Shopping silly season is here, and it's sillier than ever
As a retail nerd, I always have high expectations for the industry when it comes to creative, slick and sophisticated ways of getting the customers to their store and/or website. So imagine my disappointment when I checked my mobile and mailbox flooded with SMS and emails during Black Friday.
There was truly no sophistication in the offers sent out; it was discount, discount and again discount. Even retailers I regularly shop with, who should know that I don’t fit in a tight black dress, sent mass marketing SPAM messages pushing 30 percent or more off.
It was a race: which retailer could get the lowest price to get the customer and persuade them to make a purchase?
Following this, I took advantage of having my home Capgemini office on the top floor of one of Scandinavia’s largest shopping malls, touring the mall during Black Friday to watch what the Retailers were offering. What was interesting was the upscale of fashion brands and more common brands, which were all advertising in the same way. Imagine it; big black signs and white letters - 'Black Friday, 30% off'.
What’s unique about that? Nothing.
Over previous years, we have seen retailers get Black Friday wrong; they enter the season with an overstock, resulting in margins taking a hit when post-Christmas sales start.
It begs the question: have retailers considered what is needed? For example:
- Infrastructure & operational costs: Do retailers understand the capacity required within their end-to-end supply chain to deliver the volumes expected from Black Friday, and are they set up to be agile enough to respond to tight turnarounds?
- Merchandise costs: Do retailers know how profitable their planned promotions will be? Have they analysed the full margin impact of their chosen promotions using data from previous experience?
- Customer loyalty cost: What is the cost of ‘getting on the bandwagon’ to customer loyalty and what considerations need to be taken to stop customers getting ‘promotion fatigue’?
Promotions: silly or spot on?
Retailers are often running so fast, they’re not able to take a step back before setting the wheels in motion ahead of the holiday season. Yet, spending time considering these three key factors could help them to run more profitable and successful promotions:
- Understand the products to promote: Sounds simple, however, it is crucial to have the right process in place to review the proposed width of offers being presenting to customers holistically. This will help ensure the right presentation of the holistic offer to customers, and can match growth ambitions. How many times have we heard the phrase ‘customer is king’, and ‘customer centricity’, however, do not faithfully take heed?
- Plan the right level and length of discounting: Many retailers are great at collecting data, but the key is having a robust [even if simple] analysis in place to help inform decisions regarding duration of discount and the level of discount to be used. Lessons from the past can inform future decisions, but also reduces the risk of losing profit unnecessarily.
- Assess and understand the wider business impact: Nobody wants to over-promise and under-deliver, so ensuring the plans in place take into consideration the wider business impact associated with supporting a successful event. A simple process including all key departments - from marketing through to logistics - will help drive a single view, a better decision making process and best visibility of potential impact. This way when things go wrong, everyone can work together, limiting unwelcome surprises and balance commitments across the business.
Let’s ensure retail has a happier Christmas this year.
Ensuring a few key measures are in place before the Black Friday onslaught could help retailers better manage their profitability, and indeed any other promotional event. For many, particularly in the run up to Christmas, this is the most profitable time in the retail calendar (and for some the only opportunity to get back in to the black).
By not taking heed and applying these three concepts retailers will risk creating a ‘black hole’ in their balance sheets.
By Peter Lindell, Head of CPRD Sector – Europe, Capgemini
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