Friday, December 25, 2009
Six Ways Retailers Will Trick You to Spend More
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Chances are your wife doesn't need a matching pair of slippers to go with the pajama set you bought her this holiday.
But if you spend $5 more, you get free shipping on your order. So it would be silly not to buy them -- right?
As the crucial holiday shopping season progresses, retailers are desperate to make sure the few dollars consumers part with this month are spent at their stores.
By offering gimmicks such as free shipping, they're also hoping shoppers will splurge on that extra little something that wasn't on their list.
And the deals are more aggressive than ever.
"Everybody is in the discount business these days," said George Whalin, president and CEO of Retail Management Consultants. "If they [aren't], they won't get the customer through the door."
Because self-spending levels dropped off at the height of the crisis, a new strategy retailers have employed is distributing gift cards to customers who spend a certain dollar amount in their stores, analysts said.
Some consumers are more apt to spend a few extra bucks to earn these free credits because they seem like a bigger bargain than receiving a percentage off, said Brian Sozzi, equity research analyst at Wall Street Strategies independent research company. But often, the deals aren't as great as they appear.
At Abercrombie and Fitch, for example, shoppers who spend $100 receive a $25 gift card. The hitch, however, is that the cards can't be used until January. When shoppers return to the teen retailer then, the steep discounts are gone, and there isn't much in the store that fits into the $25 or less category, Sozzi said.
"You're spending maybe $150 on an entire outfit and you're only getting $25 off," Sozzi said.
That means two trips of increased sales for the retailer.
Free shipping offers similarly stimulate online sales, especially when customers have to spend a certain dollar amount to receive it. According to a study by the National Retail Federation, nearly 80 percent of online retailers plan to offer free shipping with conditions at some point this season.
At Bed, Bath and Beyond, for example, shoppers receive free standard shipping when they spend $100 or more over the Web. Even though shipping typically doesn't cost very much, this method persuades shoppers to buy that item they were up in the air about, Sozzi said.
Wal-Mart Stores offers a variation on this method, allotting customers free shipping to a nearby store. The discounter markets the service as a convenience, but it's another way to get shoppers into their locations, where they might add items to their carts, Sozzi said.
"In-store pickup programs can be an important differentiator against lagging multichannel competitors and a key tactic against online-only rivals," according to a Forrester research note.
Perhaps the biggest consumer peg this holiday is packaged deals, such as buy one get one free sweaters at Ann Taylor, Sozzi said.
Limited Brands has long marketed its products this way, offering "Buy 2, Get 1 Free" scents at Bath and Body Works stores and "5 for $25" cotton panties from Victoria's Secret.
And as always, retailers have designed their stores so that shoppers first have to walk through more expensive sections, such as apparel, to get to the highly reduced inventory, Sozzi said.
"They make it easy to pick up scarves and belts and other various accessory-type items," he said.
Retailers have also become more aggressive in offering discounts for those who spend a certain amount of money in one visit, such as at Express, where consumers get $15 off if they spend $30. But Whalin said he's worried that some stores may be taking the discounts too far.
"That's an awful lot [off]," he said.
Still, an NRF study found that impulse spending will fall again this year. What's more, experts agree it will be hard to break consumers of the crisis-bred expectation that they should never have to pay full price for an item.
But 2009's marketing approach is still an improvement over last year -- when retailers slashed up to 70 percent off on apparel -- because they had time to strategize deals and cut back on inventories, said Ellen Davis, vice president of the National Retail Federation. Plus, it's a way to move products out the door.
As the economy improves, Davis said she predicts retailers will begin to market different perks, such as the best customer service. But for now, price remains key.
"We all want a bargain, I don't care who we are," Whalin said. "Frugality is definitely the way of life today."
But if you spend $5 more, you get free shipping on your order. So it would be silly not to buy them -- right?
As the crucial holiday shopping season progresses, retailers are desperate to make sure the few dollars consumers part with this month are spent at their stores.
By offering gimmicks such as free shipping, they're also hoping shoppers will splurge on that extra little something that wasn't on their list.
And the deals are more aggressive than ever.
"Everybody is in the discount business these days," said George Whalin, president and CEO of Retail Management Consultants. "If they [aren't], they won't get the customer through the door."
Because self-spending levels dropped off at the height of the crisis, a new strategy retailers have employed is distributing gift cards to customers who spend a certain dollar amount in their stores, analysts said.
Some consumers are more apt to spend a few extra bucks to earn these free credits because they seem like a bigger bargain than receiving a percentage off, said Brian Sozzi, equity research analyst at Wall Street Strategies independent research company. But often, the deals aren't as great as they appear.
At Abercrombie and Fitch, for example, shoppers who spend $100 receive a $25 gift card. The hitch, however, is that the cards can't be used until January. When shoppers return to the teen retailer then, the steep discounts are gone, and there isn't much in the store that fits into the $25 or less category, Sozzi said.
"You're spending maybe $150 on an entire outfit and you're only getting $25 off," Sozzi said.
That means two trips of increased sales for the retailer.
Free shipping offers similarly stimulate online sales, especially when customers have to spend a certain dollar amount to receive it. According to a study by the National Retail Federation, nearly 80 percent of online retailers plan to offer free shipping with conditions at some point this season.
At Bed, Bath and Beyond, for example, shoppers receive free standard shipping when they spend $100 or more over the Web. Even though shipping typically doesn't cost very much, this method persuades shoppers to buy that item they were up in the air about, Sozzi said.
Wal-Mart Stores offers a variation on this method, allotting customers free shipping to a nearby store. The discounter markets the service as a convenience, but it's another way to get shoppers into their locations, where they might add items to their carts, Sozzi said.
"In-store pickup programs can be an important differentiator against lagging multichannel competitors and a key tactic against online-only rivals," according to a Forrester research note.
Perhaps the biggest consumer peg this holiday is packaged deals, such as buy one get one free sweaters at Ann Taylor, Sozzi said.
Limited Brands has long marketed its products this way, offering "Buy 2, Get 1 Free" scents at Bath and Body Works stores and "5 for $25" cotton panties from Victoria's Secret.
And as always, retailers have designed their stores so that shoppers first have to walk through more expensive sections, such as apparel, to get to the highly reduced inventory, Sozzi said.
"They make it easy to pick up scarves and belts and other various accessory-type items," he said.
Retailers have also become more aggressive in offering discounts for those who spend a certain amount of money in one visit, such as at Express, where consumers get $15 off if they spend $30. But Whalin said he's worried that some stores may be taking the discounts too far.
"That's an awful lot [off]," he said.
Still, an NRF study found that impulse spending will fall again this year. What's more, experts agree it will be hard to break consumers of the crisis-bred expectation that they should never have to pay full price for an item.
But 2009's marketing approach is still an improvement over last year -- when retailers slashed up to 70 percent off on apparel -- because they had time to strategize deals and cut back on inventories, said Ellen Davis, vice president of the National Retail Federation. Plus, it's a way to move products out the door.
As the economy improves, Davis said she predicts retailers will begin to market different perks, such as the best customer service. But for now, price remains key.
"We all want a bargain, I don't care who we are," Whalin said. "Frugality is definitely the way of life today."
This article is part of a series related to being Financially Fit.
Krystina Gustafson
Labels: home shopping online
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Click this now to the Perfect Global Business Video
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