If done correctly discounting can attract more business your way, but a careful balance has to be stuck. The team behind the e-book ‘How retailers make money discounting in 2016’ share their advice on this important subject.
Long gone are the days when retailers used to just offer discounts and sales during prime shopping points in the calendar; it is now almost a perpetual world of discounting in order to attract customers. There is little question that the subject of discounting is one of the biggest aspects of modern retailing and customers have adjusted their psyche and their expectations accordingly.
There is often a fine line when it comes to discounting. Get your strategy and pricing levels just right, and you will be able to achieve good cashflow and a healthy inventory turnover. Get it wrong, and you end up feeling like you are only in business to pay the staff and overheads, with little reward for your efforts. The question that almost every retailer, regardless of what market they are operating in, needs to ask is whether the subject of discounting should be viewed as a hindrance that is stifling your business or an opportunity to be grasped with both hands?
A change of shopping habits
You could construct a reasonable argument to pinpoint a number of specific moments in retailing history where customer’s attitudes and expectations changed. Black Friday is definitely one of those pivotal moments, which came about as a way of launching that all-important Christmas shopping period, but has subsequently ended up fueling a mindset of expectation, where customers go searching for deep discounts and are prepared to shop around to find the lowest price, rather than just accept what is in front of them in the store.
These high-profile shopping events are further fueled by the media attention that they manage to garner, with stories of heavily discounted TV’s and half-price furniture, making headlines and seemingly having the effect of changing consumer shopping habits for good.
The modern consumer
What retailers have to contend with going forward is the fact that customers are far more demanding and less tolerant than they were in the past. This means that, in order to thrive as a retailer and appeal to the modern consumer, you will have to be able to get the balance just right, of delivering the right product at the right price, in order to get customers spending money.
It seems that it is no longer enough to advertise a sale and expect customers to come looking for a bargain. One of the strategies now regularly employed is to advertise promotions and specific offers in order to attract the consumer in the first place.
Restructuring may be necessary
The continued rise of internet shopping and the noticeable growth of off-price retailing are major trends that are fundamentally reshaping the retail industry. If you are a retailer who wants to prosper in this newly-shaped arena of consumerism, there will almost inevitably have to be an element of restructuring required, so that you can accommodate discount strategies which work and offer modern solutions, such as a wider range of payment options.
Bricks and mortar retailers have to contend with the fact that internet sales are continuing to grow, which is often at the cost of direct store purchases, and it is predominantly the younger demographic of shoppers driving these purchases. The important point to take on board for bricks and mortar retailers is to anticipate this change in buying attitudes and patterns and devise a strategy that allows your retail business to embrace these shifts and adjust the business model to address and compete with these issues.
One way of addressing the discounting dilemma and making it work in the right way for your business, is to make use of an ever-growing availability of personal consumer data, thanks to the growth in big data technology. Consumers have become less resistant, or at least more tolerant, of the request for personal information and they give up their personal shopping habits and preferences far more easily than they used to.
Liking a product on Facebook or talking about it on social networking sites, registering for email offers and a whole host of different initiatives, will mean that you can collect very useful and dynamic data about a customer, which you can use for some targeted discounting and offers.
One of the key trends in retailing is the fact that retailers have the ability to understand and interact with their customers in a much more personal way. Investing in understanding your customer is a key trend for 2016 that could also allow you to use discounting strategies in a much more targeted and efficient way. An offer to your customer is now a combination of different elements, such as a specific product, price or personalised discount.
There are some good indications that retailers who offer a well-structured and more highly targeted offer to their customers, can achieve a higher ROI and maintain better profit margins, than across the board discounting. A strategy that revolves around personalisation and price optimisation will transcend into what you could call an offer optimisation strategy and would be an excellent use of big data.
More payment options
The continuing rise in the use of mobile payment solutions is prompting retailers to look at the payment options being offered to their customers at the checkout. Updating your payment terminal to a newer model will help in a number of ways. It will help improve compliance and security issues but another vital aspect of upgrading is that it will enable you to accept more payment options, which will improve customer perceptions of your business and encourage a more positive shopping experience.
While we may not yet be quite heading for a cashless society, being able to offer your customers a wide range of contactless, mobile and other smart payment options, will definitely help to keep your customers happy. Offering various payment options may not be as strong a buying incentive to a customer as a discount offer, but it does all add to the package.
The rise of the omnichannel shopping experience
Sometimes also referred to as Multichannel retailing, omnichannel retailing is all about using the various channels in a customer’s shopping experience and bringing them all together to provide an excellent pre-sale and after-sale shopping experience. This involves embracing social media, utilising online and mobile store technology and also includes more traditional methods such as face-to-face and telephone communications with your customer.
Formulating a successful discounting strategy is just one of the challenges facing retailers in 2016 and in order to drive your business forward, it will seemingly take a lot more than an attractive price tag to attract customers, but the rewards are there for all to see.
The UK Retail eBook: ‘How retailers make money discounting in 2016’ will help show you how the UK’s top independent retailers use smart promotion strategies to increase sales and compete with the big guys. It is available as a free download – for more information and to download it visit, www.vendhq.com/uk-retail-ebook