Online retailer tinyme will have a few products on sale for limited periods of time in November and December. These campaigns will be promoted through social media and email marketing, then stopped.
Mike Wilson is trying to strike a balance. The co-founder of online retailer tinyme sees the benefit of discounting to drive sales but wants to avoid the perception among customers that the purveyor of personalised children’s gifts is that guy in a suburban shopping mall with a megaphone shouting “everything must go!”
“You walk into any mall and most fashion stores are always on sale,” he says. “Our challenge has been how do we translate discounting into offering excellent value, without being perceived to be continually in fire sale mode, which seems to be where most other players are at.”
The challenge is made all the more urgent by the 47 days left until Christmas. For tinyme, the urgency doesn’t let up until late January, with the e-commerce player relying on a good back to school season as well. Wilson estimates that about 40 per cent of the company’s revenue comes in November, December and January.
The Christmas period is crucial for retailers. After a tough trading year, many will be hoping for a very festive season to lift sales and profits. To boost sales numbers, many will turn to discounting – last month Dun & Bradstreet analysts found that retailers’ expectations of prices for the Christmas period were at their lowest level in more than two decades.
But the founder and managing director of consultancy Pricing Prophets, Jon Manning, says a culture of plain discounting can be a dangerous strategy. He says retailers will find it hard to wean customers off sales “because discounting is now firmly entrenched in people’s minds”.
Manning has some firm advice for retailers. “You want to desensitise customers to price going into Christmas,” he says.
So what’s the answer? BRW spoke to a collection of successful online and physical retail brands, which specialise in gifts, to learn their festive season strategies. There were some frequently mentioned themes – some innovative, many common sense – that should shine a light for other retailers struggling with their own Christmas campaigns.
For tinyme’s Wilson, the balancing act is almost stable. Through November and December the website will have a few products on sale for limited periods of time. These campaigns will be promoted through social media and email marketing, then stopped. “It’s less like a classic ‘40 per cent off everything in store’,” Wilson says. “We never go that far.”
The retailer will also use season-long promotions such as free shipping codes to be promoted in print advertising. “It’s a way of discounting without being so overt,” he says.
To create a sense of value for the customer around the tinyme personalised products and increase the amount they are prepared to pay per transaction, the website will promote “combo buys” such as a lunch box and matching drink bottle. “It’s a genuine discount but it doesn’t come across as a sale,” Wilson says. “It’s more like an offer.”
Not that Wilson is completely against discounting, per se, but he says you have to do it in a smart way. For example, when users are about to use the check out to complete their transactions, they are presented with “kris kringle” style small gifts that are discounted. “That’s a percentage off but it’s hedged away from our main home page,” Wilson says.
Much of tinyme’s strategy centres around the common online qualities of value and convenience but bricks and mortar retailers can play into these traits at Christmas as well.
Bundling a selection of complementary products extends the transaction price, gives the perception of value and is convenient, Pricing Prophets’ Manning says. But crucially, to get the most bang from your bundle, the offer needs to have a clear time limit and the individual components of the bundle must sell for a higher price, he says.
Stationery brand Kikki-k is taking the strategy a step further and including limited edition products that cannot be bought separately, such as a one-off journal, in Christmas bundles. This taps into customers’ desire for exclusivity, while the “curation” of gifts is an attraction, chief executive Paul Lacy says. “In general, around Christmas our stress levels and busyness levels are pretty high,” he says. “In the last couple of weeks [before Christmas Day] our gift packs go through the roof.”
Customer service should be tweaked to focus on gifts in the lead-up to Christmas, he adds. “Our guys will be saying things like, ‘Can I help you with your gift list?’ or ‘Who’s on your gift list that’s hard to buy for?’ Phrases like that, which are trying to solve the challenges that people have got at Christmas.”
At lingerie and adult toy seller Honey Birdette, the questions are more specific. “We’ve really gone away from that, ‘Oh, love your handbag, how’s the weather’,” co-founder Eloise Monaghan says.
In the chain’s six stores, which will be eight by Christmas, there’s a clear December pattern. At the beginning of the month, the customer demographic is skewed towards women buying goodies for holidays and Christmas Eve, while more men come in at the end of the month to buy gifts for their wives, girlfriends and lovers. For the men, the customer service needs to be swift. “We don’t have them waiting. They want to be served straight away,” she says, adding that the questions might be more along the lines of “Conservative or adventurous? Fair and red-headed or blonde and tanned?”
As for the women, Monaghan encourages her staff to put on a show. One any Thursday night, groups of women come down from the office towers to grab a glass of champagne, watch a burlesque dancer and learn about products they might not have seen before, she says.
Many customers might bemoan the busy shops and clogged car parks but enhancing the in-store experience is one advantage that physical retailers still hold over their online competitors.
Each year jewellery and homeware retailer Dinosaur Designs creates a special Christmas mobile decoration that hangs in the flagship store. The one-off design can cost up to $20,000 but given the local brand pulls in 35 per cent of its revenue in the two months to Christmas, it’s worth it, founder Louise Olsen says. “You’ve really got to celebrate the experience of shopping and celebrate the season,” she says. “I think it captures people’s imagination and gets them into the mood of the season. It’s a magical time of year and you’ve really got to get into that and enjoy that.”
Manning says ideas like this play into his mantra for physical retailers: “Excel at what online retailers can’t do”. This can include playing up the immediate satisfaction: buy and take home. Or it may mean holding product in store, away from curious children, until Christmas Eve. And what time-poor consumer doesn’t love a perfectly wrapped present, complete with bow and gift tag?
It can even extend to discounting. Manning suggests retailers discount in November, when they are most competing against online retailers. Then when the window for delivery from a website closes, shops can put their prices back up. “Why wouldn’t a retailer actually [offer] their most competitive prices very soon,” he says. “Then they can move them up and up. That way you’re going to extract a premium from those last-minute shoppers when you can’t get anything sent to you.”
Christmas Day falls on a Tuesday in 2012. With a whole weekend and a frantic Christmas Eve Monday to capitalise on, a premium could be just what struggling retailers need.