Archive for the 'Promotional strategies' Category

Can low prices alone drive loyalty?

Not for the first (or last) time on RetailWire, panelists engaged in a conversation about whether low prices or compelling sales can make or break retailers’ loyalty programs. I think there’s a lot more to it:

Most retailers’ so-called loyalty programs are little more than extra discounts layered on top of existing sale prices. It’s a transactional approach to the business, if you believe that true loyalty is developed by moving customers from “satisfied” to “committed.” And it’s the easy way out.

A value-oriented retailer will argue that deeper discounts are part of its brand equity — which may be true — but this is not the same thing as building an emotional connection through great content, execution and service. If anybody thinks that Amazon has built brand loyalty (among Prime members and others) strictly on the basis of competitive prices, they are missing the point of everything else Amazon is trying to do.

Discounting finds the cosmetics department

A topic near to my heart, from a recent RetailWire panel discussion:

Speaking as a former buyer of cosmetics (going back to 1980) and then as a merchandise manager with oversight of the category, the beauty business has been the last refuge of full-price selling in department stores. But the temptation to put these goods on sale has migrated from discount stores and mass merchants to those department stores — with the added impact of Sephora, Ulta and online sales. And like anything else related to price promotion, retailers will find it hard to stop taking this particular drug once they start.

A long time ago, cosmetics fed off the traffic that the traditional department stores enjoyed. Then they became “headquarters” businesses in their own right given the strength of brands like Lauder, Clinique and Lancome. Eventually customers were trained to “wait for the gift-with-purchase,” just as they were trained to “wait for the sale” elsewhere in the store.

Those legacy brands are aging, just like the legacy department stores that carry them. This pattern is being repeated throughout the retail industry and the entire CPG world. So the conventional wisdom — that discounting cosmetics will only commoditize the business — may be true but may not be relevant anymore.

Is Amazon Prime Wardrobe another disruptive move?

Amazon is introducing a new feature for Prime members: Risk-free trial of several apparel items with the ability to return what you don’t like. (And price incentives to keep more of what you chose.) RetailWire panelists mostly see this as another Amazon “game changer,” but I view it a bit differently as their response to the lack of physical stores:

If Amazon aspires to be the top seller of apparel in the U.S. (and it’s already getting close), it needs to add a “try before you buy” feature to keep driving more Prime memberships. It’s responding to the challenge of concepts like Trunk Club — but it’s also acknowledging its lack of a physical footprint. Think about it — stores like Kohl’s and Macy’s already have huge numbers of brick-and-mortar locations where you can return unwanted clothing that you bought online. This may be a rare case where Amazon responds to a competitive weakness in its formula.

Is the pendulum swinging back on early Thanksgiving openings?

I’ve argued for awhile that earlier and earlier Black Friday (or Thursday) openings are counterproductive. Here are some recent thoughts posted on RetailWire:

Some of the biggest players (Walmart, Target, Macy’s, Kohl’s, JCPenney and Best Buy) still plan to open on Thanksgiving. But the pendulum is swinging back, and the Mall of America’s announcement that it plans to close on Thursday will be a major influence on other mall operators. It seems clear that the push for earlier “early bird” hours on Black Friday (followed by midnight openings, followed by Thursday openings) has had a diminishing effect on sales — by draining any sense of urgency out of Friday morning shopping. (And the availability of goods online hasn’t helped, either.)

It’s hard for the retailers who insist on being open for Thanksgiving to be the first one to blink, but it seems clear that consumer sentiment is tugging them in that direction.

And this more recent post:

While the reports of the death of Black Friday are greatly exaggerated, there is no doubt that it’s lost importance on the retail calendar. The shift to e-commerce is part of the reason, but the bigger cause is retailers’ greediness in pushing their “early bird” hours earlier and earlier and finally opening on Thanksgiving itself.

My long experience working for a company that knew how to “nail” Black Friday tells me that the event was once as much a social occasion as a way to hunt for deals. Opening earlier and earlier never seems to result in more net sales but actually becomes counterproductive when any sense of urgency about “early birds” flies out the window.

Has overpromotion hit a wall?

The topic of whether department stores (and other retailers) are overpromoting is always a provocative one at RetailWire. Here are my recent thoughts on the subject:

JCPenney makes a good cautionary tale about what happens when a promotional department store tries to go “cold turkey” on its sale events. LIke it or not, the customer has been trained to wait for sales for a long time (Gimbels, anyone?) but the difference now seems to be the frequency of margin-busting sale events and extra discounts. JCP’s experience may have scared other retailers away from cleaning up their promotional calendars and risking a volume meltdown.

Certainly retailers like Amazon and Costco drive plenty of volume without being especially promotional. But they operate with different margin requirements (and expense structures) than the typical department or specialty store. So I’m not sure there is an easy answer to the question — but it’s clear that the overpromotion is not driving sales growth.

Target’s Marimekko promo in the rearview mirror

Here’s a RetailWire post from awhile ago, before Target kicked off its spring limited-edition promotion of Marimekko-designed apparel and home goods. This turned out to be less successful than some of the others (Missoni, for example). Have customers gotten burned by the chronic outages of these promotions, or did they simply not like the product? Here are some early thoughts — keeping in mind that it didn’t sell out quickly:

I’ll use Target as an example of a store more committed to the occasional “wow” experience than everyday blocking and tackling. The upcoming Marimekko is bound to draw traffic to Target stores and the website, and to sell out quickly. But the company has been plagued by stock-outs for many years, and finally is in a position to address its supply chain problems with the hiring of an Amazon executive.

Yes, sometimes loyalty needs the “wow” factor, or a strong value proposition. But it more often takes consistent execution to move a customer from merely “satisfied” to committed. Just ask Amazon how good execution has worked to grow its Prime membership.

Macy’s is looking for a new CMO

Chief Marketing Officer, that is…after letting go a 32-year veteran of the company. RetailWire panelists took the chance to discuss whether Macy’s needs an insider or outsider to fill the position. (And one panelist added that Macy’s could use a new head merchant, too.) Here’s my point of view:

This may be a good opportunity for Macy’s to look at its stale marketing (and especially its sales promotion) with a fresh set of eyes. Macy’s is in a promotional rut where all of its print sale events look exactly the same (red and black, coupons, a bunch of boxes on every page) and the customer is bombarded by the same kinds of overlapping offers they are used to seeing from Penney or Kohl’s. Surely Macy’s has an opportunity to use its promotional tactics as part of an overall re-branding strategy. (What is “The Magic of Macy’s,” anyway?) Without knowing the inside candidates, I’d look outside first.