Myer pulls back from discounts, but can SMEs do the same?

Businesses moving away from discounts need to gradually move their customers away from expecting extraordinarily low prices, and instead should brand themselves as offering a higher value proposition and use tools like customer database marketing, experts warn.

The comments come after department store giant Myer said yesterday it will begin to move away from extended discounts and sales, and instead rely on a traditional experiential approach to retailing, emphasising customer support and staff knowledge.

”We have a lever to pull where, on a weekly basis, we can look at discounts versus profitability and sales and it’s our job to balance the three,” chief executive Bernie Brookes told Fairfax yesterday.

Retail Doctor chief executive Brian Walker says the move won’t necessarily prompt other retailers to do the same, but discounting can’t last forever. As a result, he says businesses should be prepared to move back to a full-price environment.

“You need to create a very clear specialised proposition, and build yourself a brand. If we look at Myer, they are talking about creating an emphasis on the “experience” of entering the store, and access to knowledgeable staff. This is what businesses should be doing.”

Walker’s comments come just after a survey revealed customers are now growing fatigued of sales, with discounts no longer the trigger point for purchase activity. Instead, Walker says businesses slowly need to wean customers back to full price and engage in some sneak marketing tactics.

“Businesses should look at their customer databases and interact with their most loyal customers to keep them coming back in. They can also engage in direct marketing and face-to-face, talking to your most loyal customers and so on. Offering that extra bit of exceptional experience.”

“What happens in a discounted environment is that you become easily competed with, which means less profit, and puts you in the “scourge” of discounting. But that will change.”

Retail expert Phil Bonanno agrees, saying businesses need to move back to a “value proposition”. When you increase prices, he says, you need to replace it with something different, whether that be a deal for regular customers, or some sort of promotion that isn’t necessarily tied with cost.

“I would say that businesses need to look at their entire value proposition. If we take fashion stores, which have been hit by discounting, they need to ask – what is compelling about what I offer? If you’re just copying someone else, especially in Melbourne, which is such a fashion-savvy market, you won’t do well.”

“So when you start moving away from price comparisons, it becomes more about your –point of difference. CRM becomes more important, you need to start addressing the actual physical make-up of your store to make it look different. Simply put, you have to evaluate your whole business proposition.

Bonanno says while smaller businesses will cheer at thought of Myer pushing larger retailers away from price cuts, they still need to get their proposition right before they pushing up prices – otherwise they’ll be left in the cold.

“There are probably many retailers now who are pleased to see some of the big guys putting the brakes on, but they still need to look at their overall business and how it’s being run.”