Navigating Retail: Key Strategies and Trends for Success in 2022

NSGA- Nov/Dec 2021

How Ready Are You For 2022?

According to recent numbers released by Deloitte retail sales this holiday season are projected to increase from 7-9%. E-commerce is projected even higher with estimates ranging anywhere from 11-15%. Given that the increase in seasonal sales last year was 5.8% during the holidays this is of course positive news. Fueling the increase is folks getting over their concerns about going out shopping and traveling more. Even more interesting is the “steady decline in the savings rate which is down to pre-pandemic levels.”

NSGA retailers should be aware that there will be continued movement toward online buying across all product classifications which will include sporting goods. This should encourage any merchant still on the sidelines with regard to online to find a way to get in the game.

Clearly retail is still plagued with a multitude of challenges namely finding and keeping good help and supply chain interruptions to name two of the more significant ones. Another issue you will soon discover if you haven’t already is a substantial increase in shipping costs. This coupled with inflationary pressures will force retail prices higher.

Trends to Consider

Given that as a preamble there are a few trends in retail that do seem to be working well and should be considered.

Thrift Shopping vs. Fast Fashion

It has been touted that thrift shopping or selling second-hand or used clothing may take over fast-fashion within a decade in some stores. Though on the surface this may not look as though it applies to the typical NSGA retailer this niche is on the rise in many areas as customers continue looking for “value.”

Redefining Value

Value used to refer to price. Today however it means more about convenience. From liberal return policies to free shipping for online purchases the customer today is demanding that the shopping experience make their lives easier. If not their default is a world of internet shopping that never closes maintains an infinite selection clearly has the best pricing and next day delivery… for free!

Coupons: A Powerful Tool

The use of coupons has proven to be a more effective way of enticing customers than merely offering a discounted price. A study by Claremont Graduate University revealed that coupons create “happiness and health.” Retailers too would be happier and healthier at least financially if they knew that a $25 coupon is more effective than simply a 25% off coupon. Dollar amounts are tangible.

The Reciprocity Principle

Have you ever gone to a Costco on a weekend and been offered a free sample? You probably felt somewhat of an obligation to buy the product assuming you liked it. They gave you something for free so therefore you should give something back. That is the Principle of Reciprocity in action. I can speak from firsthand experience that this works and I have the Costco receipts as proof.

Notice the Solicitations for “Worthy Causes”

Notice how many solicitations for “worthy causes” are in the mail with actual currency inside. I receive several each week that contain not only dimes and nickels but half dollars and in some cases actual dollars. The senders know that not only will I take the time to open the letter but I might engage with their message and send in a contribution. You might find Dr. Robert Cialdini of Stanford University’s book entitled “Six Principles of Persuasion” interesting if you would like to learn more about this.

The Cosmetic Industry’s Marketing Strategy

The cosmetic industry has used this marketing concept to their advantage for years. Why you ask? Because it works! What if you were to offer a free pair of socks or a shoe care product as a promotion? Perhaps some glove oil with a new mitt or a puck with a hockey stick? Shoppers prefer getting something extra for free to getting something cheaper. Over time a retailer’s perceived generosity makes them more likeable and leads to positive brand associations. You have to give to get.

Best Practices to Review

As we approach the end of this strange year with all of the economic unknowns of 2022 there are several best-practices that bear repeating:

• Preserve cash whenever possible.
• Mitigate all unnecessary risk.
• Review expenses monthly looking for pockets of potential savings.
• Review your P/L and balance sheets monthly.
• Do an annual breakeven analysis by store. More often if conditions change.
• Perform a cash flow exercise through year end. Then do it again with a 5-10% reduction in revenue.
• Consider paying people on performance instead of only hourly.
• Move dead inventory out! Now is NOT the time to have cash tied up in underperforming inventory.
• Perform a thorough brand analysis at year end to make sure all vendors are performing up to par with YOUR business needs.
• Streamline vendors and assortments while at the same time keeping any possible supply chain interruptions. Narrow and deep always trumps wide and shallow when it comes to assortment planning.

Remember the newest freshest merchandise is the catalyst to increased profitable sales.

How disappointing would it be for a customer to make a trip to your store only to be offered last year’s carryover merchandise still at full price?

Use your merchandise plan as the buying guide that it is.

It is a great insurance policy that will help keep inventory levels stay within a profitable range.

Seek independent outside counsel if you need an objective opinion.

Have a happy Healthy and Prosperous Holiday Season!
Until next year…
Ritchie Sayner

Ritchie Sayner

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