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Perpetual Discounting: How To Avoid The Trap

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Retailers seem to be in love with the strategy of giving discounts to attract customers into their stores.  You only have to walk into any shopping centre to be bombarded with signs in many retailers’ windows advertising price discounts. 40%, 50%, 60% off signs (and even higher) scream out to try and entice shoppers to enter their stores. This is what you call perpetual discounting. How can this strategy be sustainable with the rising costs of rents, wages, and utilities?

I’m not naive to believe that retailers shouldn’t discount, it’s a great way to clear old or slow-selling stock. However if the reason a customer shops with you the first time is solely based on the discount they receive, then expect them to move on to your competitor when the discounts dry up.

I think many customers hold back on their spending, waiting for the discounts they know are coming. It certainly seems to appear that way based on the relatively benign results from the governments’ tax stimulus package. Amazon prime day, Black Friday, Cyber Monday, Click Frenzy are all examples of online heavily discounted shopping events. And let’s not forget Boxing Day for physical stores, yet online discounting on this day is having a negative impact on in-store sales.

My thoughts on reducing the reliability of perpetual discounting is quite simple and something I have been banging on about for some time. Getting the in-store experience right, not transacting with your customers, but creating a memorable experience they can’t get elsewhere. In fact, customer experience is expected to overtake price and product as the key brand differentiator by the year 2020, according to KPMG’s Global Retail Trends 2018 report.

We are seeing many examples of how stores are tackling this approach and certainly, technology plays a big part. However as I have mentioned before, technology on its own is not enough. Team members have to fully connect with the technology and use it to provide deeper engagement with customers. Apple stores have been the market leader in this regard, great looking stores, plenty of product to interact with and salespeople whose approach is based on helping customers, not trying to sell them stuff. Their sales results speak volumes to how successful this strategy works.

Shopping centres are investing heavily in refits to attract customers, and many stores are upping the experience factor so customers get the chance to touch, feel and play. Something that online can’t get near as yet. Myer and DJ’s are working hard to reinvent the experience factor with DJ’s and their amazing shoe floor in Sydney and partnering with BP to offer they’re fine food at service stations. There are sports stores with running tracks, basketball hoops, Coles and Woolies with smaller store formats, and barista coffee, fresh hot convenience food, sushi and sliders. The list goes on, and most of these innovations have little to do with discounting.

So what can you do in your stores to up the experience level with your customers and therefore giving them a reason to buy and come back? Or is it just easier to give margin away and keep discounting!

Do you agree with me that we are too reliant on (perpetual) discounting and what are you doing to increase the in-store experience factor?

Has November REPLACED December as the Mega Promotional Month of the Year?

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