Why This Summer is Such a Unique Opportunity for Retailers to Maximize Margins

We’re in the middle of a retail resurgence; after a year of lockdowns and pent-up consumer demand, the consumer engine is turning again. In short, the hard-fought battles retailers spent stemming the tide are starting to pay off. The National Retail Federation is anticipating that 2021 is going to see the fastest growth in retail since 1984, with an industry-wide estimated growth of 10.5 percent to 13.5 percent. 

While these numbers are obviously encouraging, and should be taken as a big sigh of relief after a chaotic, transformational year, now is not the time for retailers to become complacent. Returning to the old way of doing business—particularly with respect to pricing and promotions—could squander the opportunity presented by a surge in consumer demand. 

This summer shopping season offers a unique test case for retailers as they navigate this new frontier. While there are certain sectors of consumers who are foregoing traditional summer retail trends like purchasing new clothing or patio furniture, for example, in favor of travel after a year inside, there is a sizable consumer base that will drive retail sales through the end of 2021. Smart retailers willing to break from tradition will seize this opportunity and provide personalization that drives KPIs while simultaneously maximizing margins. 

 

Breaking From Conventional Wisdom

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Summer months are often an exercise in plate-spinning for many retailers, assessing current needs while simultaneously working towards the future. All spring and summer stock (and overstock) needs to be cleared out, which in turn paves the way for fall and winter sales, which traditionally power companies through the fourth quarter, and the cycle begins again the following spring. As a result, inventory is planned to move quickly. 

What this process leads to is retailers ascribing little value to their overstock. Traditionally, as retailers enter the late phase of the summer shopping season, they wind up offering broad, blanket discounts and clearance sales designed to get product out the door, with little attention or care given to their margins. This trend is particularly prevalent in apparel, but multiple sides of the retail industry from grills to back-to-school supplies can fall prey to this way of doing business.  

While this method of discounting and inventory management has become conventional wisdom, it’s also created a shopper base that has become increasingly discount dependent. Unless it’s a product a customer needs, and needs immediately, too often they’ll remain on the sidelines until later in the season when prices are sure to drop. 

We’re entering an interesting dichotomy this year where the old ways of pricing and promotions are running up against a new, highly motivated consumer base. For retailers to make the most of this opportunity, they need to meet this unique moment with strategies that take into account individual consumer drive, and strike while the iron is hot. 

 

Maximizing Margins to Reap the Benefits of Consumer Demand

By recognizing consumer demand, and understanding the intent of motivated buyers, brands are able to capitalize on the retail bounce back without sacrificing any stock to over-discounted clearance. As the end of the summer shopping season approaches, the methodology of blanket discounts and clearance sales become more and more appealing, but they fail to take into account the individual habits of discrete consumers. 

By leveraging data and automation tools, like those available in the RevTrax Offer Management Platform, consumers can be evaluated based on their own discount dependencies, and given personalized offers that drive sales. Instead of throwing clearance items on a blanket 50 percent off discount, individual consumer scoring metrics can be used to identify customers that would be motivated with a 15 percent off discount, or no offer at all. By personalizing the discount strategy for known and unknown audiences, retailers are able to give customers the motivation they need to buy while constantly considering the margin implications of their promotions. 

The cycle of deep discounting can be appealing, particularly when retailers are evaluating overstock items; get them off the shelves and get new products that don’t need discounts at all into the shop. The more retailers play into this cycle, however, the more customers expect it. By taking an individual consumer’s habits into account, and personalizing offers based on their motivations, retailers are best positioned to ride the wave of pent-up consumer demand that will come to define the back half of 2021

Are you interested in maximizing your margins? Get in touch with a RevTrax expert today to discuss how automation and AI in pricing and promotions can transform your bottom line.

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