Do retailers need to buy the loyalty of consumers?
Research recently published by the International Council of Shopping Centers finds that price and value are the biggest factors driving consumer loyalty for retailers and brands today.
Ninety-two percent of respondents said price and value were the primary reason they continued to support retailers and brands. Product quality (79 percent) and variety/selection (71 percent) trailed well behind as loyalty drivers.
A recently published Wall Street Journal article posits that the retailers showing the biggest sales growth in the second quarter all share one thing in common — low prices.
Retailers posting gains include Amazon.com, Old Navy, Ross Stores, Target, TJX and Walmart. The article points out that two of the retailers — Target and Walmart — were public about the “investments in price” each has made with the goal of driving traffic, sales and gains in market share.
Other retailers not known for low prices, such as Dick’s Sporting Goods, Foot Locker and Macy’s, did not fare as well, according to the Journal’s reporting.
Ed Stack, CEO of Dick’s, recently told analysts on the chain’s second quarter earnings call that its consumer research found that customers see its prices as “not competitive” in the marketplace. Dick’s posted a 0.1 percent gain in same-store sales in the most recent quarter, well below the two to three percent gain its management was expecting.
Macy’s, which has seen sales decline for 10 straight quarters, has recently begun dropping prices on makeup and cosmetics in its stores to gain back former customers and attract new shoppers. The chain has also begun setting up Backstage shops, its off-price concept, in its full-price department stores to attract budget conscious consumers.
Jeff Gennette, CEO of Macy’s, Inc., has set a goal of increasing private brand sales to 40 percent of the company’s total, up from 29 percent. Doing so would, presumably, give Macy’s lower priced alternatives to national brands while helping to protect margins.
- Low Price Is the Only Winner in Retail – The Wall Street Journal
- Low Prices Raise Customer Loyalty – International Council of Shopping Centers/Business Wire
- Will more promos fix Dick’s Sporting Goods pricing challenge? – RetailWire
- Will dropping prices on cosmetics drive traffic to department stores? – RetailWire
DISCUSSION QUESTIONS: Have price and value become the primary reasons why most consumers continue to support certain retailers and brands? Do retailers that emphasize service and other elements of their businesses need to sharpen their pricing practices in the current environment?