HOW CAN RETAILERS KEEP THEIR MARGINS UP AHEAD OF 2022?
Q: Thanks to the off-price merchandise I bought last year, and unprecedented demand, my margins have been better than ever. What’s your advice for keeping margins up as we head into 2022, given that demand will likely soften?
Steve Pruitt: You’re right, our merchants have been blessed with some of the highest maintained margins we’ve ever seen over the last eight months. And even though initial markups have begun dropping recently, our margins are still holding up because we’re not taking markdowns as we did in years past. But, as we head into next year, demand will likely wane while inflation will drive up both our fixed costs and our labor costs.
This is a tricky situation, but I do see a potential offset as the supply chain continues to open up. We may see an influx of goods later this year, so merchants should be on the lookout for off-priced opportunities that will help them balance out the higher costs that they will surely face next year.
One thing we’ve learned already is that customers are tolerating higher prices, so hopefully, this will continue amid inflationary pressures. In the meantime, bank as much margin as you can now, so you have a cushion going into the second half of next year in particular.
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What we have found in our business is that instead of sending texts announcing discount offers, we can engage customer simply by asking them to reply to a question. It makes them feel valued for their input and keeps our client’s brand in their heads. We are also starting to see more retailers who have email-based loyalty programs migrate over to our sms text based loyalty programs as texts are one of the few things being read.