make more purchases when they are not busy with work, with data on household consumption expenditure showing that the amount of sales generated by businesses spike right when the summer and Christmas seasons roll around. Large e-commerce companies know that there is a large demand for a variety of products during these periods and have been using this seasonal buying windows to decide when they can hold large online sales events. As such, smaller businesses can also bank on these seasons and follow the example of various market leaders.

SALE AWAY! 

Many people assume that only buyers benefit from these price reductions. However, holding sales can also bring new customers to online businesses, encouraging unplanned purchases, preventing shopping cart abandonment, and drastically increasing revenue. In addition, new digital advertising methods and consumer behavior studies have also ensured the beneficial impacts of these consumer incentives to any business, no matter how big or how small. As such, it is becoming clearer that holding big discount sales is a marketing strategy that every business should take into consideration.

Visual by Chloe Gaw

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