November 3, 2008
Retail TouchPoints: Cross-Channel Retailers Realize ‘Need for Speed’ as They Get a Jump On Holiday Promos
By John Gaffney
Through a special arrangement, presented here for discussion is an excerpt of a current article from the Retail TouchPoints website.
The holiday season is shaping up to be a game of high-stakes poker played at high-speed. According to experts observing the situation, the key players may call “all in” at any time with an aggressive slate of discounts, promotions, and cross-channel incentives.
“The big change this year is that retailers are moving their holiday campaigns forward in an attempt to close some sales early,” said Chad White, director of retail insights and editor-at-large for the Email Experience Council. “As of Oct. 19, 40 percent of the retailers I track had referenced the holidays in at least one e-mail. Last year only 31 percent of retailers had referenced the holidays by that point. Last year we didn’t reach the 40 percent mark until Oct. 25, so retailers have moved their holiday campaigns forward by roughly a week. Based on this, I expect Cyber Monday to be huge again this year as retailers give customers another compelling reason to pull the trigger and not wait until the days right before Christmas. I also expect more Black Friday messaging this year.”
Some retailers have tried to take the high road as the season approaches, but most analysts expect speed and even desperation to rule the rest of the year. Circuit City, for example, has drawn some positive press for its “One Price” policy that guarantees the same price regardless of the channel it’s purchased through. Best Buy has pushed its ramped up mobile offerings. OfficeMax has taken up cause marketing. But expect these all to be footnotes on Dec. 26.
“It is the nature of the economy to turn all consumers toward value,” said Lauren Freeman president of the e-tailing Group. “Expect them to look for deals across all channels. They will look for early season deals, and then look for late season deals. In the middle I expect to see a lot of limited time type of promotions and accelerating discounts.”
Last year, the main cross-channel issue was free shipping. This year most retailers would kill for that kind of simplicity. Consumers expected retailers to ante up free shipping for most any order regardless of value. This year, free shipping has not been promoted as heavily by e-commerce pure plays or cross-channel retailers. But it’s a tactic that can and will be broken out at any time.
Larry Freed, president of ForeSee Results, said that free shipping is among the aggressive tactics that will simply depend on who blinks first. With Halloween over, he said, the game is on.
Discussion Questions: How promotional should retailers be this holiday season? How should they gauge when and to what degree to bring discounts in to drive traffic? Considering the cross-channel capabilities of many chains, what type of promotions make more sense this year?
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Free shipping will be the flint and promotions will be the fire.
We’re seeing a significant uplift this season in retailers turning to the digital media channels of voice, e-mail and mobile. It makes sense for a number of reasons:
– Consumers are shutting out “mass media” with TiVo, satellite radio, broadband, MP3 players, etc.
– Declining newspaper circulation and its corresponding effectiveness.
– Increasing costs of direct mail. Postage is up over 20% the past 4 years and print and ink costs have increased too.
– Turnaround time of voice and mobile campaigns from conception to execution is 2 days or less. Can’t do that with direct mail, print, radio or TV.
– Digital media is environmentally friendly and gaining huge acceptance. No paper waste or toxic ink dyes in an email or text message.
– Over 90% of adult purchasing decision makers have a cell phone and 70% use text messaging. No other direct channel is even close to the potential reach.
– Digital media is a fraction the cost per CPM. One direct mail piece equates to over 15 text messages or voice calls. A 15 to 1 ratio is attractive when budgets are tight.
So, the economy is definitely driving some of the adoptive behavior of budget-stretched retailers, but ultimately consumers are living more and more in a digital age and astute marketers, in order to be viable and competitive, need to deliver their marketing messages where their customers live.
Aggressive discounting and early promotions are certainly expected. This year, more than most years, consumers will expect to get the same value and shopping experience regardless of the channel. The nature of the economy has consumers in frugal mode which likely translates to getting out earlier to find better deals and doing a bit more research online before going in store.
