Romulus Grigoras, CEO of OneStock, looks at what brand marketers can do to maximise profit margins over the next 12 months.
The retail industry is fast heading towards the destabilising, price-slashing era we saw a few years ago, when consumers became so used to regular promotions that many would faithfully wait to place an order to claim their 20% off. According to the latest IMRG figures, nearly a quarter of overall UK retail sales (23%) came from products that were reduced between July and September 2018 – almost a third up on the same period last year.
As brands find themselves caught up in another round of endless discounting, they are forgetting there should always be a valid reason to reduce prices: either to acquire new customers or as a thank you to loyal ones. Chasing revenue with blanket promotional activity, simply because competitors are doing so, is damaging and sacrifices engagement with core customers in pursuit of fair weather shoppers.
There are practical strategies that retailers can employ to break this cycle that will benefit both themselves and their customers.
Need versus want
When someone visits a retailer, either online or in-store at the start of a season and purchases an item, they are saying something important. Not only are these shoppers identifying themselves as true brand fans, by buying at full price they demonstrate the value they place on the products.
Retailers should analyse this buying motivation carefully to understand loyal customers’ needs and encourage similar patterns of shopping. It’s about focusing on promoting quality over cost. Brands that fully grasp the mindset of consumers and shape their marketing messages, inventory requirements, site interactions and in-store experiences accordingly are more likely to avoid a surplus of stock later in the season.
Get the message across
How much marketing is taking place post-sale? And is it tailored to each customer? Every purchase is an opportunity for brands to engage further with shoppers, but this doesn’t always happen. If a shopper makes a transaction in-store they will receive a thank you and perhaps an invitation to join a mailing list, while if they purchase online, they will likely be sent a mandatory dispatch note with their package and maybe a next purchase discount coupon.
Retailers are missing out on a major opportunity. Ideally, they will know what the customer has been looking at, both online and in-store, and use the data to create targeted messaging, enticing shoppers to buy again. For instance, why not give the shopper details of recommended related products or a personalised voucher in the parcel or with their till receipt?
Many retail sectors operate in a seasonal cycle, which can make it hard to sell at full price at the beginning while also increasing the chance of surplus stock towards the end. Apart from the incongruity of trying to motivate shoppers to purchase, say, a winter coat in the middle of a balmy Indian summer, the traditional season-based way of selling is no longer in tune with many consumers’ lifestyles and behaviours.
By changing the rhythm of this restrictive approach and introducing special collections half way through each season, retailers can reinvigorate their ranges and imbue a sense of urgency to the shopper to shop. Many luxury brands successfully introduce mid-season cruise or holiday collections aimed at clientele heading off for winter sun. How about spicing up your main collection by collaborating with a new designer or launching a celebrity marketing campaign.
Marks and Spencer is currently doing this well. Its partnership with TV presenter Holly Willoughby involves promoting regular edits of new products. A popular household name will resonate with a retailer’s target market and trigger additional full-price purchasing.
Retailers can lose the opportunity of selling popular items at full price if they underestimate demand and sell out early in the season. An omnichannel approach to stock management will help avoid the issue of unavailability on one channel and a surplus on another. If, for example, an item is out of stock online, why not ship from store directly to the shopper? This will both increase customer satisfaction and revenue.
It’s hard to resist offering promotions, especially in this tough commercial environment. Before retailers launch into another year of price-slashing they should re-evaluate their aims. Instead of falling into the trap of grabbing shoppers’ attention with constant free shipping offers or a ‘last hour to buy’ message, they need to remember that discounting, even intelligently, is only one strategy marketers can employ to make a merchant-customer relationship special and long-lasting.
By Romulus Grigoras