As fall- and winter-season apparel moves in,
Consumers could see the deepest second-half discounts in history.
BETHESDA, Md., Sept. 24, 2020 (GLOBE NEWSWIRE) -- According to a new whitepaper from retail data provider, PreciseTarget, retailers are sitting on a glut of $230 billion in apparel and footwear inventory because of shuttered stores and job losses brought on by the Covid-19 pandemic. This will force brands to offer an unprecedented level of deep discounting for the remainder of 2020 and could create an opportunity for smart brands to acquire a new base of loyal customers.
PreciseTarget’s whitepaper explains that deep-discount pricing alone is likely to attract low lifetime value shoppers who tend to lack brand loyalty. But if retailers use discounting to attract the right customers, they create opportunities to amortize the investment in discounting over the lifetime of a relationship of a high-value customer. In other words, sellers should think of discounting as a cost of acquisition for strategic customers, rather than a diminution in product margin.
Merchants can target the “right” customer -- someone who has an established taste for the products found in a retailer’s assortment -- to increase the probability of repeat sales in the future. In addition to discounts and promotional pricing to move inventory quickly and make room for the new season’s wares, retailers need to develop sophisticated targeting strategies.
As such, PreciseTarget recommends brands use three types of targeting campaigns that incorporate consumer taste:
- Brand over-indexers: While consumers are becoming less brand loyal, a subset of the customer universe over-index for brands. They are brand loyalists “brand fans.”
- Product taste propensities: This approach targets people whose tastes match the attributes of apparel products and attract consumers who like products within specific price classes.
- On-sale buyers: Many people only buy products that are on sale. Retailers must use two combined data sets of on-sale merchandise and those who score highly for products on sale. These data sets are ideal for second-half year promotions.
“It’s an immense logistical challenge to retrieve merchandise that is scattered throughout a geographically dispersed store network, particularly if the in-store staff has been furloughed,” according to PreciseTarget CEO Rob McGovern. “Brick-and-mortar retailers with a weak e-commerce infrastructure really face an uphill battle. A single online order could request a pair of jeans that’s in the Orlando store with a blouse in San Diego, and a belt in Boston? The fulfillment burden is significant.”
Even liquidating aggregator chains such as T.J. Maxx and Burlington will be affected as products that land in those stores will have already followed a declining margin curve at original retailers, he said.
McGovern added, “Think about the situation in terms of a stadium filled with people, all trying to exit through one door. The most effective way to efficiently move this inventory, even at deep discounts, is to use data to drive DTC sales during this period of disruption to physical retail outlets.”
The whitepaper can be downloaded from the PreciseTarget website
About PreciseTarget
Founded in 2016 by Rob McGovern, the celebrated entrepreneur who founded CareerBuilder, PreciseTarget is committed to helping retailers use consumer taste to acquire new customers, enrich existing customer relationships, and re-activate former customers. Learn more at www.precisetarget.com.
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