NEW FINDINGS SUGGEST RETAIL’S ANTIQUATED DISCOUNT STRATEGY ISN’T WORKING

by Stephen Garner May 16, 2016

holiday_shopping1Retailers are relying heavily on discounts and promotions thus far in 2016, continuing the trend from the 2015 holiday season of pulling the promotional “lever” far too often, according to the DynamicAction Retail Index: Spring 2016. The findings were released today at the inaugural Shoptalk conference in Las Vegas, Nevada.

According to the index, retailers sold less at full price in the first quarter of 2016 versus a year ago, with full-price sales down 4 percent for the quarter and orders using a promotion up 63 percent. March was an especially promotional month, with an 86 percent increase in orders using promotions compared to 2015. Additionally, retailers found it harder to convert first-time buyers into second-time buyers, with those conversions down 6 percent compared to last year.

While revenues were up 10 percent in the first quarter compared to 2015, the index reported that retailers’ ability to control profit has been unstable in early 2016. Retail profits were up an average 5.2 percent year-over-year in the first quarter; however, most gains occurred in January, with increasing volatility in February and March.

“The antiquated strategy of retailers relying exclusively on their promotional calendars to run their operations has fostered an ingrained need for discounts by consumers, who are increasingly being trained to wait for promotions or discounts prior to making a purchase,” said John Squire, CEO and co-founder of DynamicAction. “The very best retailers are preparing right now to answer customers’ needs and beat shareholders’ expectations during the holiday season of 2016, by focusing on curbing the promotional addiction and utilizing their full data set to better manage inventory and operations.”

The DynamicAction Retail Index: Spring 2016 is an analysis of more than $5 billion USD in consumer transactions which benchmarks retail trends in key categories from January-March 2016 in comparison to the previous year. For more information, click here.