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Consumers may be confident enough to start spending again—but not at any price. Discounts and promotions remain the main motivators of buying decisions. And consumers will shop around until they find the bargains they seek.
The days of using promotions to move end-of-season merchandise and establish brand equity through strategic sales have plainly given way to the “constant promotion”—everywhere, all the time. But responding to bargain-hungry consumers in this way can eat into sales and erode margin. Indeed, recent evidence from across retail segments reveals the perils of competing on price alone.
There is, however, an alternative. Accenture experience shows that retailers that couple a coherent pricing and promotional strategy with four non-price differentiators restore their equilibrium.
Over the past decade many retailers sought to create competitive advantage by localizing based on store-specific consumer behavior. Once considered merely an option for achieving competitive opening price points, private labels are now strategic aspects of many retailers’ assortment strategies.
Experience Driven Shopping
More than 90 percent of retail sales still occur in brick-and-mortar stores—yet too few retailers make the effort to differentiate the service and store experience in order to develop brand loyalty. And as a result, price remains a critical buyer value. The case for building experience-driven retail brands is compelling. Our recent survey of US consumer sentiment found customer service second only to price or the value proposition as a reason to switch brands.
Anytime, Anywhere Availability
Today’s time-starved consumers increasingly seek convenience when they shop and some retailers have become specialists in delivering it. If retailers can provide convenient access to locations and/or superior, cross-channel product availability, customers are less likely to make price their primary concern when they buy.
New Cost Models
Building true differentiation involves more than just the right assortments, experience and availability. It also implies re-thinking the retailer’s operating model—a prospect so daunting that most retailers shy away from it. Some 60 percent of respondents in a recent Accenture survey of retail c-level executives, for example, said they would choose supply chain or IT if they could pick any department to rebuild from scratch.
April 25, 2011
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