Consumers Paying Full Retail Online
It’s true. Consumers will buy even if there isn’t a BOGO
or a 40 percent off tag attached to merchandise. Well, at least that’s true
some of the time when they are shopping online.
According to MyBuys’ E-commerce
Wellness Index, the average sales of full retail items at 250+ e-tailer clients
was up 19.1 percent in June, while sales of discounted items dropped 26.6 percent
during the period. The number of items purchased at a discount was 14 percent
of total orders. That’s down from 46 percent in June of last year.
The lack
of discounting did reduce overall revenues, however, by 7.5 percent.
Robert
Cell, CEO of MyBuys, did see fewer discounts as a positive even if revenue
numbers were off. "Retailers have been successful at executing strategies
to increase purchases at full price while reducing their reliance on discounting
strategies."
Discussion Questions: Do you see retailers making the effort to get off the
promotional binge across selling channels? Are consumers buying it?
Consumers will indeed buy online without BOGOs, 10-fors, TPRs, and freebates, and here’s another dirty little secret; consumers buy online because SKU rationalization has resulted in taking a lot of the fun out of shopping the brick and mortar stores. In fact, in many cases all that remains after SKU rationalization for consumers are deals and prices on the very same merchandise and assortments carried by every same type of store in the neighborhood.
I think this says more about what, who, when, and why consumers shop online than it does about retailing overall. If as a retailer I’m seeing differences in the willingness of the online consumer to pay full price, I’d really quickly try to segment and unpack what’s different about that profitable merchandise driven consumer and figure out how to keep them that way and get more of them.
I’m not convinced that either retailers or consumers are ready to hold the line on promotions and keep disciplined even when times are tight but to me, this points again to the need for deeper multichannel analytics to understand which media channels and offers are driving what kinds of customers and which customers retailers are really making money on.
It’s all about access and convenience and full price may prove a small price to pay.
Discounts are expected in the brick and mortar world because retailers made the mistake of spending decades teaching consumers to never full price. Let’s hope the online folks are brighter than their non-virtual peers.
There is something suspect about these numbers. They simply don’t add up.
Take for example the statement that June’s discounted sales dropped 26.6% over June 2009, resulting in discounted sales representing 14% of total sales in June 2010. This doesn’t seem to jibe with their statement that discount sales in June 2009 represented 46% of total sales. In my way of accounting that appears to be a much larger percentage decline than 26.6%.
That said, I don’t for a minute believe that anything but a series of unique circumstances have combined to create such an anomaly. Consumers are trained to shop for discounts and retailers (clicks and bricks) will ALWAYS resort to discounting to drive business in a competitive environment.
Long term, retailers have to slow down the promotional binge, or they will have to take costs out of their systems in some manner. The online version offers that prospect with select consumers.
As far a whether consumers are willing to pay more this year vs. last year…you just have to review the numbers, and listen to the future spending plans of consumers. The answer is clear…they ARE NOT WILLING TO SPEND MORE THAN THEY DID LAST YEAR.
Consumer Confidence remains low. Based on the July Consumer Intentions & Actions (CIA) survey of 9,009 Adult respondents, when asked “Which of the following best describes your feelings about chances for a strong economy in the next 6 months?’, only 27.9% of respondents were ‘Confident/Very Confident’. Of Households earning $50,000+, the number is only 29.2%.
The slog continues.
From the consumers’ perspective it is still about the right product at the right place, at the right price, at the right time.
You’re looking at apples and oranges here. Health related items actually do not do all that well when on promotion. I know this from some of the promotions we ran years ago, where being put on promotion actually hurt sales. Online retailers are playing a cat and mouse game on pricing and it is taking a toll on sales. Any web site that does not show me the price way before checkout, I simply move to another site.
Consumers are comparing prices on everything since the “Great Recession” began, and this will continue. Most retailers and online retail sites do have a deal addiction. Just ask the automobile industry what happens when you cannot feed this addiction. Forget the idea of list price and replace it with everyday price. It does not always have to be the lowest; it needs to be competitive and fair.
I can’t grasp it. Why would consumers be willing to pay full price online after having to tighten their belts for so long? It reminds me of the song “How are you going to keep them down on the farm after they’ve seen Paris?” Once you taste buying at less than full price; there is no reason to return.
Lies, damn lies and statistics. These numbers do not make sense, and the sampling method is very suspect, at best. Common sense belies these numbers, since we know that people shop online because they want to save, not so that they can purchase product at full price. This is especially true during a recession. No, consumers are NOT paying full retail online more than ever before….
I’m a naturally questioning sort, so I’ll go with those who question the numbers here; and I’ll add this possibility: with the increased knowledge available online these days maybe many retailers have given up the sham of “X% off” and simply lowered their regular prices…if you got $10 for something you got $10, you’re not better off for not having it 50% off of $20.
From my experience with my retail clients, it appears that consumers have not significantly reduced their desire to purchase at a significant discount from retail price. However, my clients are also finding that the incremental lift that comes from discounts has been decreasing steadily in the past year.
So we find ourselves in a conundrum; consumers expect a discount in order to make a purchase, yet those purchases are rarely shown to be incremental. What happens is the result is that our clients face reduced profitability while maintaining similar retail sales volume.
In some cases, consumers may be willing to forgo an additional discount in order to receive value-added services. We find that to be true, among a limited group of customers. The good news is that those customers tend to be better customers for the organization in terms of total sales revenue and profitability.
But the jury is clearly still out.
Consumers can compare prices for retailers online or in-store so easily these days. With retailers like Walmart and Target offering to match competitor’s prices, discounts seem to be a given even if retailers want to slow down promotions. Free shipping and special sales also encourage online sales.