20% Off – The new retail?

I walk into a store to purchase a pair of shoes and immediately see the signs, “20% Off Everything!”  I’m indifferent – no wait, I’m disappointed, “Only 20% Off?”  Then it hits me, my perception of full retail now starts at 20% off.  If merchandise isn’t at least 30% off, it’s not on sale in my mind.

Twenty years ago we used to line up at the mall for stores having their annual 20% off sales.  For retailers, those days are long gone.

As a retailer, what are you supposed to do with this shift in the consumers’ mindset?  Well below is a quick list of options:

1.       Always have a 20% sale running – This painful option give up valuable points on your margins.  It also firmly establishes you as a discounter.

2.       Raise your list price and then mark down – This is a simple solution but it can have a negative impact on your business image.  Your customers’ are more informed that ever and they’ll see what you are doing.  If you lose their trust in pricing, you’ll lose them as a customer.

3.       Add Value and sell at list price – Give the customer additional value if they purchase from you.  For example, if you sell shoes, offer a liberal return policy.  If you sell tires, rotate them for free for the first year.  If you sell running shoes, sign the customer up for a free running class.  These options create more work for you, but it will keep your customer happy and loyal.

4.       Hybrid solution – I currently have client that is going to use combination of all three solutions.  They are going add 5% to their current list prices, then put it on sale for 15% off (effectively a 10% discount), and offer a customer loyalty program that gives additional benefits in the future.

As you can see, there are several strategies that you can use to hold your margins.  Touch base and we can see which one can help you.  -Richard

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