Looking at the scenes from Black Friday and more recently the January sales, you would be forgiven for believing that consumer needs and behaviours haven’t changed all that much over past decades: as a leading retailer you can simply slash prices, make a lot of noise and they will come!
However, in the US the proportion of online sales has risen consistently since 20121, with in-store sales down 7% last year2. The top performing retailers in the UK and US all had integrated eCommerce offerings and an active social media presence. Habits are changing: consumers want more options, not fewer. This goes for major sales as much as for every other week in the year.
As positive growth returns to the UK, we will see price point move down the hierarchy of triggers to buy, over sale periods. In an increasingly competitive and commoditised market, the shape of a retailer’s customer experience will serve as its key differentiator. The breadth of your multichannel presence (ie web, mobile, in-store) is just one element; consistent brand experience, ease of purchase and aftersales care are others, and are often illogically deprioritised at these points in the calendar.
Why illogical? Because discounting is not just a way of getting rid of old stock – it is a golden opportunity to win new customers. And when people can compare prices at the touch of a button, discounting alone does very little to establish brand loyalty. They will pop into Target on the Friday and then return to Walmart for the next 51 weeks. However, get the experience right, and they will come back much sooner.
Although the Black Friday and New Year sales plug traditional low points in the retail calendar, mass discounting with a compromised customer experience could be ultimately damaging for retailers: it sets a precedent with consumers for regular price cuts, with minimal expectation of loyalty in return. Despite being one of the most visible discounters last year, the Home Retail Group is now urging caution after seeing Black Friday sales directly suppress December and January revenue4, a trend repeated elsewhere5. From this point of view, ROI from increased ad spend in late-November could be a cause for concern.
Elements of this compromised experience (such as ‘in-store only’ offers and shorter return periods) equate to sacrificing loyalty in order to shift the stock. That said, there are a number of ways retailers can use discounting intelligently, to foster loyalty and maximise profits. Attractive discounts and a compelling customer experience do not have to be mutually exclusive.
In the past few years we have seen major retailers better leverage their online presence to differentiate the experience. US retailers are ahead with mobile check-in and gamification, contributing factors to mobile traffic momentarily overtaking desktop browsing for the first time ever this year6. UK retailers such as Currys have also used social engagement effectively, holding a series of Twitter auctions7. These are cute marketing devices for driving sales, but not a substitute for a fully integrated and consistent buying experience.
A recent personal example: I headed to a famous shoe retailer just off Oxford Street a few weeks back, and after finally finding a pair I liked in my size, was then told at checkout that there were “no refunds”, only store credit. Of course, this only applied to discounted goods.
This is outdated thinking. Although the need to shift old stock is understandable, why sacrifice future customer loyalty for the sake of securing a single purchase? The short-sightedness of this approach is reinforced when you consider that I ended up buying exactly the same pair of shoes online, from a pure play e-tailer offering free returns over an extended three-month period.
Pre-sale experiences like these could be one of the contributing factors to the recent fall in in-store purchases over these periods. The other side of the coin is the aftersales experience, and this is where there is greatest disparity between retailers at present. If discount periods are set to become more frequent in the annual calendar, a robust aftersales experience becomes even more important as a motivator to purchase. The expectation of easy returns promotes the initial purchase.
Recent trends suggest that although the Black Friday and New Year sales are here to stay, retailers will have to put more focus into retaining customers over the rest of the year, otherwise deeper and deeper discounts will damage their bottom line. When questioning where to spend their marketing budgets, it is time to consider investing in a robust customer experience to win loyalty, rather than a big ad spend to shift last season’s shoes.
- Figure 1: images copyright REX/Ray Tang and ClarkHoward.com