The outlook for retailers appears bleak. Following the Royal Wedding bounce, many have found themselves suffering from reduced footfall and tightened customer purse strings.
According to a report published last week, almost three quarters of High Street shops are currently trying to lure customers in with sales and promotions.
But with profit margins already squeezed, and competition fiercer than ever, retailers need to think creatively if they are to secure their chunk of the ever-decreasing consumer spending pot. So how can you beat the retail gloom, without breaking the bank?
The 80-20 rule remains the guiding principle on which many retailers base their strategies. This ‘law’ suggests that most retailers will derive around 80 per cent of their sales from just 20 per cent of the products that they carry – and, in some cases, that 80 per cent of sales will be derived from 20 per cent of customers.
The rule, also known as the Pareto Principle, has several important implications and applications. But before you can play around with it, you need to understand how it affects your business. What is the 20 per cent of products that account for the bulk of your sales? How elastic is the demand for those products? Can you increase your margins on them? And of the remaining 80 per cent, what proportion are performing as well as they should? Could you increase sales by, for example, placing some of your less well-performing items in other areas of your store?
Concentrate on service
Many retailers presume that, in the current climate, price is the only way in which they can differentiate themselves. But you should not get caught in the trap of presuming that all other factors are secondary to price.
Instead (or in addition), make sure that you concentrate on providing the very best possible customer service. Give your staff ‘refresher’ courses to ensure that they have the skills they need to deal with situations appropriately – and make sure that you have a clear process in place to help you deal with customer complaints quickly and effectively.
Of course, promotions can be a fantastically useful tool for increasing both footfall and sales. But given the number of retailers that have already begun their sales, you need to think carefully in order to devise a promotion that will stand out from the crowd.
This is obviously easier if your field of competition is relatively small. But if you operate in a crowded market, a simple price promotion is unlikely to be sufficient. Instead, think about eye-catching, attention-grabbing ideas that are relevant to your customer base. Think beyond the same old 2-for-1 deals in order to get the best results.
A strong brand identity is one of the most important ways in which you can build customer loyalty, and encourage squeezed customers to choose your business over the shop nextdoor.
Consider ways that you can build a unique identity for your business. Think about the basic things first. Does your logo need a revamp? Do your staff uniforms need rethinking?
More broadly, you should think about ways that you can make your business unique. Think about the brands to which you consider yourself loyal. What makes them stand apart from their competition? By looking at these ‘success stories’ you can help to construct your own strategy.
Finally, many businesses are turning to voucher sites like Groupon in an attempt to increase footfall. This has become increasingly popular amongst firms operating in the hospitality sector.
These sites can be a fantastic way to get people through the door – and, of course, one of their main values is the marketing potential that they provide. But before you dive in, you should make sure that you understand the potential drawbacks.
Many businesses offer remarkably generous discounts when dealing with these sites. If your aim is to increase footfall, then that’s fine. But you should remember that every table you fill through Groupon also has an opportunity cost. In other words, you need to build in the potential cost to you of no longer being able to fill that table with full-paying customers. Provided that you understand this risk, and that you are happy to take it, voucher sites can be a useful tool.