Is Hobby Lobby making a mistake (a big one) ending 40 percent off coupons?

Discussion
Source: Facebook/@HobbyLobby
Jan 29, 2021

Holy shades of Ron Johnson at J.C. Penney, Batman! Hobby Lobby has decided to end its use of 40 percent off coupons in its stores and its customers do not appear amused.

In a post on Facebook, according to reports, the arts and crafts retailer said that, with its decision to end the coupon promotion, it was stepping up “efforts to discount thousands of items every day. This will offer a better value instead of providing a discount on only one item with the coupon.”

The Hobby Lobby news may sound like history being repeated to those who remember when J.C. Penney tried to do the same thing early in 2012 under the leadership of Mr. Johnson, the chain’s CEO. The chain rolled out fair and square pricing, as it was being marketed, nationwide before testing it was tested and the response from Penney’s core customers was, to put it mildly, negative. In addition to turning off Penney’s established base, it also failed to attract new younger consumers, as was the aim behind Mr. Johnson’s failed attempt to reinvent the retailer’s business.

[A RetailWire query to Hobby Lobby to determine if the retailer test marketed its new pricing approach before deciding to roll it out chainwide on Feb. 28 was not answered at the time of publication. This article will be updated if Hobby Lobby provides a response.]

The arts and crafts retailer’s new strategy does not initially appear to be well received based on social media responses. Here are some of the comments found on Hobby Lobby’s Facebook page:

“Hello Amazon”

“You just keep shooting yourself in the same foot, don’t you? I always used a coupon if and when I shopped at your store. Now there’s just another reason to go somewhere else.”

“Just about everything in your store is way overpriced. The only time I buy something there is with a 40 percent off because then I can get it for marginally less than what I get it for elsewhere.”

DISCUSSION QUESTIONS: Is there a good way for a retailer to go from being promotion-dependent to emphasizing low everyday prices? What would you recommend Hobby Lobby do to address the fears of shoppers who believe the chain is taking something positive away?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The best approach is to start by removing those promotions that just don’t work against their objective (whether it be traffic, basket or something else)."
"This is a big mistake. When I read this two examples came to mind quickly. Penney’s and Mens Wearhouse."
"So the good way to make this kind of conversion? Slowly. Evolutionary, not revolutionary."

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27 Comments on "Is Hobby Lobby making a mistake (a big one) ending 40 percent off coupons?"


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David Naumann
BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
8 months 19 days ago

Retailers need to be careful about disrupting consumers’ “don’t move my cheese” mentality. Hobby Lobby has cultivated a strong following of customers that expect the 40% off coupons and even if average prices are just as low, taking away a benefit that they expected and valued is a very risky marketing strategy. Another option Hobby Lobby might have tried was to limit the coupons to one per month per customer or some other less frequent cadence to limit the exposure of the discounts. Stopping it abruptly is maybe not the best approach.

Neil Saunders
BrainTrust

Ah, just when I wanted a discount on some Iraqi artifacts….

But seriously, this kind of transition is always difficult and if not handled correctly, causes resentment and defections. The crafting space is competitive and one of the issues with mainstream stores — including Hobby Lobby, Michaels, etc. — is that they are not always competitive with online, especially for those buying in bulk. Hobby Lobby may be trying to remedy this by reducing coupons and investing more in EDLP but even if that’s the case, it will take time to reeducate the consumer.

storewanderer
Guest
8 months 19 days ago

Hobby Lobby already has every day prices quite a bit lower than their competitors on the hard craft/supply type items. And on categories where their prices are inflated, departments such as seasonal or furniture (yes, departments since they have no scanners they run sales by putting that entire department on sale) are always some percentage off.

Neil Saunders
BrainTrust

Our price tracking data shows that online is often cheaper, especially for hobbyists who buy in bulk. This applies to most of the crating players like Hobby Lobby, Michaels, Jo-Ann, etc. Within that segment Hobby Lobby is not badly priced, but bring online into the mix and it becomes less competitive.

Suresh Chaganti
BrainTrust

While a Big Bang rollout of new promotional strategy is fraught with risk, the comparisons with J.C. Penney are superficial. Netflix separating the DVD rental was way ahead of time and it generated even bigger backlash.

But the reality is, JCP is a more generic retailer with not much differentiation from other departmental stores in terms of product assortment, brand equity, merchandising, or strength of private label. It was reliant on the brands it carries, as any retailers are.

Compared to that, Hobby Lobby has stronger brand — (known for its conservative, Christian leanings), unique categories and a relatively niche space and a leadership position.

Even then, I think Hobby Lobby could have much easier time scaling back slowly. But it is equally possible that the execution would have faltered. Overall I have a feeling HL would pull this off successfully.

