Twitter
Facebook
Linked In
RSS
Login or Register
New to InternetRetailing?
Register Now
Internet Retailing
You are in: > Home > Views > Guest Comment

This is your 1 complimentary article for this month

Become a member for unlimited and immediate access.


Register
Already a member? Log in here

GUEST COMMENT Short-term discounting causing long-term effects for retailers

Linked InTwitterFacebookeCard
Endless discounting on all channels is harming retail
Endless discounting on all channels is harming retail
Mike Callender, Executive Chairman, REPL Group
Mike Callender, Executive Chairman, REPL Group

Historically, retailers could look forward to regular calendar dates when footfall would increase and the sales would roll in. Previously, Boxing Day, Easter and Bank Holidays, were key dates in retailers’ calendars, holding the promise of profit. However, in recent years, as shopping habits have changed, the importance of these dates has faded.

 

Now, records are showing a year-on-year decline in footfall and sales over these periods and Christmas 2018 was no different.

 

According to the British Retail Consortium, last Christmas was the worst in a decade for high street retailers, something which has been confirmed by The Office of National Statistics, which revealed that sales volumes fell by 0.9% in December. Yet, while sales fell over the festive period, November experienced a rise of 1.3% - a fact largely attributed to Black Friday discounts luring shoppers to carry out all their Christmas shopping earlier.

 

This shift to Christmas shopping being done during Black Friday sales is symbolic of a wider issue of short-term discounting that has become common on the high street. Retailers have unintentionally created a new normal whereby consumers expect sales and discounts all-year-round with sales driven by discounting now the norm. Discounts and sales are now expected as a standard and as consumers, we have become guilty of taking this for granted.

 

For instance, it’s not uncommon for consumers to see an item discounted by 10% and to wait until it is reduced further before making a purchase. This is a serious issue for retailers as lower margins inhibit investment and is unsustainable if retailers want high street longevity.

 

A winning formula?

While the majority of high street stores have been busy cutting prices, it is the retailers who have refused to cut prices that have seen the best results. In January, JD Sports reported that like-for-like sales rose more than 5% in the 48 weeks to 5 January, and total sales increased by 15%. The sportswear retailer credited these impressive results to the decision not to follow rivals into big price cuts.

 

That said, consumers certainly aren’t shopping at JD Sports because of its failure to cut prices. Rather, it is the funds gained by refusing to cut prices and decrease margins that are allowing the retailer to invest in the in-store experience and entice customers. This is something retailers stuck in a cycle of reactive discounting are invariably unable to do.

 

Ultimately, short-term reactive discounting is putting pressure on stores to maintain low prices, despite profits already struggling, and is forcing retailers to fight against each other to win over consumers. Instead of focusing on discounting and the race to the bottom, retailers should work together to look at the reasons people enjoy the in-store experience.

 

One area other retailers should look to JD Sports for guidance in is its stock management. This is because while JD Sports doesn’t offer products at discounted prices, it does offer the right product in the right place. Through effective supply chain management, the retailer is able to ensure it has the right products in stock, meaning customers are more willing to pay full price to receive the item they want there and then.

 

Investing in supply chain technology can make a huge difference to retailers, removing the need to discount items due to improper forecasting and stocking as they are ordering the right amount of stock from the beginning. This is proof that if customers are being given the right high street experience and are able to find the products they want in one shopping trip, the fact items aren’t discounted won’t be an issue.

 

The customer experience

Among the other challenges facing retailers and forcing many to turn to reactive discounting is the need to drive footfall. Research from retail performance insights provider Springboard has found that footfall across all retail destinations has decreased by 13% since 2008 and by 20% in high streets. And with regular year-on-year falls of 1-2%, this slow, steady decline needs to be reversed quickly.

 

Yet, despite a decline in people visiting the high street, customer expectations are rising exponentially. Consumers are more knowledgeable, have greater choice and are more demanding about cost, quality and delivery. While fewer might be shopping on the high street, it’s those who are looking for an experience who are most likely to be found in-store. For these people, a trip to the high street isn’t just about making a purchase, so it’s vital that retailers work to understand what they want and tailor their offer to them.

 

In an increasingly competitive market, with competition coming from both online and bricks-and-mortar stores, to survive, retailers must create a great in-store experience involving human interaction and exceptional customer service. To see the best results here, retailers must begin to establish the type of differentiation that consumers now demand and offer something their competitors aren’t, even if that’s just in terms of customer service. Having a point of difference has become the difference between success and failure on the high street and shouldn’t be underestimated. By creating a point of differentiation and focusing on experience, stores will be able to boost capture rates, drive dwell time and convert visits to sales.

 

In order to improve the in-store experience, retailers must also become tech-enabled. From streamlining workflows to understanding the customer journey, the right software solutions can future-proof our high streets. The power of AI, machine learning and data science is already giving retailers unrivalled insights into business operations.

 

By plugging into its power, retailers can empower employees, exceed customer demand and boost both productivity and profit. If they adopt new technology, understand the drivers behind falling footfall and spend, and respond to the changing retail landscape, they can all play their part in preserving the UK high street. This is all achievable without resorting to short-term discounting and the knock-on effects this has on their business.

 

While reactive discounting might be a quick fix, in the long term, it won’t achieve the results retailers desire and will leave them without the funds needed to invest in stock, staff and technology to improve the situation. With JD Sports acting as proof that price cuts aren’t needed to entice customers, stores must instead focus on differentiation and improving the in-store experience so that the price of their products becomes secondary to the experience. In order to achieve this, retailers must begin to adopt new technology, work to understand the drivers behind falling footfall and spend, and respond to the changing retail landscape.

 

Author

Mike Callender, Executive Chairman, REPL Group & Diane Wehrle, Retail Intelligence Expert, Springboard

 

Image: Fotolia

Linked InTwitterFacebookeCard
Add New Comment
You must be logged in to comment.

The InternetRetailing Newsletter

A curated update containing news analysis, reports, podcasts and opinion - completely free and delivered three times weekly

Become a Member

Create your own public-facing profile
Gain access to all Top500 research
Personalise your experience on IR.net
Internet Retailing
We are the magazine, portal and research source for European ecommerce and multichannel retail, hosting the board-level conversation for retailers, pureplays and brands across all of our platforms. Join the conversation.

© InternetRetailing Media

Latest Tweet

Internet Retailing
Tamebay
eDelivery
Twitter
Facebook
Linked In
Youtube
RSS
RSS
Youtube
Google
Linked In
Facebook
Twitter