Red tags. Blue lights. Ten for $10. Buy one, get one free. For retailers faced with a slow economy and super cost–conscious customers, the sale’s the thing. But choosing items to discount, amounts to take off and ways to promote them play a big role in any successful sale.
“Retailers really have to go out of their way these days,” says Jim Hertel, managing partner of Chicago-based consulting firm Willard Bishop. “They’re getting more active and more aggressive.”
Although hard numbers are tough to come by, anecdotal evidence about how today’s consumers perceive sales suggests that shoppers are looking for the best deals regardless of their income brackets. “There’s more conscious consumption,” says Jay Waddell, managing director/partner at the Sterling-Rice Group, a Boulder, Colo.-based consulting firm. “Even people who aren’t quite as pinched feel good about being frugal.”
Shoppers look for the real deal
Consumers are scrutinizing deals more closely than ever before. “They’re more sophisticated,” Hertel says. “Retailers need to be more aware of price points.” Savvy shoppers are even traveling to more than one store for good sales. “It’s almost counterintuitive,” says Waddell, “but people will go to three stores: Whole Foods for certain things, Costco for bulk things like paper towels and Safeway for other things.”
Summer Auerbach, chief operating officer at Rainbow Blossom Natural Food Markets in Louisville, Ky. (and NFM’s Q&A, page 9), says because of the recession, “we try to have more items on sale, and we try to maintain a good price perception while maintaining our margins.”
The challenge of naturals
When it comes to changing consumer perception of natural and organic products as being more expensive—remember the nickname Whole Paycheck—Garland McQueen, director of operations at Ellwood Thompson’s Local Market in Richmond, Va., says stores face a hard sell. “Many customers have reduced much of their natural food purchases in return for the perceived value of the conventional product from the discount chains, [so] natural food stores have to be more diligent in devising ways to retain current customers and attract new ones,” McQueen says.
Sales strategies from the trenches
Focus on winning categories. Scott Roseman, founder and co-owner of New Leaf Community Markets in Santa Cruz, Calif., says sales of produce, meat and dairy are winners. “Fresh items are more exciting, more attractive to customers.” According to a recent report from the New York-based marketing and media information company Nielsen, perishable department sales grew faster than all other retail sectors in 2009 through September. Deli spending was up 5 percent from last year. Fresh meat and seafood gained 4 percent. Produce, as well as bakery, increased 3 percent. However, 51 percent of meat and seafood was purchased on sale.
Hertel says soft drinks and snacks always are big movers that have mass appeal as well. “If I put black pepper on sale and somebody buys three bottles, the chances of them using more are pretty remote,” he says. “But with soda and salty snacks, if people get more in their houses, they’re more likely to consume more. When retailers promote these things, they get the benefit of increased sales.”
Sales on supplements, especially standard go-to’s, have worked well at Rainbow Blossom. “If it’s a commodity-type supplement, customers are likely to buy a brand that’s on sale over one that’s not,” Auerbach says.
Make a sale in every section.
McQueen says Ellwood Thompson’s has at least two items in each department “with very aggressive pricing and prominent signage.” Rainbow Blossom tries to have at least one product on sale in every section of shelving. Most sales last a month and then change to a different product.
This tactic can attract shoppers who don’t always stick to the list. “People will buy something they hadn’t planned to because it’s on sale,” Waddell of Sterling-Rice says. “They’ll say, ‘I wasn’t planning on ribs, but they’re 50 percent off.’”
Rather than putting specific products on sale, the Free Market in Appleton, Wis., runs sales across brands—in the supplement aisles, for example. “We have two or three companies with 20 percent to 25 percent off all their items,” says owner Cindy Weinfurter. “You don’t have to have as deep a discount if you have a lot [of products on sale].”
Try fewer and deeper.
If the discount is too shallow, customers are unlikely to bite. “Anything less than 10 percent off, and shoppers say, ‘You have to be kidding,’” says Hertel. Say you’re considering putting 15 items on sale this week. Five are priced better than the competition. Five are equal to the competition. And five are not a super sale. “Take out the five that are not as good and the five that are as good and make the five that are better really good,” Hertel recommends.
New Leaf’s Roseman agrees. “It only takes one or two things [on sale] to get a customer excited.” Rainbow Blossom has a few key deep discounts, then spreads smaller sales throughout the store.
The bottom line is always a factor, though. As Weinfurter points out: “If the product is $5 or less, they’re more likely to throw it in the cart. If it’s higher priced, they have to think about it.”
Do the math.
It’s a safe bet that your customers didn’t bring in their calculators to figure out the best deal, but they want to know the final cut. Make it easy on them. “I don’t like working at a percentage off,” says Roseman. “Customers like to know what price they’re paying.”
McQueen uses a similar strategy. “We never sign a product as 10 percent off or 50 percent off, but choose to state the actual dollar savings. For example, Nature Valley Cereal: regular $3.99, now two for $5. You save $1.49. This sends a message that the customer will have $1.49 extra to spend on something else, hopefully within our store.”
Rainbow Blossom sometimes advertises both the percent off and the sale price. Or it gets creative to persuade customers to buy more: “We like to do two-for-one instead of 50 percent off because you are able to move more product and increase sales,” Auerbach says.
Beware of over-signage.
Signs advertising sales serve customers—they let shoppers know what’s on sale. But don’t overdo it. Waddell recalls a retailer in Florida that had more signage than customers could absorb. “They had different names, different colors for everything, including nutritional labeling,” Waddell says. “You’d look down the bean and soup aisle and 40 percent of the items had a sign.”
A better strategy: Rainbow Blossom puts one employee in charge of making uniform signage for all its stores, and changes the signs on the first of every month.
Use old and new media for promotions.
Social media is making a big impact. You can friend Ellwood Thompson’s on Facebook. The store also tweets. But traditional promotional methods still have their place. Last year, 41 percent of shoppers were enticed to buy on-sale items by prominently placed circulars, according to the Nielsen report.
Good old-fashioned coupon-clipping is back, too. In Florida, Waddell’s firm visited a man in his $1.5 million home. “He must have made $250,000 a year. And he was cutting out coupons.” But adding a twist to the tradition can make more buck for your bang. The Free Market offers a coupon for a certain amount off a $25 purchase to both a current customer and the new shopper the customer brings into the store.
Jane Hoback is a Denver-based writer.