There are moments these days when Black Friday/Cyber Monday 2019 feels like a lifetime ago. Obviously, back when the holiday season was going on, no one had any idea a global pandemic was coming—and that now, mere months later, retailers would be faced with a scenario where running another BFCM-level sale might feel like a necessity.
According to the U.S. Census Bureau, retail sales were down 8.7 percent in March compared to February—but that doesn’t tell the whole story. (PDF) Grocery store sales are baked into that number, and sales in that category were up 27 percent in March. Other retail categories weren’t so fortunate—in fact, quite the opposite. Electronics, sporting goods, and furniture stores saw double digit drops. Apparel stores saw their sales fall 50 percent.
“It’s a very scary scenario,” Ron Frasch, former president of both Saks Fifth Avenue and Bergdorf Goodman, told Reuters, “You have reduced eCommerce, no brick-and-mortar volume, and you’ve got bills to pay.”
The result has been a rapid change in strategy for many retail businesses across the board: Figure out how to get cash in the door ASAP to keep bills paid, keep staff members employed, and, yes, even keep the business afloat until this storm is over. Cash flow is the top priority right now—long-term sales initiatives and slow-burning marketing strategies are not.
The good news? The triage efforts appear to be working, at least to some degree. Within.co, which tracks the performance of different retail and eCommerce sectors, observed a notable bounce back in April from when things bottomed out in March.
As your business continues to stare at an uncertain future, you may find yourself looking for new ways to drive more immediate revenue. Here are four strategies eCommerce retailers are using right now to get money in the door, some or all of which may work for your brand as you continue to take steps to keep the cash flowing.
You’ve probably seen quite a few enormous discounts come through your inbox—discounts that hit the Black Friday level of 40, 60, even 70 percent off. (Or, as seen below, even one store that caught our eye by advertising “100 percent off.” That’s quite a discount!)
For some businesses, a Black Friday-level sale may be a necessity to clear out current inventory that isn’t otherwise selling. “The reality is there’s an enormous amount of excess product in the system that’s going to have to be moved through,” Steve Sadove, a senior adviser for Mastercard and former CEO of Saks Fifth Avenue, told Reuters. “It’s going to have to be liquidated and everyone’s trying to find any way that they can to sell product now.”
For other stores, though, a massive sale is just the best and quickest path to getting cash in hand. If you have inventory to move and your margins can handle it, it’s certainly a tried-and-true strategy for driving purchases.
But… there’s always a big risk when it comes to heavy discounting. While it is a way to generate revenue, it can cut profit margins down to almost nothing—and, beyond that, there are the potential long-term ramifications of devaluing your brand.
In a joint report by McKinsey and Business of Fashion, they warn, “The contagion of deep discounting could spread … reminiscent of the discounting culture that took hold during the 2008 financial crisis and has dogged the industry ever since.” (PDF)
The risk of brand devaluation is certainly real—but it also may not matter so much in this once-in-a-lifetime scenario. After all, maintaining a strong brand is important—but keeping that brand in business is ultimately more important. Likewise, it would be great to move a warehouse full of merchandise at your normal margins—but that may not be a viable option in an era that’s anything but normal. Instead, the options may be: move the merchandise at reduced margins, or risk having to sell it to a liquidator for pennies on the dollar. The scenarios we’ve just described are all extraordinarily tough decisions for businesses to make right now—and fortunately, we have found some “middle ground” solutions.
One way to mitigate the potential negative effects of an impromptu BFCM-level sale: make it clear this isn’t your brand’s new normal—this is a one-time special. Your customers know what you’re going through right now—every person and every business is feeling the economic impact of the pandemic. So, hopefully, your customers won’t reframe their feelings on your brand’s value proposition from a one-time, “we never do this” sale.
That framing has been used by brands both smaller…
Other brands have been putting specific categories or items on sale for a limited time each week to keep customers coming back.
Another option, as KPMG suggests, is to focus on adding value. “Instead of reflexively cutting price, focus on the total value package of your product. Consider flexible terms and conditions, generous return policies, or including additional services to increase your total value proposition.” Right now, just the fact that you can ship immediately might give you an advantage over some competitors.
Finally, it’s important to note that you shouldn’t feel like you have to offer a huge discount right now. According to a survey by CommerceNext, of the companies who are currently performing better than they expected, only 30 percent attribute that success to running deep promotions, while 49 percent attribute it to driving demand through marketing.
Get creative about what you’re offering or how you’re positioning your products to appeal to the unique needs of your customers right now.
The first step: just being empathetic to what your customers’ lives currently look like. “We are not an essential item, we don’t even pretend to be,” says Em Sexton, owner of the boutique eCommerce store The Flourish Market, “However, if people are looking for a pair of jeans they can bend down and run and grab their young toddler in without them coming down, these are the types of needs we help fill. They’re real needs—they’re privileged needs—but there are always needs in the market, there’s always money flowing.”
