Archive for the 'Promotional strategies' Category

“Everything on sale”: Reality or illusion?

When state regulators get in the way of retailers’ promotional calendars — to attempt the establishment of “real” regular prices — it provokes a lot of commentary. Here’s an example from a recent RetailWire discussion. My point is that promotional department stores’ prices are more carefully monitored than the average shopper might think:

The barrage of promotional events, often with weeklong sales overlapped by one-day sales and so forth, has created the impression that “everything is always for sale” in many promotional department stores, and it’s a powerful marketing tool. But I’m guessing that a study of the actual number of days items are on or off sale might paint a different picture.

Most of the stores mentioned in the story have to deal with the reality of various states’ regulations, especially when they operate coast-to-coast. So there is probably a science applied to the establishment of regular prices, followed by a strict calendar of “on sale” and “off sale” days.

As a hypothetical, just because Macy’s puts a private-label polo shirt into every one of its “one day sales” doesn’t mean that the goods are on sale 365 days a year. And just because they do sell goods at “regular price” some of the time, doesn’t mean they can compel customers to pay full price for them.

Who holds the cards in the “free shipping” game?

The major package carriers (UPS and FedEx) have made clear to their retail customers that their pricing will need to go up for holiday 2015, to help cover the growing costs of so-called “free shipping” offers, late shopping deadlines, and so forth. The question is: Who pays? Here’s my point of view from a recent RetailWire discussion:

There is no such thing as “free shipping,” no matter how aggressvely the service is pushed by e-commerce and omnichannel retailers. Somebody ends up paying for shipments that are too close to shopping deadlines like Christmas, or too bulky in the first place. So it’s understandable that the big carriers (UPS and FedEx) need to think harder about the impact on their own shareholders.

The question becomes whether retailers have any negotiating leverage against the two giant carriers, or whether they are willing to pass along costs to their customers even in the form of higher prices (so they can continue to offer “free shipping”). There will be a lot of back-and-forth between retailers and delivery companies before agreements are reached, so the initial volley by UPS and FedEx may not be the last word.

Cacique: The Anti-Victoria’s Secret?

RetailWire panelists recently discussed the new Lane Bryant campaign for its Cacique intimates brand, which pokes some fun at the “unattainable” body image of the typical Victoria’s Secret model. Here’s my opinion about how well this campaign works to target a plus-sized customer for intimate apparel:

Victoria’s Secret has for many years capitalized on what some might consider “idealized” rather than realistic body types. (I know I’m treading on sensitive ground here.) And they have built up an enviable brand position as a result. Over the last few years, Cacique (and to a lesser extent Soma) have tried niche-building around an older or plus-sized customer who doesn’t want what VS is selling — either the merchandise or the brand position.

Whether the “I’m No Angel” campaign will drive Cacique’s sales is hard to say, but I’d rate it as a success in terms of brand positioning. Lane Bryant should be applauded for recognizing that its core customer is just as entitled to be comfortable “in her own skin” as a Victoria’s Secret model.

Farewell to deep discounting? I don’t think so…

The following comment from RetailWire was triggered by a Washington Post article about stores’ promotional cadence. The premise of the article: The “glory days” of 40% off discounts (and more) are over. I’m not seeing it:

I agree that retailers need to do brand-building on the basis of merchandise content, customer service and loyalty marketing (benefit-driven, not price-driven). But I don’t see much evidence to back up the Washington Post premise that stores’ promotional cadence is losing any steam. Judging from our mailbox and e-mail offers, there are plenty of retailers (Macy’s, Kohl’s, Penney and just about any specialty store you can name) continuing to drive promotional sales with extra coupons on top of other sale offers.

There are two bigger questions that retailers need to grapple with: First, is price a sustainable loyalty driver? (I’d argue “no,” because somebody can always beat you on price.) Second, does the store’s expense structure provide enough breathing room for the promotional impact on gross margins?

The recent results of JCP and Kohl’s provide a good contrast: Both operate with a similar promotional cadence and both stores’ gross margins are in the same ballpark, too. The difference is that Kohl’s has a far leaner expense structure than Penney and delivers a better operating profit as a result. So the real “sustainability” question surrounding discounting comes down to whether a store’s overall operating discipline can support it.

The one “right” pricing strategy? Let’s lay that one to rest

In a recent RetailWire discussion, the topic of everyday low pricing (EDLP) came up in the context of food retailing. The issue is whether “the best” strategy can even be defined. Although I put the spotlight on general merchandise, there is certainly no “one size fits all” answer to this question. It all depends on the rest of your retail strategy:

It’s probably valid that too many overlapping promotional strategies only serve to confuse the customer. In the world of general merchandise, Kohl’s (for example) is working to simplify its multilayered promotions through its new loyalty program and mobile app. But there’s no doubt that “the thrill of the hunt” drives department stores’ business, and JCPenney learned the hard way about the cost of switching to an EDLP approach.

Meanwhile, other retailers depend on EDLP as a key piece of their overall strategy, whether in groceries, consumables or apparel. It’s not just Walmart that avoids sales on top of EDLP, but off-pricers and some fast fashion stores. So choosing which is the “best pricing strategy” depends — as usual — on the rest of your strategy and what drives your sales and profits effectively.

Praise for Target’s holiday TV campaign

RetailWire ran a weekly series of face-offs comparing holiday TV spots for various retailers. The “finalists” included everybody from PetSmart to Radio Shack. In my view, Target’s campaign came up the winner this year:

There were several effective ads among the weekly winners, but I still vote for the Target commercial as the overall champ. This spot turned out to be the kickoff of a well-sustained, consistently themed campaign that ran through Christmas. The focus on category dominance in toys never got lost in the creative execution, while the ads struck a nice balance between emotion and “attitude.” (See the followup commercial with the “naughty boy” getting a lump of coal in the form of an antique cell phone.) Well done, Target, and consistent with the brand position you are trying hard to recapture.

Thanksgiving 2014: A post-mortem

I posted the following at RetailWire on the Monday after Thanksgiving. The “punch line” is that Cyber Monday sales were soft, too. Despite a lot of positive tailwinds, this holiday may be another squeaker:

It can’t come as a surprise that sales on Friday itself fell in brick-and-mortar stores, although the size of the decrease was bigger than I expected. Every year that sales are pulled forward by earlier openings — first from 6am to 4am to midnight on Friday and now to 6pm or earlier on Thursday — takes the sense of urgency out of Friday morning. The entire four-day weekend has to be considered disappointing.

This year’s decline was more pronounced than usual because of the rapid shift to e-commerce and mobile commerce (not reported in the overall weekend numbers) and the probability that some sales shifted to the early part of November this year. As the consumer becomes more empowered each year by the information at her fingertips, she is also less likely to believe that Black Friday pricing is really the lowest of the holiday season.

Add it all up, and it probably made for a more pleasant, and less crowded, shopping experience on Friday. But the sheer size of the numbers will leave retailers sweating it out — as usual — for the next couple of weeks.


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