To Camille’s point about not offending non-Christian shoppers, personally I’d like to see it go the other way. Speaking as one such non-Christian, I’d rather the retailers went all-out in the Christmas wars, and wink at us non-Christians as third party beneficiaries of the craziness! It would be a lot less offensive than promoting the idea that this is some generic holiday season that should be emptying all of our wallets. I’m happy sitting on the sidelines, jumping in for the occasional incredible deal for something I need.
But I digress. While I agree with those above who think this holiday season will be a “go low early” year, I think retailers should consider more of a mid-term strategy and keep some powder dry. Holiday buying is going to arrive before consumer confidence comes back, perhaps before it even bottoms. No amount of promotion is going to bring unfettered spending in the next few months. But six months from now, if things seem stable and a new administration seems to have a handle on the economy, those who didn’t get hit as badly as they feared will start spending. That is the time to grab share and revenue.
Last year we got a real taste of many retailers’ approaches to a soft market. Go low, and go quickly. We can anticipate much more of the same. The only thing that may moderate the flood of promotions is that inventories appear to be much lighter this year.
Speed is the key this year. First to market with an aggressive plan will capture the greatest share of dollars. That helps explain the early challenges being mounted by Walmart and Sears/Kmart.
Game On! This is the only year among the past five that I have already begun holiday shopping. The danger is that when I start early, I end up spending more because as I continue to find value I act on it because “it was a deal.”
In a sly way, I hope that happens this year to more people. One – it’s good for retailers. Two – it informs the marketplace in general about what level of pricing is now acceptable on all kinds of goods. Three – it allows for a needed emotional boost–taking care of each other and those less fortunate with gifts accomplishes that.
Flexibility is key this year. Trying to not offend consumers who don’t want to see sales and promotions too early, trying to not offend non-Christian consumers, trying to offer promotions when consumers are ready to buy, and trying to be at the front of the pack creates a huge challenge.
In addition, retailers need to gauge the differences in localities against a national strategy in the US. Having local managers stay on top of the pulse of their consumers and ensuring that top execs have this information from around the country is key for retailers being able to respond at the best time.
This year we will see a game of chicken. Retailers want to generate as many sales as possible while maintaining margins. That won’t last, so retailers need to have many promotional options ready to be advertised and implemented. Marketing departments will need to create multiple plans featuring multiple tactics. It may be a fun year to watch the machinations, but not to be in the front lines.
Retailers who already stake a lot of their brand positioning on value need to be at the top of their game this season. There is no doubt that the economy has trumped other issues in the election, and it’s top-of-mind for consumers…there’s a reason why Walmart has grown its comps this year while reinforcing its value message.
As far as “how promotional,” the question is how much more promotional can the marketplace be? National retailers like JCPenney and Kohl’s have engaged each other for years on number of sale events, depth of discounts, and so on. It may not be all about being cheaper than last year–especially if inventories are managed more conservatively than in 2007–but communicating that value message early and often is critical. This is no time for value-oriented stores to be overly “aspirational” or upscale in their branding or merchandising, especially with strapped consumers and a short calendar between the holidays.
This is straight forward holiday retailing: lower price, earlier promotion, quicker shelf-placement of holiday items.
Every retailer this year should be making these changes now and implementing a no-holds barred grasp for the business. The holiday business won’t just be restricted this year, it will also be smaller and more difficult to get the shopper’s attention.
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Free shipping will be the flint and promotions will be the fire.
We’re seeing a significant uplift this season in retailers turning to the digital media channels of voice, e-mail and mobile. It makes sense for a number of reasons:
– Consumers are shutting out “mass media” with TiVo, satellite radio, broadband, MP3 players, etc.
– Declining newspaper circulation and its corresponding effectiveness.
– Increasing costs of direct mail. Postage is up over 20% the past 4 years and print and ink costs have increased too.
– Turnaround time of voice and mobile campaigns from conception to execution is 2 days or less. Can’t do that with direct mail, print, radio or TV.
– Digital media is environmentally friendly and gaining huge acceptance. No paper waste or toxic ink dyes in an email or text message.
– Over 90% of adult purchasing decision makers have a cell phone and 70% use text messaging. No other direct channel is even close to the potential reach.
