How to discount smarter this holiday season
Sales season is fast approaching. But when should retailers start discounting? And what should you cut?
Pre-Christmas discounting has become a new tradition for retailers, but with the holiday season generating as much as 30 per cent of overall annual revenue, it’s crucial that businesses maintain their margins.
This year, COVID-19 has already triggered a “sales frenzy” for some brands desperate to shift excess stock, says retail industry expert Roger Simpson.
So, what is the secret to smart discounting this Christmas? To be “unpredictable”, says Simpson, and to get specific about what’s being discounted and which customers are being targeted.
1. Start your sales strategy in November
Retailers need to think of Christmas as a “12-week window" running from November into January, says Brian Walker, CEO of the Retail Doctor Group.
Google Trends data shows that customers start researching Christmas gifts as early as October, while Afterpay’s own data reveals that consumer spending spikes in mid-November (around Click Frenzy) and then stabilises in the lead-up to the Christmas peak.
For omnichannel or e-commerce retailers, Walker recommends tracking website traffic closely to reveal when consumers are starting to spend. He says you can then target your discounts to products or ranges that are lagging behind.
2. Don't be predictable
As pre-Christmas sales become the norm, many shoppers have become trained to expect discounts.
To encourage shoppers to spend – rather than waiting for products to go on sale – Simpson recommends encouraging a sense of urgency and ensuring that sales periods don’t become predictable. One tactic is to vary what’s on sale – for example, discounting T-shirts one week and dresses another – and varying the timing of sales, too.
Not knowing how long a product will be on sale can attract the same customer to a store more than once, he adds.
Given the pressures created by the pandemic, Simpson says that retailers could consider tying sales strongly to events – such as the Melbourne Cup in November for beauty products or the Boxing Day cricket test for summer sports gear – in order to deeply embed the one-off nature of the sale in customers’ minds.
One tactic is to vary what’s on sale – for example, discounting T-shirts one week and dresses another – and varying the timing of sales, too.”- Roger Simpson
3. Offer-tiered discounts and holiday bundles
Discounts based on how much a customer spends or how many items they buy are a clever way to increase your average order value – and sell both full-price and discounted stock in one transaction.
“I like the practice of a customer buying the first item at full price and then getting the second item at a discount,” says Simpson. “That way they’re incentivised to buy an extra product rather than just the one.”
Super Retail Group is very good at this, adds Walker, who says that the company, which owns Supercheap Auto, Rebel, BCF and Macpac, has been successful at designing offers that discount the second item by up to 50 per cent.
Holiday bundles are another option, and, with COVID-19 closures leaving much winter stock unsold, Walker adds this is also a good way to partner old products with newer items and encourage people to buy both.
4. Reward loyalty and your VIPs
With COVID-19 fuelling a surge in online shopping, this Christmas offers an unprecedented opportunity to capture more customer details, which, in turn, will generate more revenue in the long-term.
Offering VIP customers special member-only discounts (and requiring shoppers to sign up to email lists to access sales) is a great way to reward loyalty and build your customer database.
Simpson points out that there are plenty of ways to generate goodwill without discounting, too. For instance, offering extra services such as personal fashion styling appointments. “This steers you away from a focus on price and offers the extreme value of personal one-on-one service,” he explains.
5. Offer a bit extra for January
Christmas sales are all about getting “more than one bite at the apple”, says Walker, and that means getting customers back into the shop – be it online or in-store – and he recommends “sales strategies where I’m invited back in January to redeem an offer”.
The idea is that customers who buy in November and December receive a voucher for 5-10 per cent off a purchase when they return to the retailer. It’s a tactic often used in the food and beverage industry, explains Walker, but one that could work equally well in retail.
6. Pre-promote discounts by mining customer data
Many retailers now have databases of customer details and purchase history, all of which can be utilised to create bespoke marketing en masse, notes Simpson.
He explains that stores that know their customers’ purchase history can individualise the way they market a broader sale where they’re opted in to receive marketing and other promotional offers.
“If you know I’ve bought Led Zeppelin albums before, you can tell me you’re having a flash sale on those collections,” he says.
“Discounting doesn’t happen by accident,” adds Walker. He says that good retailers plan out their product-mix strategy for discounting well ahead of the sales season, and by doing so set themselves up for a strong finish to the year.
Rachel Williamson is a journalist who has covered small business, technology and investing for publications such as Bloomberg Business and Forbes.
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