How to Maximize Sales Potential in a Changed Economy

The holiday season is a time of celebration for many retailers. But once it’s over, keeping sales moving in the right direction can be a challenge. To help give retailers some strategies to combat ongoing challenges, such as consumer budgeting and digital competition from non-market leaders, Deloitte held a Webcast yesterday (December 2), called “Customer Relevancy: Achieving High Performance Beyond the Holiday Season.” After the Webcast, Nielsen Business Media’s Stacy Straczynski caught up with Mary Delk, director for Deloitte’s retail practice, who discussed current retail trends and what actions retailers need to take to stay competitive. Here’s what she had to say:

Nielsen Business Media: How have shifts in the consumer mindset shaped spending behavior?
Mary Delk:
[In the Deloitte 2009 Holiday Study] there were a number of questions that had some sort of link to discounts or the usage of coupons or “I’m going to buy my gifts on sale” and when you looked across all those questions and you linked it back to the demographics of the survey, the people who were looking to save money or buy on sale or get deep discounts, it didn’t center on any one group. It cut across all age and income spectrums…

NBM: Will retailers be hard-pressed to meet these new demands?
A lot of [retailers] planned for it. I know of a number of retailers who did a lot of direct importing then went back and negotiated with manufactures. They figured out how to take some cost out of what they were doing. I know the supplier community has had to sit down with a number of retailers and figure out how they can provide more exciting promotions and not get ‘out of our hide’ in terms of profit.

Last year, retailers were so reactive. They had too much inventory and had all these broad cuts across categories. When that happens, you sell the best stuff and that not so good stuff sits longer and longer and requires deeper and deeper markdowns. I think what they have to do now is they have to be more surgical and take those deep discounts on the items [not performing well] and be a little less on the items showing good demand.

NBM: How do you feel the changes in the economy due to the recession have affected the retailer/consumer relationship today?
I think it’s really impacted loyalty. Consumers are more concerned about their own pocketbooks than they are about necessarily staying put with a retailer. And not all of them—about 26 percent of them said that they were no longer loyal to a retailer they had been loyal to in the past as they look for the lowest price.

I think what it’s doing on the retail side, at least what I hope its doing, is making retailers realize that they have to be more in tune to what customers want, how they want to be treated and what they will respond to and essentially value their business more. I think one of the things you might see next year is people re-exploring and revamping their loyalty program somewhat.

NBM: Is there any way that retailers can go about regaining that lost loyalty, or do you think it’s too late?
There’s always going to be a certain number of customers that are going to go for the lowest price—that’s always going to happen. One of the things I didn’t talk about in the Webcast today was that in our survey 44 percent of people said they remained loyal to the stores they like, but they are making fewer trips and they’re buying less. Don’t lose those people. Figure out how you might be able to get them to spend more. The other thing that people have to keep in mind is that generally the “best” customer, the highest spenders and most frequent shoppers, is worth about 20 times that of an average or below average customer. That’s a huge number. That group of “best” customers is probably pretty loyal to you.