WILL THERE BE MORE PROMOTIONAL ACTIVITY IN 1995 THAN IN 1994?
Byline: Sharon Edelson
Christmas 1994 will be remembered as much for the feverish markdowns as the disappointing results. “They’re like a drug,” several store executives said of promotions. Yet despite efforts to find other ways to motivate consumers to buy, when faced with the anniversaries of big numbers, retailers inevitably fall off the wagon, resorting to one-day sales and storewide events.
WWD asked five retailers whether this year’s promotions will be even more aggressive than 1994.
Robert Mettler, president of the apparel and home fashions group at Sears, Roebuck & Co., Chicago: “We have certainly seen more severe price-cutting based on difficult sales performance. This is a market-driven economy. When the customer doesn’t respond, there is the question of how to clear inventories and the question of what the right price is becomes the issue.
“Do I think promotions are going away? No. With fewer, but bigger and more leveraged, companies that are able to compete very aggressively, I don’t think 1995 will be any less aggressive than 1994 was.”
Michael Gould, chairman and chief executive of Bloomingdale’s, New York:
“Every year so far has been more and more promotional, so I don’t see why it won’t continue. I’m sure nobody’s happy with their margins in 1994. But I worry more about the customer and what the right value for the customer is, than the Catch-22 of ever-increasing markdown rates. We’re going to continue to be more customer-driven from a standpoint of what’s the right price and what’s good value.
“It’s becoming more and more difficult for a store like ours, which has the ability to sell regular-priced merchandise, to compete with all the promoting around us. It just puts more pressure on us to develop Only-at-Bloomingdale’s merchandise and to focus on our professional selling and building client relationships.
“The customer is getting jaded. That’s why the week after Christmas is becoming more and more popular. The business the week after Christmas was staggering. But Bloomingdale’s will never win the battle or compete with stores in the one-day mode. We’re not a main-line department store.”
Stanton Bluestone, president and chief executive officer of Carson, Pirie, Scott, Chicago: “Unfortunately promotions have become a way of life for the retailer as well as for the customer, in terms of expectations. That being the case, the continued one-day sales and 12-hour sales will show little or no growth as we go forward because there’s just too many of them. Meeting those numbers, let alone exceeding them, will become more difficult.
“Sales and markdowns aren’t going to go away. We need to have them, but we need to work around those events with other events that are more innovative. For example, in October, we ran a sales promotion vehicle supporting Goodwill Industries. Customers brought outerwear, blankets and comforters to give to the homeless in exchange for gift certificates.
“Over-promoting will bring you the same number of sales at higher markdowns, but won’t bring incremental sales. It’s a matter of developing customer confidence, of offering things to make their shopping experience positive, in addition to offering good assortments.”
Jeff Cohen, vice president of Conway Stores Inc., New York: “The promotional activity is getting out of hand. In retailing, everything is about hitting numbers, so it will probably continue at the same pace.
“We feel there’s been a tremendous amount of abuse by the department and discount stores, who play with 30 percent and 40 percent markdowns throughout the season. Our strategy has always been very tight inventory control. We’re an every-day-low-price company.
“I wonder if department stores can really do this forever and not start to be shopped only during promotional times. It becomes like a drug. Customers now are not really sure what a real value is. It makes it more challenging for us. Legitimate retailers need to be careful because the consumer is pretty cynical to begin with. It’s going to become more mundane, and the customers will stop reacting to it.”
Carey Watson, senior vice president of marketing at Burdines, Miami: “Promotional activity was more aggressive in 1994, and I think it will continue at about the same level this year. It’s not at a dangerous level yet, but we really need to be aggressive about exploring other ways to motivate the customer.
“We’re part of an interactive test with Time Warner in Orlando. It will be a few years before interactive shopping becomes very meaningful, but there are applications you can take and apply to how you service customers in store and how you promote your business. Interactive is going to be extremely important.
“In the first quarter of this year we will be testing two point-of-sale interactive screens, one for Bally intimate apparel and one for a cookware manufacturer. The screens will help educate consumers about the benefits of certain products and help them make purchase decisions. There’s a lot of new technology that can help us reach out to customers, once they’re in the store, to make their shopping trip more effective.”