Ana Andjelic is svp, global strategy director at Havas Lux Hub
For three days in October, fans of the Swedish fashion retailer Acne Studios had the opportunity to access the Acne Archive website and purchase a selection of items on sale. Acne Studios is known for never offering discounts, so it was no surprise to find that, by the end of day one, most products had sold out—including those that had already been sold on sale by a number of retailers.
All in all, it was a perfect example of brands’ hesitation to rebel against the discount-driven retail culture. Many continue to make short-term efforts to salvage the old-fashioned retail model, but they don’t have to: Today, competitive advantage can be achieved less by having the best promotions and more by devising smart ways to avoid them.
For instance, many forward-thinking retailers are attempting to differentiate their brand and protect their competitive advantage by turning their merchandise into Veblen goods: products for which demand and sales increase with price. Others are supplementing their products with superior service and targeted, hand-crafted personal messages in order to raise their perceived value. They’ve found that data-driven and culturally plugged-in email programs make their brand more desirable to customers—and result in higher conversion rates—than mass emails do.
Offering a small discount to welcome customers is another popular practice, especially among high-end fashion aggregators like Farfetch. They’ve found that such a discount doesn’t hurt their brand’s equity, and what’s more, it their makes consumers feel appreciated. Many of these retailers have also found gentle, timely, and well-written reminders of items left in their customers’ shopping carts to be effective prompts to buy—no promotion needed.
For their VIP customers, a number of retailers have found success offering invite-only, limited-time sales. These sales are special, private, occasional events that are designed to reward top customers for their loyalty. To get the most out of such sales, retailers prep by pinpointing their best customers, their location and their style preferences.
Others rely on waitlists and “back in stock” email sign-ups to provide value because they play into consumer psychology: Waiting for something makes us want it more and appreciate it more when it finally arrives. As a bonus, both strategies work as organic email capture tools.
Maintaining a tiered inventory and distribution strategy is another value-add that helps retailers avoid discounts. A brand with different retail touch points—like a physical store, an e-commerce website and partner retailers—can select the cadence of releasing merchandise across all in a manner that caters to consumer demand. A combination of data—namely social data, e-commerce data and in-store sales data—informs their decisions as to when and where to make different products available, depending on when consumer demand for them is the highest.
Finally, direct-to-customer retailer Everlane takes an iterative approach to merchandise design that enables it to sell products that its customers want and are willing to pay full price for: It creates classic pieces that don’t have a fashion expiration date—so they never need to go on sale.
Despite all of these alternatives, heavy discounting is still prevalent due in large part to the decline of department stores. Desperate to keep customers coming to their stores and websites, they continue to offer bigger and bigger discounts, more and more often—but the strategy of discounting is not limited to department stores. In 2016, off-price stores, like T.J. Maxx, Saks Off Fifth, Nordstrom Rack and The Outnet have seen a 4 percent traffic increase and a 50 percent conversion rate on visits, according to NPD Group’s study. What’s more, digital-first aggregators like Spring Shopping are following the trend. To draw shoppers to use their mobile app and visit their website, they lead with merchandise that’s on sale.
In this environment, consumers are so primed for deals that many won’t even consider buying anything at full price. According to NPD Group, two-thirds of all consumers are off-price buyers. In fact, many intentionally abandon their shopping carts on a regular basis in the hopes of triggering discounts by email. According to research, it makes sense: Getting a good retail deal makes us happy—and we prefer many small discounts to a few large ones. Tyranny of choice plays a role, too: Faced with an overwhelming number of choices of nearly-identical merchandise, price has become our go-to decision-making tool.
But there are many other tools that retailers can successfully utilize. Compared to regularly offering discounts and promotions, implementing a consumer-centric, data-driven, iterative retail approach is harder. But it is also infinitely more rewarding and sustainable.
Photo courtesy of MM.Lafleur.