If you’re looking for inspiration on how brands are adapting their product positioning, check out how apparel stores have been curating galleries of stay-at-home essentials or nice tops and comfortable bottoms for your Zoom calls. Hardware stores are promoting DIY home improvement projects. Toy stores are focusing on ways to keep kids occupied, mentally stimulated, and active.
And if you’re not sure how to best serve your customer right now, just ask. “I picked up the phone,” Sexton says, “And called our customers—the ideal customers who represent the core—and asked them what their ideas were.”
When she pressed people for what they might spend money on right now, she found they wanted easy, affordable gifts to send to people they miss or who are going through a tough time. So Sexton decided to offer $30 themed gift bundles.
“[Our first] 50 boxes sold out in less than 24 hours,” she says, “And then I went all in and I actually purchased enough supplies for about 500 bundles. I put all my eggs in one basket, but I felt good about it because we listened, and our test affirmed it. We put over 500 bundles online without having one single product in our hands, which bought us a week because we needed cash right then. We put them up for sale and 90 percent went in less than four hours.” While the profit margins are lower than usual, especially with shipping, the boxes are providing enough money to keep her company operating—and keep her employees working.
Sexton, who has a background in change management, says this is the time to focus—both for your own sake and your customers’ sake. “A confused mind always says ‘no,’ especially in a crisis,” she says. Don’t try to promote a huge variety of products in your emails or other marketing—keep your offering more focused to avoid overwhelming your customers. And personalized or segmented emails with targeted, relevant picks are even better.
In terms of where you should market, it can be tempting to pour money into increasing your ad spend—especially as ad prices and competition drop. According to CommerceNext, a small group of companies are succeeding by using this strategy—27 percent of retailers who are currently performing above where they expected to be got there by increasing their marketing spend.
But spending money right now isn’t in everyone’s plans—especially since the big need right now is to bring in money. So instead of increasing your advertising, try paring it down to focus on the channels you know will work.
“If you haven’t already, cut your lowest ROI channels,” Within.co says, “Move your marketing dollars to channels that drive the most revenue. Stop wasting budget on low-performing inventory.”
Many companies have found the best investments are email and social channels where they can target loyal customers and connect with them in a way that feels more human during the pandemic.
“Email performance right now has brought in steadily high revenue and conversions compared to other marketing channels,” Within.co found. Customers agree, and say they prefer to receive promotions from brands via email more than any other channel right now.
One more recommendation: Create or expand your loyalty program to bring back your best customers. Even just checking in with your VIP customers can be a good thing—it will keep you front-of-mind and engender goodwill for when they are ready to spend money again.
While it can be tempting to give people a moment of reprieve from reality, you risk sounding tone deaf or out of touch by not acknowledging what’s going on. Make sure to tailor your marketing to the current moment and acknowledge what’s happening in the world.
According to a survey by communications firm Edelman, 84 percent of consumers want advertising to focus on how brands are helping people cope with pandemic-related life challenges. And 77 percent want brands only to speak about products in ways that show they are aware of the crisis and the impact on people’s lives. That strategy works, too; a CommerceNext survey found three-quarters of the retailers who are currently performing better than expected are doing so by adjusting their messaging to incorporate sympathy and compassion.
If you want to take it a step further, you can even spell out the impact of a customer’s purchase.
This could be by, say, donating a portion of sales to a worthy cause.
But it could even be as simple as letting customers know how their purchases will help your business. “Let people know how to help you,” Sexton says, “People have never cared more about small businesses.” She’s been very open in her marketing about the needs of her business and the impact her customers’ purchases are having. “If I let them think [we’re not struggling], it counts them out, it lets them sit on the bench. So my call to my audience has been, ‘This is so important and, no pressure, but it’s all coming down to you … we can keep going with your support.’”
These are unprecedented times, and eCommerce businesses have adjusted their strategy accordingly—which, in many cases, has been a focus on getting cash in hand immediately. These are four ways stores are accomplishing that goal.
- Black Friday-style discounting. Right now, many businesses are prioritizing revenue over worries about potential long-term downsides of discounting. However, if you do offer a BFCM-level discount, it’s good to make it clear it’s a unique occurrence.
- Adjusting product positioning to customer needs. You may need to change how you’re framing your products, or even offer something entirely new to best serve your customers. If you’re not sure what they need, don’t be afraid to pick up the phone (or send out a survey) to ask.
- Narrow your focus. Pare down your product catalog and marketing channels. Instead of being tempted by low media costs, focus on doubling down on your high-impact channels, especially those where your loyal customers connect with you.
- Help customers make a difference. Many of the brands that are outperforming their own expectations have demonstrated an awareness of the global situation and conveyed genuine empathy. You can appeal to customers by showing how their purchases can make a difference, whether it’s by giving a percentage of your sales to a worthy cause or just by explaining how they will help your small business survive.