Kicking the habit of the promotions drug
The retail world is awash with discounting. It wasn’t supposed to be like this. The idea was that the recession would prompt a certain amount of offers and promotional activity and then things would return to normal.
But this hasn’t happened and there is a growing realisation that discounting might be here to stay. It is being driven by the fact that the flat growth now being experienced by retailers is not going to return to anything like the pre-recession growth levels.
Evidence of this changing mindset is that even before starting in her role as the new director general of the BRC (British Retail Consortium) Helen Dickinson stated that her period in office will be characterised by the industry’s zero-growth backdrop.
So while the discounting in the early days of the recession was regarded as a short-term hit that could be accepted, the fact that there is now an ongoing need to discount in order to simply stand still is putting the long-term viability of many retailers into doubt.
The next time you eat out at a Pizza Express, just take a look around you and see if anybody in the place is paying full price. Such is the multitude of printed money-off vouchers that the restaurant chain is pumping out every day that if you are the only person in the place paying the menu price for your food then you would feel a little cheated.
The supermarkets have also been caught out by the damage of discounting, having found that the buy-one-get-one-free phenomenon has turned into something customers now insist upon. As a result margins have continued to be hit badly. Such has been the level of discounting that around 40% of supermarket sales are now related to products priced below the full ticket price.
For an idea of how discount-driven the industry has become – type in ‘discount bedrooms’ into Google. You get 84 million responses. For ‘discount kitchens’ you get 13 million, and for ‘discount bathrooms’ you get almost 67 million.
When discounts are combined with increasingly frequent Sales then the situation is exacerbated. For instance, Bathstore has shifted into its Autumn Sale – moving seamlessly from its Summer Sale – and even the upmarket players are being purchase online klonopin sucked in. Harvey Jones Kitchens has extended its Summer Sale – due to public demand, apparently. It’s not really a great surprise that the punters have voted for cheaper prices.
But as well as reducing margins and profitability, this discounting frenzy has also reduced the levels of loyalty to retailers. With discounting, we find the emergence of the promiscuous shopper and the deal junkie. It’s little wonder therefore that discounting is being tagged as akin to crack – addictive to both retailers and shoppers.
I have attended a couple of conferences of Tesco suppliers held by Dunnhumby, its number crunching division that drives its Clubcard loyalty programme, and the red-hot topic for a number of years has been the need to reduce discounting.
There is a belief that giving reduced prices to all its customers – including their least loyal shoppers, the deal junkies – is a pointless exercise and that it is far better to give the better offers/prices to its genuinely loyal customers – i.e. its frequent and most profitable shoppers – by sending them targeted coupons and promotional offers.
But despite their acknowledgement of the damage discounting has been doing to their business, even the mighty Tesco has found it well nigh impossible to wean itself off the money-off mechanic – partly because all its rivals aggressively partake in such a practice as they are equally addicted.
While the supermarkets continue to fight each other on discount, and mull over the prospect of cold turkey, there have been the odd signs of some merchants kicking the habit. Fashion retailer Fat Face has reduced its sale of discounted goods by two-thirds from the level they were at two years ago.
Its chief executive, Anthony Thompson, recently stated: “We’ve gotten off the discount drug and that drug was a bad one to get on. It makes you feel okay at first but you find you need a higher and higher dosage.”
Whether any players in the kitchens, bedrooms and bathrooms sector will follow suit depends largely on the stomach they have for standing out from the crowd and attempting to appeal to customers with something more than simply the cheapest price.