If you are a professional in Retail and eCommerce, then you are probably familiar with NRF’s Annual Shop.org Digital Summit. This year the two-day conference takes place in our backyard of Dallas, Texas and is kicking off on September 26th. As proud sponsors of such an innovation-driven and thought-provoking event, we are excited to provide a prelude to a topic that has permeated the industry: retail’s pervasive discounting addiction and its impact on consumer acquisition and loyalty, as well as merchandise’s availability and profit.
As many news outlets have reported throughout 2016, leading industry media outlet Business of Fashion (BoF) alerted readers to the use of on-going discounts emphasizing that “while these promotions may benefit price-conscious consumers, the practice is unhealthy for retail industry players, for whom competing on price with deeper discounts is creating a race to the bottom, shrinking profit margins and diminished brand value, while making the path back to growth more difficult.” As much as you might have already heard that in your Macroeconomics 101, it can’t be reiterated enough.
The frugality experienced in American shoppers and their enhanced bargain power is yet a residual of the past recession and is ever boosted by the expansion of eCommerce – allowing fingertip access to worldwide shopping options. BoF explains that many retailers have not been able to foresee change on consumer demand and behavior, manufacturing too much merchandise and then relying on price cuts to push through their inventories.
In fact, in a DynamicAction Retail Index report that compared Q1 2015 to Q1 2016 found retailers sold 63 percent more orders with a promotion this year. While last year’s promotions may have gotten shoppers in the door, this year Q1 faced a 7 percent decrease in new customers with a 6 percent drop in returning customers.
Loss in customer loyalty, one of the alarming consequences of extensive promotions, is connected to brands’ inability to foster a greater sense of value, as they train their customers only to come back (if at all) during their promotional calendars. In a recent Retail Touchpoints article, John Squire (our CEO) explains that “this year, retailers also have struggled with acquiring new customers and fostering an authentic relationship with them… retailers aren’t adjusting their inventory accordingly, leading to overstocks and more discounts, particularly in apparel.”
Securing customer loyalty is linked to the experience retailers offer to their customers throughout their interactions. That, in turn, is linked to their ability to assess the data created upon those interactions. In this case, real-time data can be used for more than just personalization.
It allows retailers to optimize the investments they place throughout their strategic efforts. Take as an example digital marketing tactics, of which email remains one of the most effective tools for engaging with customers. As consumers receive messages and notifications from a diversified array of channels every day, if a message is not clearly relevant to individual interests or needs, it is (nearly instantaneously) deleted. Being able to use connected data is the answer for ensuring that investments placed across departments (such as in Marketing) will result in competitive personalization and overall the best customer experience offered.
By joining data points across their organizations, retailers can clearly grasp how their customers shop and what they shop for. Through a better understanding of their customers, retailers can then implement merchandising strategies that benefit both the consumer and their bottom line. In this scenario, a data-centric (i.e. customer centric) approach allows retailers to modify their tactics in response to real-time events and behaviors. It empowers retailers to crack the code their customers sent their way, via the assessment of metrics that they could be unaware of. Here are a few of those metrics, as pointed out by Squire:
Inventory Views
DynamicAction has found that top performing retailers have 84 percent of their inventory viewed on their pages. By connecting web site views and inventory data, retailers can pinpoint exactly where they need to focus their promotions to get that inventory moving into shopping carts.
Views Availability
Through tracking which available products customers are actually viewing, merchandisers understand not only what is in stock, but also what their customers are looking for, that in turn results in the ability to provide their customers with those items. Ultimately, it translates into quality consumer experience and cultivation of loyal customers.
Full Price Sales Percentage
A study DynamicAction produced with IHL Group, Retailers and the Ghost Economy: The Haunting of Overstocks, identified that markdowns from overstocks annually cost retailers $471.9 billion worldwide. Here, the ingrained capability to connect data across channels and understand what customers are searching for enables merchandisers to correct inventory issues and reduce markdowns, as they increase product exposure, postpones a markdown date or invest spend towards a specific brand or category.
Assessing silo-free, connected data, allows retail businesses to have a full grasp of demand behavior, a greater degree of personalization, and ultimately, a better customer experience. All of which contributes to a healthier profit performance, not only as a result of not relying on price cuts, but also being able to increase perceived value to your brand. The best retailers are getting back to the basics of the invaluable merchant/customer relationship, now empowered with the strength of data to solidify their path towards increased profits.
Will you be joining us at Shop.org Digital Summit? Come visit us at booth 4000. We look forward to connecting with an ever so talented crowd of Retail and eCommerce professionals from across the globe to share current opportunities, threats and breakthroughs in our all-time favorite industry. Additionally, this year we are hosting the “Retail Responds: Coins of Caring” donation station. We will be making cash donations to Girls Who Code, Retail Orphan Initiative or Team Rubicon for each professional in Retail and eCommerce who joins us for a brief introduction to DynamicAction in our booth.
Learn how using 600 proprietary algorithms that encapsulate 80 cumulative years of retail knowledge enables DynamicAction to pinpoint margin-eroding issues across the organization, prescribes precise solutions and accurately ranks those according to the highest profit generated.
