How Retailers Can Make the Most of This Year’s Deep Discounting

Retailers, particularly those in high throughput categories like footwear and apparel, are still feeling the effects of the inventory glut that started in 2022. The issue is so severe for some brands that the tactics being used to clear inventory have moved from desperate to dangerous.

We’re already seeing brands offering 40 percent off site-wide or up to 90 percent off specific items to clear the excess ahead of the holidays and new shipments. Holiday promotions start earlier every year, with some retailers having sent their first 2023 holiday campaigns in August. Retailers are also expected to face some macro-headwinds with warmer-than-normal weather forecasted for the holiday season and further impacts to consumer spending, like student loan payments set to resume in October.

While quarterly numbers are critical to hit, doing so at the cost of long-term customer value creates problems for tomorrow. Given the holiday season is when acquisition costs go up, payback is more critical than ever, which means improving your approach to increasing reach.

Understanding New Customers

Every smart retail marketing organization is maniacally focused on return on investment, but there are inputs required to understand payback that are necessary when the economic environment is challenging. When increasing reach and getting your brand in front of new potential customers, the preferences of that incremental audience often vary from your typical customer base. This means a retailer must go the extra mile to understand these new cohorts to create the highest chance of driving long-term value.

Many fashion, apparel and footwear brands have an item they're most known for. Think yoga pants for athleisure brands like Athleta and Fabletics or the classic flat from Tory Burch. These brands have driven a significant volume of existing customers through the purchase of these items, but this doesn’t mean that new audiences will only be interested in this part of the assortment. A net new audience for Athleta might convert at a higher clip on swimwear (depending on the season), a tote at Tory Burch, or a celebrity collection at Fabletics.

Testing is the best route to developing these insights at the source level alongside audience analytics from social and the use of technologies that can predict in-session consumer behavior in just a few clicks.

Get Creative With Conversion

For most fashion apparel and footwear brands, promotions are a critical part of the conversion path. We all know the long-term impact of training customers to expect discounts for every purchase, so it’s time to get creative with measuring acquisition return and with promotional programs.

Retail marketing teams are always fast to make changes to campaigns based on weekly and 30-day return on ad spend — which is needed — but there’s a long-term view that also needs to be heavily weighted. Looking at cohort performance over longer-term windows, such as 60-day and 90-day, will yield valuable insights related to pre-conversion activities that might alter acquisition efforts. Many retailers know the value of an email subscriber compared to unidentified or guest converters. If this number is significantly higher for email subscribers, test focusing your calls to action (CTA) on subscription, rather than purchase, conversion. Other high-value CTAs to test include creating a profile, booking a virtual appointment, or other options based on your offerings.

Retailers and brands should be experimenting with initial conversion promotions to get new customers back to the site and buying more, especially coming into the holiday season. There’s a wide range of creative approaches to incentivizing first purchase beyond the new-norm of signing up for email and SMS in exchange for a one-time 10 percent off or interactive approaches like spin-to-win. These creative approaches can also drive second and third purchases, creating more long-term value.

One tactic to test is a series for new subscribers or customers — provide an incentive to opt in for communications by promoting that they’ll get special offers in their first two weeks. The special offers can be escalating discounts around a specific category to drive repeat category purchases; discounts from various categories in the catalog to drive discovery and multiple gift purchases from the brand during the holiday season; or other tactics like “mystery” promotions. In a typical holiday season, most retailers would be rightfully concerned about training a customer to only buy on discount. However, when so many retailers are already in deep with discounts, this is an example of how they can turn a highly promotional environment into a highly valuable environment.

If you’re a brand or retailer with a well-known category or item — e.g., Athleta’s leggings or Tory Burch’s flats — test removing initial conversion offers to determine impact on conversion. If a shopper is coming inbound from search on terms that align to that item or quickly navigating to those product detail pages, there's clear purchase intent. A conversion offer may not be necessary and those dollars can be used elsewhere to drive initial conversion or cross-category purchasing.

Don’t Forget About Data 

Retailers repeatedly struggling to hit comps or ROAS benchmarks usually struggle with data silos and data actionability. Shift a portion of team energy to testing and learning with a focus on developing customer-level insights vs. channel-level insights.

To do this, a retailer has to start with understanding customer movement by developing reporting that demonstrates how new-to-file customers perform over time in terms of purchase volume, purchase value, and other similar metrics. By understanding how customers continuously move through the purchase funnel time and time again, year-over-year across a five-year to 10-year period, retailers have the foundation needed to build targeted hypotheses and tests that generate insights that can move the business forward, not just improve a single campaign outcome.

When so much is on the line, customer movement data is critical for improving acquisition program performance through the holidays and into 2024. By knowing what actions (including discounts) moved more first-time buyers to become repeat customers, retailers can better determine where to place investments on generating incremental reach and that will translate into incremental revenue.

Sherene Hilal is the chief product officer at Bluecore, a retail shopper identification and customer movement technology that turns anonymous shoppers into known customers and repeatedly moves them through the purchase funnel more efficiently than any other customer data solution in the retail stack.