A Vicious Cycle of Sales

The headline question says it all: After Sales, Will Shoppers Pay Full Price Again?

Shoppers are getting used to those 75 percent off sale signs, and that's bad news for merchants who worry they will also have to quickly slash prices on spring goods to attract customers.

The story continues to describe and analyze the issue, but the bottom line is this: expectations among consumers have changed.

Thrift is the Word

Let’s face it, with the bad news about the economy hitting them from every direction, consumers are looking for ways to save money and through the holiday season, retailers have been more than happy to help them do that. At that point it was a kind of win-win situation: retailers needed sales and consumers needed (note that I did not say “wanted”) low prices. With employment instability, credit problems, housing problems, government bailouts that the people did not want, bank failures, doom and gloom from the media and the government alike; people are inclined to follow their instincts and hang on to their cash.

That kind of thrift offers security to consumers in insecure times, which is good. What it does not do, however, is help solve our economic woes. Consumers that do not spend, except in highly self-serving ways such as paying down debt, are as great a drag on an economy as banks that refuse to lend—and we already have more than our share of those.

This is what retail stores are facing, consumers that want to hang on to their money, and the deep price cuts in the retail sector during the holidays have led them to expect to be able to do just that.

Marcia Layton Turner, a mother of two from Rochester, N.Y., recently walked away from an outfit that she spotted at a local Kohl's store that was 50 percent off. "Forty to 50 percent used to excite me," the 43-year-old writer said. "Now, I want at least 70 percent." Turner says she has taken advantage of 75 percent discounts on children's clothes in recent weeks and is willing to wait to get the same type of deals in the coming months.

Turner speaks for a growing number of consumers that have figured out they can simply wait-out retailers to get the sale prices they want. It could some time before that changes.

Surviving in Price-Obsessed Times

It is not all bad news, there are things you can do. They range from bolstering your customer service to creative marketing and useful merchandising. Remember, you are more than your products, your store is an experience and your products are solutions to people’s needs.

Even if you cannot match the price of the competition, by bringing your customer service up to scratch, you will be developing relationships with your customers in a way the big box retailers and the discount places cannot match, and such relationships make the price difference far easier to manage. Beyond that, though, creative and aggressive marketing and advertising will put your name and your products out there while others are pulling back, hoping to “ride out the storm.” Those who leave their ships to the mercy of the waves end up in a life raft. As for the merchandising, ask yourself how you can put product together to offer the greatest value for the money. By discounting the bundle based on the product mix, you could offer some good deals that would be unique to your store.

The Bottom Line

Winston Churchill said it best: If you are going through Hell, keep going. That is the secret to success. At least, that was the secret to his success, but it is good advice nonetheless. Whatever you are going through has another side to it, an exit, and if you can reach that then you will be out and safe. The retail sector, along with the rest of us, has this recession to go through. Will it get worse in 2009? It might. That really does depend on what Obama and the Congress do, but it could also get better, or we could see blue skies again in 2010 or 2011. There is no telling. Knowing that, there is only one thing you can do, for yourself and your business.

Keep going!