Retail Touchpoints: Mid-Season Report Card For the Holiday Season Shows Missed Opportunities
Through a special arrangement, presented here for discussion is an excerpt of a current article from the Retail TouchPoints website.
Consumers did flock to the stores on Black Friday 2008, but mostly to deep discounters and at those stores they were looking for unusually large markdowns. Those out shopping are looking for 70 percent off and higher - and in many cases the retailers responded...but at what cost?
"It is the year of the deal," says Brad Wolansky, vice president of global e-commerce for The Orvis Company. "Even merchants who traditionally aren't promotional (such as Orvis) must pay to play this year. Serving up the 'same old stuff' doesn't work, particularly on the web where customers can see the difference."
But industry experts have mixed opinions on the subject: "Deep discounts don't boost your brand, they just destroy your margin," says Nikki Baird from RSR Research.
Greg Buzek, president of IHL Services, has a different take: "Retailers that are not willing to heavily discount during this season are going to see dramatic drops in same store sales. Abercrombie discounted less than others and saw their overall sales for November drop 28 percent. Those that discounted might not have increased sales, but they were able to weather the storm a bit better."
Janet Sherlock, research director at AMR Research, noted that it has also been challenging for retailers to compete against the prices of competitors filing for bankruptcy and running GOB sales.
"While top-level revenue figures were adequate during the 2008 Thanksgiving weekend, profit contribution was likely poor for many retailers," said Ms. Sherlock. "Unfortunately, we then train the consumer to expect excessively low prices. Next year, there will likely be fewer retailers."
Whether or not deep discounting is helping retailers this year or any year for that matter, retailers still must focus on garnering sales from their best customers not only during the holidays but all year long and from one year to the next. "Retailers really do very little to make their loyalty shoppers feel special," notes Ms. Baird. "How about a special gold member lounge complete with foot massage and hot chocolate? Or loyalty members only from 4-6am and 9-10pm?"
Mr. Buzek agrees. "I think most retailers are missing the boat on focusing on low margin sales only to drive traffic for (Black Friday) rather than building a longer term relationship that allows for outreach and 'special days' throughout the year. Retailers like Borders and Best Buy get it with their programs. I'm not sure of too many others that are taking advantage."
Discussion Questions: Have retailers been too promotional this holiday season? Will the price slashing only condition consumers to expect discounts in years ahead? What opportunities are retailers missing amid the discounting?