The seasonality of retail

Posted on 1st January 2016 at 4:10pm by Carl Reader in Business, Random Musings

It's the start of a New Year, and people are flocking out to the January sales... or are they?

This year I have been amazed by the shift in seasonality in the retail world. We became comfortable with "January" sales starting earlier each year. Over the past few years they sneaked back to Boxing Day, then onto Christmas Day (online only). That kind of made sense, as stores could capture full value from Christmas shoppers. This year, it seems like it was all go from 20th December... with next day delivery available!

The traditional cycle has been broken up as well. Rather than focusing on just summer and winter sales, there has been mid-season sales along the way. Chuck in promotions for Valentines Day, Easter - and let's not forget Black Friday, and the chances of finding items at full retail price are slimmer than Southend United winning the FA Cup. Especially as Black Friday lasts a few weeks according to Amazon.

My concern with this trend is nothing to do with tradition, or aggresive pricing. It's simply that the average consumer will begin to ignore the retail price, and instead base their decision making solely on final price. The "50% off" tag will not hold the allure it once did. RRP's will be a work of fictional irrelevance, much like we've all come to know and love with some major furniture chains. Most goods that we purchase will become the 70% off Lonsdale trainers, or the half-price broadband offer. And the challenge of this is that it then becomes a race to the bottom. Suppliers get squeezed. Employees get shafted. Service goes downhill.

It's not a win for the customer, as it might seem on the face of it. RRP's go up, costs go down, and net margin stays the same. It becomes a game of cost leadership, and the economies with lower infrastructure costs, together with questionable employment protection, are the only winners.

Just think before adopting a discount strategy - can I compete with the big boys? And by big boys, I mean China? Consider whether the reduction holds any sway in todays world of expectation. Are you just undercutting yourself by undermining your value?

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