ASK THE EXPERT: ARE CUSTOMERS TRADING DOWN, OR BUYING LESS
Q: I have been reading a lot about customers dealing with inflation by “trading down”, or shopping at less expensive stores. But is it true for our clientele? I have a high-end menswear operation and I don’t see our customers switching to big box stores.
A: What we know so far based on our client data is that October sales look to be the weakest over the last 18 months. To determine if sales are really slowing, or if your customers are trading down, we suggest keeping track of two key performance indicators: 1) the average transaction value, and 2) units per transaction.
If these two indicators are dropping the customer is still in the store, but buying less. If these indicators are holding steady it’s likely that your customer is trading down to lower-priced stores, or that they have put a pause on shopping altogether.
These are important factors to monitor, especially as we head into the holiday season when we are determining our markdown levels. Slow sales in October may be a blip, but if we don’t see an uptick in November, we may have to plan steeper promotions compared to the last two years.
We have been fortunate during the pandemic recovery in that we have had to take fewer promotions than normal. But with inflation still lingering, we may be headed toward a more normal sales cycle.
ABOVE: Photo by Karolina Grabowska
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