Don’t Discount the Effects of Snow

Don’t Discount the Effects of Snow
Tags: Consumer Behavior, Customer Experience, Loyalty Programs, Marketing, Retail - General, Shopper Marketing
February 2, 2011

Much of the country is buried under snow banks. America's retailers, meanwhile, are trying to dig out from a pile of inventory.

It occurred to me just this past weekend after stopping at a local retailer to return a sweater. I had no intention of purchasing anything, but then I saw a sign that read, "Additional 30% off everything in the store!" Twenty minutes later, I was leaving with another sweater.

The International Council of Shopping Centers reports that retail sales declined in each of the first four weeks of 2011, and were down 1 percent in the week ended Jan 29. This follows a better-than-expected December that left many retailers and investors upbeat.

Now, faced with incoming spring inventories, retailers are forced to amp-up their regular promotions and get those winter-weather stragglers out the door. This is actually a pretty common late-winter strategy, but the cold weather forced so many people indoors, particularly in the populace northeast, that retailers are facing unexpectedly high piles of merchandise. The most precise inventory controls could not have predicted it.

This is good news for consumers, particularly those cashed-strapped shoppers trying to stretch the family dollar. But it is bad for retailers, many of whom end their fiscal year in January. And if it is bad for retailers, it is bad for their employees and investors – shares in Target declined by $2 in the five-day period ended Feb. 2 (noon), while Macy's lost about $1.75 and Kohl's, $1.50.

I wonder if these deep discounts, as necessary a tool as they may be, undermine loyalty. True, that 30 percent discount persuaded me to buy a sweater I otherwise would not have bought, but I don't feel any added affection or dedication to the retailer as a result. Actually, I was put off that I could not find what I really wanted in my size, and "settled" for a sweater strictly because it was at discount.

Is that the kind of love retailers want to build? It seems that if they are forced to cut prices, they might as well make the most of it by delivering the best possible experience to discount shoppers. Maybe when the economy improves, they'll become regular shoppers.

In conditions like these, it may be a question that few retailers have the luxury of considering. Inventory is fast coming in through the back, so the old stuff has got to go out the front. But somewhere in between, perhaps before the spring, they can focus on the love.