Archive for the 'Promotional strategies' Category

Diminishing returns for Black Friday

With the release of the NRF’s annual holiday shopping forecast comes a RetailWire discussion about Black Friday. The debate? Whether the event itself is essentially dead as a volume driver. My opinion? Not so fast:

“Killed” is too strong a word, because Black Friday still represents one of the biggest shopping days on the retail calendar. But the day has lost its punch for a number of reasons:

1. Most obviously, the shift from brick-and-mortar to e-commerce. With the growing number of store closings and “zombie malls,” this will be a bigger problem than ever throughout the 2017 holiday season.
2. The Thursday paper stuffed with promotional circulars doesn’t reach the huge number of Gen Y and Z shoppers who don’t even read the paper.
3. As stores have extended Black Friday opening hours into Thanksgiving itself, they have simply cannibalized their own business.

I could go on, and these are tough “macro” challenges for an individual retailer to overcome. Some of the potential solutions involve greater use of targeted social media and other messaging to reach younger customers…and this is true from early November all the way to the last crucial weekend before Christmas.

But the biggest challenge may be to make the sale offerings and merchandise content more compelling. Easier said than done (without months of advance planning), but the recent focus on putting entire assortments on sale — instead of key items at compelling price points — has drained Black Friday of its former sense of urgency.

Advertisements

Target’s choice: Cheap chic, or just cheap?

A brief RetailWire comment below on Target’s re-pricing of food and commodity basics,  which is something they periodically need to do:

Target periodically needs to reset its prices on commodities because of customers’ nagging perception that it charges too much. This has always been an issue with Walmart as its key competitor, and now Amazon adds to the challenge with its dive into the grocery price wars.

The key to making this work is to drive the higher-margin categories like apparel at the same time. (That’s really the key to the company’s success, not its grocery business.) Target’s reset of its private brands needs to accomplish this goal, otherwise the lower prices on food and household goods will only erode the company’s profitability.

“Whole Paycheck” no more

As soon as Amazon closed the deal on its Whole Foods acquisition, it dropped prices on several best-selling staples (with more to come). This sent a shudder through the rest of the grocery industry, especially with Amazon’s history of losing money to gain market share. I argue (on RetailWire) that Amazon had to move fast to overcome Whole Foods’ perception as an overpriced place to buy groceries:

I did a fast price check at the site for Metro Market (one of the Kroger’s divisions operating here in Milwaukee, and the sister brand of Mariano’s in Chicago). Its prices on organic bananas, eggs, butter and Fuji apples are already at or slightly below the new pricing at Whole Foods. (Its price on lean ground beef is 50 cents higher as of this morning.) What this points out is that Whole Foods had a pricing problem (“Whole Paycheck”) that Amazon is taking aggressive steps to correct.

Based on what happened to Costco’s and Walmart’s stock prices since Friday, there is a typical overreaction to the steps that Amazon is taking. Just keep in mind that Walmart and many other grocers are already competitive and Whole Foods is just joining the party. Also keep in mind that the Whole Foods brick-and-mortar footprint has a long way to go before it catches up with its competitors, despite the smart moves that Amazon is likely to make.

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.