With commentators predicting a grim half year ahead for retailers, it’s all too easy to throw in the towel and join the discounting frenzy. Here, Mark Davis explains why retailers avoid such strategies at all costs… and what they should consider instead.
An expert and trainer in all things retail, business coach Mark Davis divides his time between Australia and Europe, traversing the globe to share his retail, sales, business and Internet marketing insights.
Right now retail is in a danger zone; interest rates are going up, the mortgage is getting tighter, sales are dipping… and everyone seems set to enter panic zone. So if you’re sitting at your computer attempting to fend off the jitters, I hope that this issue’s double-edged tip helps:-
You won’t achieve anything by being the same as everybody else. And you really won’t achieve anything by panic discounting.
The other day I found myself walking through Melbourne’s Crown Casino. Brand new, six-figure fit-outs of designer labels lined the walkway; we’re talking sleek chrome, gold, black and silver windows, cool lighting, music and opening hours with guaranteed traffic that the rest of us can only dream of. And what was emblazoned right in the middle of most windows? “10-70% off”!
Let’s think about this for a second or two: Was this a discount factory outlet? No.
Was this an ageing strip mall having a closing down sale? No. Was this a brand nobody knew about that was launching with a teaser item to coax customers into the store? No.
This was desperate shock advertising that completely disregarded the casino’s target market. Most people visiting the casino sincerely believe they’re in for a win, and will then be able to buy expensive clothes at full price tag that they can show off to their friends. Even those not in the mood for gambling are most likely lapping up the high-tone, luxurious atmosphere.
Casino or no casino, when you use price slashing as your lead marketing strategy, it’s a downer. And in the end, it’s all people see. What they don’t see is your store. Arguably it’s different if you’re in a discount shopping centre, but even there such strategies are questionable… When you watch shoppers in outlet stores, no discount is ever enough… most of them are just window shopping. It’s a high traffic, low conversion method.
In tough economic times, what retailers need is to break free from the herd. And here’s why: a hundred sales at $100 is $10,000; a hundred sales at 50% is $5000. That may cover your cost and overheads, but not your staff, and you can say goodbye to profit. Discounting 50% should only be ever used for those last10 pieces on a rack by the door; never for a big promotion, never for attracting people into store, and never in your mind as a salesperson. If your staff focus on discounts, you’ll be in serious trouble within three months.
Here’s how we get those 100 sales and turn them into $20,000.
1. Teach your staff to cross-sell to other items. Not just suggesting, but walking customers and their initial purchases to the racks, matching the pieces, giving them four or five things to try on and encouraging them to get into the clothes.
2. Teach your staff the rule of three. The rule of three says that if you have three items, people will choose the middle one nine times out of ten. In terms of price, this means – budget option, good, and luxury. It helps to find out the shopping budget first, usually from assessing the customer in terms of their existing clothing, accessories, and attitude.
3. Talk to customers! Some women shop on days they feel great, and will spend a lot, others shop to get out of the house. If you take the time to build a relationship, they’ll return, bring their friends, and buy more every time.
4. Remember to tell your staff that it’s not their decision when to stop selling. It’s the customers’ decision when to stop buying. I’ve had sales of $30 turn into $200 using this method. I’ve seen stores where a woman just wanted a piece of jewellery, and ended up buying the dress, shoes and bag to match.
Now, more than ever, the professional sales person earns their money. At Christmas they are just order takers; tough times are when they show why they were hired in the first place. Talking of which, the $5000 you were going to lose on discounting, you can now invest in training your staff to double their existing sales targets. Pay them commissions and bonuses, and you’ll still be way ahead.
And please, as a favour to me, rip up those discount signs.