Jeff Sward
BrainTrust

Uhhmmm … we’ve seen this movie before. And it was not suitable for any kind of sequel. Apparently customers have no benchmark for evaluating “value” in the absence of a coupon or % savings of some kind.

But wait … they do! Costco. Walmart. It’s a function of training and perception and expectations over the long haul.

So the good way to make this kind of conversion? Slowly. Evolutionary, not revolutionary. Bed, Bath and Beyond stuck with abundant coupons and now seems to be doing very well a year after a new CEO came in. He kept the comfortable and dealt with the content issues.

I actually support the idea of getting rid of false comparative prices … prices that are merely placeholders to set up the appearance of savings. But it’s a lot more complicated than just issuing a press release. And their timing would have benefitted from a little pressure testing.

Georganne Bender
BrainTrust
My partner Rich Kizer and I have been a part of the creative industries since the ’80s, having consistently worked with retailers, speaking at trade shows, and sitting on the association’s board of directors. This is a question that has come up many, many times over the years. The catalyst is Michaels – the 40 percent off coupon is its creation. Some industry retailers followed and others did not. Still more, who had accepted Michaels coupons, stopped taking them. There was unhappy customer talk for a while, but it didn’t last long. You have to understand that the 40 percent coupon discount is good only for regular priced items and non-sale items are hard to find in all big box craft stores these days. The consumer’s comment “Just about everything in your store is way overpriced. The only time I buy something there is with a 40 percent off because then I can get it for marginally less than what I get it for elsewhere.” doesn’t exactly ring true. More often than not, Hobby Lobby… Read more »
Shikha Jain
BrainTrust

Promotions are addictive. Once a consumer is used to getting them, they’re expected and triggering a sale without them is incredibly challenging. All this creates a vicious cycle. Weaning your consumer base off promotions is typically the right answer in theory. But in practice, the execution matters so much more to avoid a shock to the system. Retailers have to slowly unravel the bandage rather than rip off the band aid all at once.

The best approach is to start by removing those promotions that just don’t work against their objective (whether it be traffic, basket or something else). Then start by peeling back strategies that create excessive depth — such as stacking, followed by decreasing depth and frequency across the board. For each move, keep line-of-sight into performance of these promotions through analytics and KPI tracking. In parallel, retailers should start fresh to create their promotion playbook.

Ryan Grogman
BrainTrust

For as much as 2020 has shown that consumers can adapt to different modes of shopping, general consumer behavior does not lend itself to change when there is no perceived benefit or requirement. By using heavy couponing in the past, and to some success, Hobby Lobby effectively gained a lot of customers and established the use of those coupons as part of their shopping expectations. Now, by trying to shift away from them, and doing it abruptly, the promise of everyday low pricing will not be enough to immediately convince fickle customer that they’ll save as much money.

As David Naumann highlighted, these types of transitions are best handled over a period of time. In addition to his idea about limiting the coupon usage, Hobby Lobby could use this transition as an opportunity to introduce a loyalty program whose top tier members could still use the coupons, and then gradually shift them towards other benefits.

Ben Ball
BrainTrust

No.

Dr. Stephen Needel
BrainTrust

Well said.

Gene Detroyer
BrainTrust

Let’s see … HL taught its best customers to come and buy and get 40% off. Now it is saying to its best customers we got a better deal for you … no more 40% off. Really?

Kathleen Fischer
BrainTrust

The overall reasoning makes sense, but customers will not see it this way without a lot of guidance. It’s up to Hobby Lobby to help customers see it as a benefit for it to succeed.

Cathy Hotka
BrainTrust

The thing that gets lost here is that coupons are a remedy for prices that are too high to start with. EDLP is a strategy only if your prices are actually “low.” When customers start comparing prices online from Michael’s and Walmart, they may shift their loyalty.

UltSource
Guest
7 months 12 days ago

It was only a 40% coupon on one regular price item. They still have their weekly rotating ad that has most items being discounted 30%-50% at least for one week per month.

Rich Kizer
BrainTrust

I do admire the Hobby Lobby operation. Closing out of the constant 40% program is a big move, and one I agree with. Certainly we will see some other type of loyalty program blossoming in the store, perhaps a customer loyalty reward program that will feature some types of rotating discounts, free classes and perhaps closed event classes on new projects just hitting the market. As to the comparison with Penney, Hobby Lobby always triggers the mind with new projects and products, every visit will offer something new; while Penney adventures became a trip to basics land. Big difference.

Dr. Stephen Needel
BrainTrust

The fundamental question is what happens when you take away a recurring high-value promotion that’s not good on many products, if I’m reading the comments above correctly. If it’s not good on many products, because they’ve already been discounted, it begs the question of whether you’re losing much with it (compared to how much extra stuff coupon users buy). As George noted: the key question may be whether they’ve tested it or not. We all have data that says don’t do it, but we don’t know if that data is applicable.

