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The real deal

By: Jeff James

Listed Under: Top Story

Published: Sunday, September 05, 2010

John Bensalhia looks at the impact of bargains and special deals in retail. Do special offers draw more customers in, especially in these economically challenging times?

As David Dickinson would say on one of his countless TV programmes: “It’s a right bargain!” I am, of course, talking about the world of deals and bargains to be had in shops, not just in the UK, but across the globe.

Special offers are a good method of attracting and retaining customers. In an ideal world, customers want the best quality product, but at an affordable price. And looking at a sample of recent retail results, it seems that customers are having their cakes and eating them at cheaper prices.

GIANT
One of the giants of the value for money retailers is Amazon. If you want that particular CD, DVD or sports item, Amazon will invariably provide it at a better price than can usually be found on the high street. The latest financial results for Amazon’s second quarter bear this out. Profit rose by 45 per cent to $207million (£135million) from $142million (£92.3million) last year.

In the UK, customers have also embraced discount retailers on the high street. Last year a survey conducted by Which? found that two of the country’s discount grocery stores, Lidl and Aldi, made it into the top 10 of grocery customers’ scoring, nestling alongside Iceland and Waitrose. Both were rated highly for customer satisfaction.

Another big player in discount retail, Asda, announced last year that it was taking on 7,000 more staff, confirming that the demand for good value retailers is still as high as ever.

A separate survey also spotlighted a growth in sales of supermarkets’ own-brand products. As a low-cost alternative to the big name brands, more customers were found to be going for the cheaper option. Analysts have suggested this isn’t just a reaction to the economic downturn, but to a shift in what consumers want and the larger choice of grocers’ own brands, which can range from a value for money item through to the premium end of the spectrum.

It was reported that own-label goods make up about 20 per cent of the global market, up from 15 per cent in 2003. Market research specialist Planet Retail has indicated this share is likely to grow further - to about 23 per cent by 2013.

PROMOTION
So what of sports retailers? How, when and why should they introduce special offers and deals in their stores? One such instance should be when a sports shop wants to promote a range of products, both new and older.

Arfan Aslam of online sports retailer Kitbag says that special deals allow the company to broadcast its ranges of brand new and existing products: “The benefits of our deals is to generate exposure to a certain new range of products we introduce. Also, the older products and ranges, where they have been superseded in sales by alternatives, will get a new lease of life and, of course, deliver great savings to our customers - both old and new.”

The advantage of this, as Aslam points out, is that both new and returning customers will make purchases: “We do find these offers effective in bringing in both regular customers, who continue to view our website on a daily basis and take advantage of any limited deals, and also new customers, who find us through price comparison sites for products they're interested in, or on personal recommendation by word of mouth.”

Aslam adds that loyal supporters will always buy their club’s merchandise: “We always aim to have the best range for them. These deals are done to last a period of time that ranges from a few days to a week, so as to entice customers to keep coming back for more.

“We have a constantly revolving line of products and special offers that follow up on any new introductory range, last season’s wear and product line that suddenly become popular.”

Mike Thornhill of Millet Sports agrees that product deals and bargains are an integral part of doing business. “They are always an important part of the marketing and merchandising mix, and it helps to have an offer at all key price points to give choice and value to customers,” he says. “They also serve to bring customers in who then see the full offer, which increases your chance of sale.”

Thornhill does, however, raise a valid point that special offers should not be promoted all the time, as it lowers the value of a retailer’s business proposition. Instead, key dates are far better options.

“It is not good to be seen as permanently on sale,” says Thornhill. “But tactical use of bargains at key points in the year, such as post Christmas or at the end of a season for a sport, are very useful for clearing stock ahead of new ranges, or generating demand at quiet points.”

Product deals have allowed Kitbag to take advantage of the faltering economy as well, as Arfan Aslam explains: “Naturally, like all retail-based businesses we have not been exempt from the current downturn. However, this has made our price bargaining position with our suppliers advantageous. As we are one of Europe’s largest sports retailers, we always strive to get the best possible price direct from the manufacturer.”

Commenting on the relationship between the economic downturn and special offers, Mike Thornhill comments: “I think the current economic climate is making people focus on their disposable income and discretionary spend, and so they will naturally be on the lookout for a bargain.

“However, people aren't trading down on quality at the moment, so the bargains they will pick up on will be good value, whether this is in the form of a good offer on quality product or a value added offer where an additional item is thrown in as part of the deal. Retailers are hugely important also and if one starts discounting to clear stock then this will naturally have an impact on their peers.”

No matter what, special discount deals will always have their place in retail. And despite the constant reports of doom and gloom in the economy, ironically this means that retailers can actually benefit from this by offering special deals. So long as the sports retailer works out the best times to launch offers and product bargains, this will stand them in good stead for attracting new customers and retaining them on a constant basis. Now that’s a real deal.

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