“Sale fatigue” is real, and it’s having a dampening effect on retail sales, according to First Insight’s study Markdown Mania. Constant retail sales — from Black Friday and Cyber Monday to lesser-known holidays like Singles Day and Cinco de Mayo — have desensitized consumers so much, they’re extremely reluctant to pay full price.
Nearly half (45 percent) of women in the survey say they won’t even enter a store unless they see a markdown of 41 percent or greater. Nearly four in 10 consumers are willing to travel to another store to see if they can find the same item for less.
Even worse news for small retailers: Most consumers perceive chains as offering the best sales. Just 3 percent say boutique retailers offer the best value.
How can an independent retailer compete? First Insight cautions it’s important not to give into the pressure to continuously discount your prices to compete with bigger retailers. While it may work for a short time, in the long run, it will do more harm than good. Instead, try these eight discount offer ideas that will help you compete without losing your shirt.
Discount Offer Ideas
Focus on Target Markets Less Motivated by Discounts
Millennials are less discount-oriented than Generation X or Baby Boomer customers, the study says. Fewer than half of Millennials surveyed insist on getting discounts for furniture, home appliances or home electronics, for example, while more than three-fourths of Baby Boomers do. If it works for your business, shifting your marketing focus to attract more Millennial customers could benefit your business and boost your profit margins. Bonus: You’ll be building a customer base among a massive generation whose purchasing power is growing as they get older.
Offer Fewer but Bigger Discounts
Upscale department store Nordstrom holds sales only a few times a year. As a result, its sales are perceived as big events, working customers into a shopping frenzy. (As a regular Nordstrom customer, I’ll admit I have frequently spent much more than I planned at one of their sales just because of that “I’ll never get this price again” feeling.) In contrast, many mid market department stores feature 40, 50 or 60 percent off sales all the time. As a result, their sale prices feel like “normal” prices, making customers feel less of a sense of urgency about purchasing, and they become even less willing to ever pay full price.
Increase the Perceived Value of Your Products
Your marketing message plays a huge role in conveying the true value of your products. Even if your prices aren’t the lowest around, emphasizing the added value that customers get from your store, such as any guarantees you offer, personalized service or better-quality merchandise than the competition, can convince shoppers your prices are worth it.
Instead of Using Sales to Attract New Customers, Focus on Loyalty Discounts for Existing Customers
You can’t build a successful retail business on customers who come into your store once because of a sale and never return. Instead, get more revenues from your loyal customers by implementing loyalty programs to get them shopping with you more often. With loyalty program software, you can track how customers respond to different offers, then tailor offers to customers’ hot buttons.
Discount Brand Name Products
Forty-five percent of consumers won’t buy a brand name product unless it’s on sale. Consider discounting some of the brand names you sell to draw customers in while keeping less-coveted products at full price.
Know What to Mark Down
Are there items that customers are willing to pay full price for? For example, don’t mark down products or styles that you’ve just added to your inventory, or things that are selling well at full price. Keep an eye on product sales and trends in your industry to identify when products are nearing the end of their life cycle and can be marked down to attract shoppers without hurting your overall margins.
Use Predictive Analytics
Point-of-sale software for small businesses that includes predictive tools helps you better manage your inventory and price your products. This takes the guesswork out of deciding how to price or what to mark down, so you can attract customers while still maintaining adequate margins.
Reserve Lower Prices for Special Events
Take a cue from home party sales companies and get customers into your store for a special event with sale prices. For example, a gourmet cookware store could hold an after-hours event where VIP customers enjoy refreshments, product demonstrations and lower prices for that night only. The celebratory feel and being part of a “special group” makes customers more willing to spend.
Discounts Photo via Shutterstock