David Adelman
Guest
Anytime a retailer focuses solely on major discounts to draw in customers, there will always be trouble ahead. Bed Bath and Beyond are experiencing this hurt as they continue to roll out their 20% coupons. Consumers rely on these discounts to purchase and become “conditioned” to buy only when presented with one. The same is true for The Gap and Banana Republic. They have all trained their customers to wait to purchase until the big 50% off sale. It’s challenging to take these discounts away from the consumer, just like taking a bone from a dog. However, the big question remains, how do retailers transition and get their customers off this addiction? If you look closely at what Mark Triton is doing with BB&Y, you will see that many of the 20% coupons now apply to curbside pickup only. This is a unique way to get loyal customers to get adopt a new process. It also saves the company time and money in the long run as customers shop online, eventually lessening the need for… Read more »
Mel Kleiman
BrainTrust

This is a big mistake. When I read this two examples came to mind quickly. Penney’s and Mens Wearhouse.
If they want to get their customers off of coupons, it will need to be a very slow weening process.

storewanderer
Guest
8 months 19 days ago
This is absolutely huge news for a retailer with the characteristic of Hobby Lobby. As any shopper has noticed at Hobby Lobby, every item has a price tag and they manually input the price into the cash register. Sort of like, you know, 1980. We aren’t talking Montgomery Ward in the ’90s where they had no scanner but still keyed the item number into the register to track sales, this process at Hobby Lobby is like literally punching in 100 then hitting the crafts button. Hobby Lobby does have a scanner attached to the register, but the scanner was only used to scan these 40% off coupons, not to scan items. Given Hobby Lobby has some “thing” against using scanners for scanning their merchandise and now they are eliminating the coupons perhaps they can go ahead and remove the scanners completely. As far as the coupon elimination goes, the Hobby Lobby in my area is very busy during its limited hours and limited days of operation and when I go there, I see roughly 10-20%… Read more »
Adrian Weidmann
BrainTrust

What a smart idea — NOT. Does Hobby Lobby really think their customers believe they’re losing money with 40% off couponing?

storewanderer
Guest
8 months 19 days ago
I really don’t think this will impact Hobby Lobby much. This is a store that sells a high volume of small low value items. It is almost like a grocery store. The 40% off coupon is good only on one single item (and had a lengthy list of exclusions), you cannot use multiple coupons in a transaction (or a day per their policy) they refuse to accept it if it is expired, and I would venture the percentage of transactions or percentage of sales that was subjected to this coupon was quite low. Many here are comparing this to Bed Bath and Beyond. This is not the same thing at all. Bed Bath and Beyond sells a low volume of higher priced items. It is not unusual there to see more than half of the customers in there using multiple, expired 20% off coupons on their 1-2-3 item transactions of high value merchandise. It is different to use a 20% off coupon on a $100 bedding item that rarely if ever goes on sale, than… Read more »
Craig Sundstrom
Guest

As the (JCP) example shows, it certainly COULD go awry; but there are a number of differences, far and away the most important one being that Hobby Lobby isn’t a struggling retailer enacting what might be seen as a desperation move. And Penney also attempted — that being the key word, since it didn’t succeed — a number of other strategic changes (it’s one thing to try to walk-and-chew-gum, but throw in juggling, skipping rope …).

And, last but not least, let’s not forget there’s a reason for dong this: “promotions 24/7” isn’t the best way to run a business. I’m willing to give them the benefit of the doubt … at least until the numbers show otherwise.

dave hochman
Guest
8 months 18 days ago

No, because they probably deployed some sort of pricing software suite that used sophisticated data analytics and proved that the promotions were not paying for themselves.

Kenneth Leung
BrainTrust

I think you have to wean off the promotions slowly, start with enforcing coupon expiration dates in all channels, then shortening the expiration date and decreasing the frequency, meanwhile do your marketing on everyday low price.

Kai Clarke
BrainTrust

This is a poor decision, because of the decades that Hobby Lobby has used these to garner attention, develop customer loyalty, and position themselves in the multiple retail categories they compete. Yes, this is a mistake!

UltSource
Guest
7 months 12 days ago

Hobby Lobby eliminating the 40% off one regular price item is not comparable to what J.C. Penney did. Hobby Lobby still has multiple departments on sale on a weekly basis. This week they have 50% home decor, candles, art supplies, and jewelry making. J.C. Penney eliminated all sales and went to an EDLP format, which is why it failed.

wpDiscuz
Braintrust
"The best approach is to start by removing those promotions that just don’t work against their objective (whether it be traffic, basket or something else)."
"This is a big mistake. When I read this two examples came to mind quickly. Penney’s and Mens Wearhouse."
"So the good way to make this kind of conversion? Slowly. Evolutionary, not revolutionary."

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