Employee Discount Fever
By George Anderson
General Motors’ “employee discount for everyone” campaign has worked well enough (sales up 41 percent in June) that Ford and Chrysler are starting similar programs of their own. This development, say retail industry observers, doesn’t mean that merchants in other product categories will begin marketing employee discount programs of their own.
Scott Krugman, a spokesperson for the National Retail Federation, told the Dallas Morning News that the discount offered by the carmakers will save customers thousands of dollars but the savings are much less significant on clothing purchases, for example.
Daphne Avila, a spokesperson for J.C. Penney, said the retailer doesn’t have plans for a GM-like program but that it runs a program that allows associates to share their discount with 10 relatives and friends at four times during the year.
According to Ms. Avila, the employee discount on clothing is usually 20 percent at Penney. “I know with our friends and family nights, those are pretty successful on those days that we have them,” she said.
In categories other than autos, Cheryl Bridges, associate director of the Center for Retailing Studies at Texas A&M University, says the sales stores run often offer greater savings than the employee discount.
“In most cases, the employee discount ranges from 10 to 20 percent. When stores run promotions, it’s up to 50 percent, so the promotions are often better than the employee discount,” she said.
Mr. Krugman worries that programs similar to those of the automakers could have an adverse effect on employee morale. “To take that perk and offer it to everyone, it could send the wrong message to employees,” he said.
Moderator’s Comment: Will (should) other retailers run “employee discount for everyone” programs of their own? What do you see as the potential pros
and cons of this strategy?
Daphne Avila and Cheryl Bridges may have given the best reasons for other retailers to try employee discount programs for regular shoppers.
- According to Ms. Avila, J.C. Penney has been successful with a similar but more controlled program for employees, their families and friends.
- Ms. Bridges said the discounts are less for consumers than normal sales. While this means shoppers are saving less, it also means retailers are making
more while customers can still feel positive about getting a good deal.
We are also less concerned about morale than Scott Krugman for a few reasons.
- When business is good, morale tends to be high throughout.
- Employees are usually given their discount even on sale prices. If shoppers are buying goods at the “regular employee discount,” then workers will still
be saving more.
As a caution, however, we would also point out that employee discount programs cannot go on forever because, eventually, the reduced price becomes what
the customer believes they should be paying regularly. Stores will need to have a what’s next strategy in place. –
George Anderson – Moderator