– Digital media is a fraction the cost per CPM. One direct mail piece equates to over 15 text messages or voice calls. A 15 to 1 ratio is attractive when budgets are tight.
So, the economy is definitely driving some of the adoptive behavior of budget-stretched retailers, but ultimately consumers are living more and more in a digital age and astute marketers, in order to be viable and competitive, need to deliver their marketing messages where their customers live.
Aggressive discounting and early promotions are certainly expected. This year, more than most years, consumers will expect to get the same value and shopping experience regardless of the channel. The nature of the economy has consumers in frugal mode which likely translates to getting out earlier to find better deals and doing a bit more research online before going in store.
To Camille’s point about not offending non-Christian shoppers, personally I’d like to see it go the other way. Speaking as one such non-Christian, I’d rather the retailers went all-out in the Christmas wars, and wink at us non-Christians as third party beneficiaries of the craziness! It would be a lot less offensive than promoting the idea that this is some generic holiday season that should be emptying all of our wallets. I’m happy sitting on the sidelines, jumping in for the occasional incredible deal for something I need.
But I digress. While I agree with those above who think this holiday season will be a “go low early” year, I think retailers should consider more of a mid-term strategy and keep some powder dry. Holiday buying is going to arrive before consumer confidence comes back, perhaps before it even bottoms. No amount of promotion is going to bring unfettered spending in the next few months. But six months from now, if things seem stable and a new administration seems to have a handle on the economy, those who didn’t get hit as badly as they feared will start spending. That is the time to grab share and revenue.
Last year we got a real taste of many retailers’ approaches to a soft market. Go low, and go quickly. We can anticipate much more of the same. The only thing that may moderate the flood of promotions is that inventories appear to be much lighter this year.
Speed is the key this year. First to market with an aggressive plan will capture the greatest share of dollars. That helps explain the early challenges being mounted by Walmart and Sears/Kmart.
Game On! This is the only year among the past five that I have already begun holiday shopping. The danger is that when I start early, I end up spending more because as I continue to find value I act on it because “it was a deal.”
In a sly way, I hope that happens this year to more people. One – it’s good for retailers. Two – it informs the marketplace in general about what level of pricing is now acceptable on all kinds of goods. Three – it allows for a needed emotional boost–taking care of each other and those less fortunate with gifts accomplishes that.
Flexibility is key this year. Trying to not offend consumers who don’t want to see sales and promotions too early, trying to not offend non-Christian consumers, trying to offer promotions when consumers are ready to buy, and trying to be at the front of the pack creates a huge challenge.
In addition, retailers need to gauge the differences in localities against a national strategy in the US. Having local managers stay on top of the pulse of their consumers and ensuring that top execs have this information from around the country is key for retailers being able to respond at the best time.
This year we will see a game of chicken. Retailers want to generate as many sales as possible while maintaining margins. That won’t last, so retailers need to have many promotional options ready to be advertised and implemented. Marketing departments will need to create multiple plans featuring multiple tactics. It may be a fun year to watch the machinations, but not to be in the front lines.
Retailers who already stake a lot of their brand positioning on value need to be at the top of their game this season. There is no doubt that the economy has trumped other issues in the election, and it’s top-of-mind for consumers…there’s a reason why Walmart has grown its comps this year while reinforcing its value message.
As far as “how promotional,” the question is how much more promotional can the marketplace be? National retailers like JCPenney and Kohl’s have engaged each other for years on number of sale events, depth of discounts, and so on. It may not be all about being cheaper than last year–especially if inventories are managed more conservatively than in 2007–but communicating that value message early and often is critical. This is no time for value-oriented stores to be overly “aspirational” or upscale in their branding or merchandising, especially with strapped consumers and a short calendar between the holidays.
This is straight forward holiday retailing: lower price, earlier promotion, quicker shelf-placement of holiday items.
Every retailer this year should be making these changes now and implementing a no-holds barred grasp for the business. The holiday business won’t just be restricted this year, it will also be smaller and more difficult to get the shopper’s attention.