A job market with low unemployment numbers and consistent job creation, coupled with low inflation and even lower energy prices, would seem to indicate that we are in a positive upturn. However, not everyone shares this optimistic outlook. This is especially true with many of the nation’s retail chief financial officers. These CFOs are taking a more conservative and cautious approach to projecting how the retail industry will fare for the rest of 2016. Their projections have a lot to do with their various promotional strategies.
According to the 2016 BDO Retail Compass Survey of CFOs, those CFOs forecast a 3.4% increase in total sales. That lines up with the National Retail Federation’s 3.1% estimation of growth. In comparison, 2014 saw a 5.1% spike in sales. Obviously, those retailers would like to see a repeat of that year. That could mean adjusting those aforementioned promotional strategies.
Thankfully, they have plenty of data to help them make informed choices. What follows are the best and worse promotional strategies for retailers based on this survey data.
E-mail and Social Media Promotions
We are definitely becoming an e-commerce kind of society. This is evident in the $341.7 billion of web sales that were generated in 2015. That represents a 14.6% increase over e-commerce sales from 2014. It’s no wonder, then, that email and social media promotions were the most effective strategies for many retailers in the last year.
These types of promotions can take many forms. The email blasts go out to existing customers of particular retailers. These customers have willingly volunteered their email address and have expressed interest in receiving these kinds of promotional communications. In other words, they are a receptive consumer. Those same receptive consumers have probably “liked” a company’s specific Facebook page, Twitter hashtag and/or Instagram account.
The common factor here is that those consumers are accessing these promotions either online or through a mobile device. That is exactly where they’re doing most of their shopping.
The second most successful promotional strategy in 2015 was offering the customer free shipping. Clearly, this ties into all those email and social media promotions. Many consumers who are placing large online orders might feel hesitant to hit “complete purchase” when they realize how expensive it’s going to be to ship those goods to their home. When a company offers free shipping, the consumer often feels like it’s a bonus that makes shopping online more convenient.
The online retail giant Amazon created the perfect business model with their Amazon Prime. For an additional annual fee, customers can get free shipping on a wide variety of products. They also can benefit from countless hours of free streaming movies and television with that Amazon Prime membership. It’s a terrific way for a company to generate a positive revenue stream without losing money on those potential shipping costs.
At the other end of the spectrum are the least effective promotional strategies for retailers. Top among these strategies are in-store promotions. It stands to reason that if a consumer is going to do more of their shopping online, then getting them to the store is going to be a challenge. That means all of those promotions are just going to waste. This is especially true when a brick-and-mortar outlet does not offer an exclusive product.
In other words, if the consumer can find that same product at a lower cost online, then that’s where they’ll make their purchase. A retailer would have to make drastic cuts in their prices in order to entice those consumers to get off their computer and into the store. Typically, that only happens during the holiday season starting with the huge discounts offered on Black Friday.
Print and TV Promotional Discount
Savvy grocery store shoppers know all about the benefits of using coupons. There are even entire websites and clubs devoted to coupon swapping. However, retailers are coming to realize that a coupon that can be sent in an email or by text proves to be much more effective. There just aren’t as many magazine and newspaper readers as there once were, which makes it hard to justify spending huge amounts of money on that type of advertising.
As for television promotions, again, these are most effective during the holiday season when consumers are on the prowl for special bargains. During the rest of the year, many of those commercials are being “zapped” by DVR remote controls. Retailers might not like to admit that all their hard work isn’t even being given consideration, as consumers race to bypass the commercials in order to get back to their programs.
How the country spends its money is often the best indicator of which direction the economy is heading. That is why the retail industry always has, and always will, remain a vital part of the complete economic forecast.
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