Retailers run the risk of damaging their reputations, diminishing profits and alienating consumers by holding too many promotions
In the 1990s Sir Geoffrey Mulcahy introduced every-day low pricing (EDLP) into his family of Kingfisher retail formats, most notably and for the longest period at B&Q.
It was not successful and not understood by customers. In the UK that left only Asda ploughing a lone EDLP furrow.
Today I would describe Sir Geoff as ‘the Martin Peters of the retail world’.
For those of you too young to remember, or not followers of the beautiful game, Martin Peters was one of the young stars of England’s 1966 World Cup-winning team who was famously described by the England manager Sir Alf Ramsey as being “10 years ahead of his time”.
Today’s consumers remain addicted to offers but the increasing transparency of pricing produced by the internet and mobile technology creates new demands and disciplines for retail management.
Consumers can now identify more readily which promotions are genuine and are developing a healthy cynicism towards many retailers’ competing offers.
Does anyone believe that the DFS Sale, for example, must end on Monday?
There is a danger of losing credibility and trust. Store-based retailers need to be in control of their own destiny and create loyalty and trust (brand integrity that is exemplified by businesses such as John Lewis or Next) rather than being constantly forced to respond to every rival’s price cut and promotion.
This is even more critical when you remember that investors in pure-play online retailers – temporarily at least – prioritise sales over profit, while permanently enjoying a cost advantage.
It is a competitive price battle that store-based retailers cannot afford to win.
The Black Friday ‘pseudo-phenomenon’
But sadly, I see retailers are still being sucked down a black hole of price competition and diminishing profits, the most dangerous example being the nauseating Black Friday pseudo-phenomenon.
“It is suicidal to encourage consumers to behave like Pavlov’s dogs, panting for more reductions”
At the start of the important Christmas trading period, when traditionally many retailers make all their profit, it is suicidal to reduce prices and margins and encourage consumers to behave like Pavlov’s dogs, panting for more reductions.
And whereas in the US, where Black Friday is linked to Thanksgiving, in the UK there is no legitimate hook. Remember also that in the US there is no Boxing Day - UK retailers appear to be too greedy, expecting too much
of a good thing by trying to have both promotions.
Analysts have focused on the logistics issues and retailers’ fulfilment capacities but the fundamental question is this: does Black Friday increase overall sales or merely shift the timing of purchases and reduce achieved margins?
Conversely, I note that some of the most enthusiastic Black Friday participants were retailers with margin and trading issues.
I rest my case.
- John Richards is an independent retail consultant and non-executive director