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Black Friday results show retailers are playing the wrong game

Seize Digital
Author: Mark Sage

The results are in for Black Friday and it’s not good – even with potentially large price discounts, consumers still didn’t respond well, with like-for-like sales down 0.5% last month and footfall dropping 5.5% post Black Friday – almost double the decline of the previous year.
 
Lessons from 2017 also proved that cutting prices simply cut margins and profitability, without increasing customer demand. Retailers like Debenhams and Mothercare also struggled in January 2018 from cutting prices too early and too far.
 
Clearly, using price as the only driver of customer behaviour risks not only a short term hit on margins, but a longer term hit on customer loyalty and revenues.
 
The alternative has traditionally been focused on adding value. Maintaining your price position and using marketing mechanics like loyalty points to add value has served retailers well, gaining them customer insights and enabling targeted promotions in the process.
 
Increasingly though, traditional loyalty programs are being reviewed. Sports retailer Decathlon shut down their programme recently and Tesco faced a backlash from consumers for reducing the value in its Clubcard scheme. Online fashion giant ASOS also made the headlines with the recent axing of its scheme “A-List” citing they are ‘working on even better ways to reward our loyal customers’.
 
So, if price discounts don’t work and loyalty points seem not quite so engaging, is it all lost for High Street retail?
 
I think the answer is a resounding no – in fact, I think it’s all to play for. One interesting statistic from the Black Friday sales was from Argos, which reported that 50% of its sales on Black Friday had been via mobile, up from 40% the previous year.
 
This use of mobile is actually key for offline retail, both in providing a bridge between online and offline, but also providing a means to not only genuinely compete, but to create a new way to think of retail.
 
For most High Street retailers, customers use their mobile to find the store and navigate themselves to it – and then simply put their phone away when they enter the store. This is a huge opportunity cost for retailers, as it means they have no connection to these customers, no way to influence decisions and no way to streamline purchases during a visit.
 
Yet streamlining purchases is what can truly drive customer behaviours. In a recent report on Pay at Pump solutions for example, the number one reason for using a payment app was convenience, closely followed by rewards and discounts.
 
It’s this combination of payments streamlining, loyalty reward and personalised discounts that can provide a game-changing mix for offline retailers.
 
Starbucks have long demonstrated this effect with its mobile app – rated the most popular in its category – by streamlining purchases through payments and pre-ordering, linked to loyalty rewards and member offers. This has successfully engaged over 14m users with 11% growth in 2018 and repesents a massive 39% sales penetration.
 
These levels of mobile engagement aren’t limited to fuel and food-on-the-go though. More traditional retailers are harnessing it too.
 
Jeff Gennette, Macy’s CEO, said: “If you want to talk about the single biggest pain point in our stores right now, it’s the checkout process. It’s finding the register. Is there going to be somebody there? Is there a long line of customers and how long is it going to take me to get out?”
 
Almost every major grocer has announced they are trialling or launching ‘scan and go’ solutions for food retail. Allowing customers to simply scan products as they shop and walk out of the store. No check-out lines, no friction.
 
Decathalon, who as mentioned previously shut down their loyalty program, is now experimenting with Scan & Go solutions instead, using RFID and a mobile connection to track customers and streamline purchases.
 
The recent H&M investment in payments vendor Klarna further demonstrates this change, with the press release saying they are looking “to give customers a seamless, personalised and engaging shopping experience no matter where, when and how they shop”.
 
Nike has recently unveiled their new 5th Avenue store called, ‘The House of Innovation 000’, a retail store essentially powered by a mobile app. The app enables ‘Scan and Go’ as well as other innovations such as ‘Shop the Look,’ which allows items on display to be ordered and ‘Scan to Try’ which removes the traditional search for a sales assistant to allow items to be ordered for trying on in-store.
 
What this all really talks to is a change in customer engagement with a shift to customer experience.
 
Mass store-wide price discounts are a crude way of shifting short-term customer behaviour. Loyalty points are increasingly being seen as a passive mechanism for retaining customers – appealing to some, but not motivating all. However, enhancing the customer experience and making it easier to do business both shift behaviour and can have the customer coming back for more.
 
Better still, focusing on enhancing this customer experience through mobile in-store provides a digital customer connection and a flow of data insight that enables retailers to then truly personalise the experience and individual customer offer. Whether loyalty points, personalised promotions, in-store service or simply the convenience of frictionless payments.
 
As Sebastian Siemiatkowski, CEO and co-founder of Klarna, said: “Customers will no longer be forgiving of unnecessary complexity or when their retail experience does not leverage the insight available to make their engagement smart, personal and easy.”
 
At Eagle Eye, we’re at the forefront of this shift in behaviour and believe in making digital connections at point of sale easy, allowing retailers to focus delivering the right customer experience, whether through payments, promotions or points.