We’ve just finished a whirlwind sales and promotional period for retail. Black Friday, Cyber Monday, Singles Day, Christmas and Boxing Day have now run together during a time that dominates the already-overwhelming peak sales period across the holidays. If you extend this season to include Back to School and Halloween promotions, nearly half the year is now dependent on promotional periods.
Some of the retail traffic during this season is a bonus for retailers. Without the holiday season, it’s hard to imagine grocers selling the 5.3m litres of eggnog and whipped cream or the 168m tonnes of turkey that Canadian consumers consumed in 2014. These types of sales add extra revenue to the retail bottom line — you are unlikely to find a “two for one” deal on eggnog during the ramp up to Christmas.
However, this season is dominated by sales and promotions that shift sales from the rest of the year. For example, Canadian retail sales of home electronics such as TVs and computers rise from $2.8B in Q2 2015 to $4.5B in Q4 2015. Thinking about the number of Black Friday and Boxing Day promotions for these items, it’s easy to conclude that some consumers are waiting until later in the year to get the best deals on these items.
As a retailer, you need to balance the need to make the best margin on your products against the need to meet your consumer’s desire for sales and promotions. Opting out of promotional periods like Black Friday could leave you with customers migrating to the competition. Similarly, being too aggressive in discounting or promotions can train your customers to only “shop the deals”, leaving you with deflated traffic the rest of the year.
Setting your sales strategy for the year now will help you plan for your promotional periods and give you time to prepare for new strategies. Keep in mind that promotions should serve three purposes; to make a sale you might not otherwise make, target a customer you might not otherwise attract or to reduce inventory. Too often, promotions give incentives to customers that might otherwise buy at full price, training them to expect discounts and reducing the retail bottom line.
- Start With What’s Required
Some promotions are mandatory for retailers. RetailNext tracked an 81% spike in sales for jewelry and mens luxury gifts in the week leading up to Valentine’s Day in 2016. For retailers in these markets, this is a key season and making sure that they have sales and promotions strategies to capture these customers can make or break the year. Plan this type of promotion first and make sure you devote a good portion of your marketing budget to ensure success.
- Try Something New
A few years ago, North Americans had never heard of Singles Day. This November 11th holiday started in China during the 1990s. Many Western societies celebrate the end of World War II on the same date, so overlooking this holiday is understandable. However, Singles Day has become the largest online shopping day in the world with sales just at Alibaba sites topping $17B. This year might be the time to try a Singles Day promotion to attract either new online consumers or a new demographic of Chinese consumers.
- Evaluate the Old
Jos. A. Bank, a US retailer of mens suits, was synonymous with its “Buy One, Get Three Free” promotion. The promise of four suits for the price of one helped drive the massive expansion of the brand from a few dozen stores in the 1980’s to over 800 stores across America. However, customers complained that the deal forced them to “shop in multiples” and the promotion became a punchline on Saturday Night Live, threatening the value of the brand. In 2015, Jos A. Bank discontinued the promotion and also introduced higher priced merchandise from Joseph Abboud to change customer perceptions and increase margins.
- Move Your Model
Having a Christmas sale or promotion is probably a longstanding part of your business. Abandoning this could leave you open to losing business to your neighbours in the mall or on the street. But having to discount just to keep existing customers can cut margins to the bone. Consider taking your merchandise and promotions on the road during the busy shopping periods. Christmas markets have sprung up in many Canadian cities, pop-up shops are now common and some brands like Armani Exchange are even taking page from the food truck success story. Armani Exchange took its “A|X Chill Truck”, a converted ice cream truck, across LA to promote its fall denim lineup, grabbing huge attention on social media. These types of moves can put you in front of new customers, building your base for year round sales.
What ever your strategy for 2017, it’s important to plan out your key activities in advance. Inventory, staff and marketing all need to be in place to make sure a promotion is a success. Waiting for a drop-in traffic to throw your “50% off” sign into the store window is a sure way to lose opportunities and margin.