Nov200904
Posted by: Mark Grondin In: eCommerce Best Practices
Who’s up for a game of chicken?
Whether we like it or not, it seems like we are heading for one in retail this holiday season. Last year’s massive dive in the economy just prior to the holiday season lead to desperate discounting in quest of sales. A significant factor contributing to this was that retailers and brands were not prepared for the drop. They entered the season with high inventories and an expectation that things would grow as the previous year. When buying didn’t occur, retailers cut prices to sell inventory. We all remember this well.
Now, according to the Accenture Holiday Shopping Survey consumers may be expecting the same situation this year – discounting and sell-off. The survey of 526 consumers found that while they are planning to complete their shopping earlier than last year, 86% said they won’t buy without a discount of 20% or more. And 25% said they will be looking for 50% discounts before they buy.
But this year is different. Retailers are prepared. They have lowered their inventories, cut smaller product lines and reduced the breadth of items carried from larger brands. This year, brands and retailers are ready to hold the line on prices.
So how does this work?
How do we get consumers who expect significant discounting to pay full-price? I would love to hear your ideas on this, but here are some of the tactics we are seeing from our brands:
- Bundle discounts – Instead of discounting a product, bundle it with a complimentary item (such as a Blu-Ray player with a TV) so that customers don’t get a discount on either item, but get a better price on the package.
- Free shipping or no tax – Discounting shipping or tax is a way to hold the price on products while giving the customer a feeling that they are getting a good deal. How many of us are excited by 8% off? Probably not as many as get excited about free shipping – which is 35% according to the Accenture survey.
- Promote availability of niche products with ship-to-store – Branded websites may be the only place to get certain products that have been cut from retailers shelves this year. However, they can be put back into stores with ship-to-store (i.e. a shopper purchases an item online that is then shipped to a store for pickup).
So who will give first in this game of chicken?
I expect both parties will give a little. Consumers will get used to lower or no discounts on many items and retail will find creative ways to give smaller discounts that “feel” bigger.
In any case, according to the report, “online shopping will continue to offer stiff competition to more traditional retailers as nearly two-thirds of consumers (64 percent) intend to shop online for gifts this holiday season. And, 46 percent of these shoppers will spend more than half their gift dollars online.”
This is great news for online retailers and gives offline retailers another reason to get involved in eCommerce. Online sales will definitely grow this year – with some of the growth coming in the shift from offline purchasing.