The latest retail trade figures are out and revenues are “fine” - suggesting a relative return to normalcy. Retail businesses are selling products and customers are buying them, so that’s the good news. The “when?”, and the “for how much?” is the more interesting question.
I’ve spoken to a lot of retailers in the lead up to Christmas and New Year and the vast majority of senior retail people I talk to have noted that sales got dragged forward even more than in previous years. Click Frenzy, Black Friday, Singles’ Day are not new things to Australia but this year seems to have accelerated the behavioural shift of consumers doing more of their festive shopping in heavy sales periods.
As consumers, it seems we’re less about nabbing ourselves a bargain on Boxing Day and more about getting our festive purchasing done in November without breaking the bank. Greg Jericho at the Guardian has a pretty good breakdown of this behaviour and highlights the impact of sales moving from December into November.
Sales start earlier, leading to discounting for longer (ajfisher / gemini)
The sting in the tail of all this is retailer profitability. If everyone is fighting for the same pool of money from consumers using deep discounts, getting those sales is eroding margin. This is at a time when non-grocery retailers are operating on slimmer margins than pre-pandemic.
For the retailers I work with, these are some of the things I’m advising, now we’re into January:
1. Discount analysis
Look at your sales from October to December and do an analysis of discounting on those sales and as much as possible, track this back to realised margin.
You might need to make some assumptions, but a friendly analyst in your finance team can help here with building a model that will be good enough to make decisions.
2. 2024 scenario planning
Look at your 2024 plan and assume your revenue occurs on the same pattern, and plan for more sales pulling from December into November.
What can you do to protect that margin in other parts of the year to give you space in November? Are you doing discounts in September or October where you no longer need to?
3. Reconsider value mechanics
Have you got time to think of other mechanics you can bring to market to provide value to customers during this sale period, without having to discount deeply?
Good examples are product bundles (smaller unit discounts with higher ATV), gifts with purchase or sampling that may drive future sales into the new year.
4. Be selective with offers
Consider offers for longer term customers that reward tenure during sales periods and go less hard on the blanket discounts.
Have one or two share-worthy offers so you’re present in the melee of the sales frenzy and give people a reason to take a look, but use these to drive customer acquisition and have dedicated acquisition onboarding journeys.
Make the most of discount and non discount periods - (ajfisher / Gemini)
With the quarter finished and before getting stuck into the next round of product launches, seasonal drops and new initiatives - now is the time to take stock. It’s important to consider how these behavioural patterns are getting baked in and building next festive plans around them as this behaviour won’t be going away any time soon.