It's hardly news that the retail industry is responsible for too many self-inflicted wounds. At the top of this list, perhaps, is many retailers' long-term reliance on aggressive discounting to drive top-line sales. This has taught many consumers that the regular price is "the sucker price" in turn addicting them to various former of discounts. Retailers are addicted too, unable to wean themselves off various forms of price promotions.
“We've already established what you are, now we're just haggling over price."
- A less than PC old joke
It's hardly news that the retail industry is responsible for too many self-inflicted wounds. At the top of this list, perhaps, is many retailers' long-term reliance on aggressive discounting to drive top-line sales. This has taught many consumers that the regular price is "the sucker price" in turn addicting them to various former of discounts. Retailers are addicted too, unable to wean themselves off various forms of price promotions.
With Kohl's announcing plans to increase its Rewards program earn rate to 7.5% we take on the potential risks of this type of strategy and unpack the differences between loyalty and bribery. We delve into what Steve calls "promiscuous shoppers" and why working too hard to seduce them can backfire. Lastly, if customers just aren't that into you and promiscuous shoppers make up too large a portion of your customer base, what should retailers actually do?
But first we open up with the retail news that caught our attention this week, including the continuing slow down in online shopping and disappointing results from Shopify, Etsy and eBay, among others. We go deep on Wayfair's (or is it Waywork? Or Wefair?) disastrous earnings report and wonder whether the emperor has any clothes and/or could become an acquisition target. We also touch on whether the biggest mall to open in North America in a long time is turning into an American nightmare and what to make of the divergence between increases in shipping rates and the increase in online ordering.
Don't forget that Steve's book has been selected as a Kindle Monthly Deal, which means that for a limited time the ebook version of Remarkable Retail: How to Win & Keep Customers in the Age of Disruption is just $1.99 in both the United States and Canada.
Photo by Artem Beliaikin on Unsplash
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Steve Recent Forbes Relevant Articles
Retailer's Pointless Pursuit of the Promiscuous Shopper
Wayfair's Earnings Disaster Portends More Trouble For 'Disruptor' Brands
Wayfair, Stich Fix and Pure-Play E-commerce's Scaling Problem
The Myth of the Great E-Commerce Acceleration
Past Podcast Episodes We Reference
Understanding Customer-Based Valuation with Dan McCarthy
The Store As Brand Hub with Target's Nancy King
About Us
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to Remarkable Retail podcast, Season four, Episode 17. I'm Michael LeBlanc.
Steve Dennis 00:11
And I'm Steve Dennis.
Michael LeBlanc 00:13
You know, Steve, at some point fairly regularly during my life and a couple of decades in retail marketing operations me and my fellow executives would sit down and sometimes look at each other. And, you know, in, in frustration and say, boy, this retail stuff would be really easy if it wasn't for consumers. And in this episode, we're talking about a certain category of consumers.
Steve Dennis 00:34
Yeah, those pesky consumers. They are very, very annoying sometimes. Well, the, the thing we're going to talk about today is what I have been calling for a few years, the promiscuous shopper, and how trying to seduce them can cause some problems.
Michael LeBlanc 00:50
As this is probably figured out, this is a solo episode. So, we'll get back to great guests for the rest of our season. By the way, our season will wrap-up in mid-June, we're going to take a little bit of a break, and then we've been renewed for season five, woohoo. So, let's, let's have a woohoo. The big offices have renewed us for season five, which will kick off in early July, we'll take a couple of weeks off, as we always do. So, that's something, something to look forward to. Alright, let's get to the news of the week. So, you know, pretty startling drop in, in the Dow Jones, in the stocks and some pretty startling news coming out from the eCommerce side. Talk about to your thoughts on what you've seen and observed this week.
Steve Dennis 01:31
Well, we're continuing to see a pretty big slowdown in eCommerce, you know, we've touched on this already. You know, in that episode we did about the kind of the myth of the great eCommerce acceleration, but we're getting even more and more information. Bunch of earnings reports this past week, Shopify's revenues, had their, they still had pretty good growth compared to most companies, but really their slowest quarterly growth since they went public in 2015.
Steve Dennis 02:00
Then we saw eBay, Etsy, all report downed sales couple of other companies have, have commented about how eCommerce is, is basically pretty flat or even pulling back. So, so, that's pretty interesting and that's caused kind of a ripple effect. I mean, as you point out, the market overall was down quite a lot. But some of the online oriented companies got hit particularly hard.
Steve Dennis 02:22
The one that I got into a little bit with a Forbes piece was Wayfair's earnings. And Wayfair's you know, the biggest, by far, I guess, biggest home furnishings eCommerce player, and their earnings came out and I saw a couple people refer to their earnings as less than stellar. And I thought that was a very charitable interpretation. I mean, they were a disaster. Sales down quite a bit, big operating loss, -
Michael LeBlanc 02:52
CFO is leaving, right? CFO's leaving, -
Steve Dennis 02:53
CFO is going to be leaving, their active customer base was down, I think was 24% compared to last year, something like negative $300 million in cash flow from operations, which was like a 400 plus million-dollar swing from the quarter of last year. So, really pretty much a disaster all around. You know, I've been following Wayfair and have been pretty skeptical of their business model for a number of years, though, I will say that if you had listened to my advice, three years ago, when I was really calling out their business model, you would not have done well, because right after I said that or not like, you know, not right after I said that, but within the next few months, the stock actually went up quite a bit. And, but in the last year, it is now down like 80%. So, I think there's some real questions about the viability of this model. Certainly, they're getting hurt by, you know, kind of a pullback in spending on the homes, you know, this we don't have the kind of COVID Boom, going on. They've got supply chain issues, (crossover talk), -
Michael LeBlanc 03:56
Shift of, shift of experiences, right, people are, people are getting on airplanes, and (crossover talk), -
Steve Dennis 03:59
Yeah, I mean, there's, there's some underlying, (crossover talk), -
Michael LeBlanc 04:01
In some ways.
Steve Dennis 04:02
Yeah, I mean, there's some underlying trends. And I think, you know, certainly some, some headwinds that a number of players are starting to feel, but the thing with them is really, the underlying economics, their gross margin, to me has been unusually low for an extended period of time. They have spending, they've been spending a ton on marketing. Their SG&A costs are very high and so, with the sales slowdown, it just really, really hit them hard. So, my question is going forward, it seems like they likely have to raise prices, they likely have to pull back on marketing, you know, there's some things they probably need to do with their cost structure. But if they can't get the top line going, which could be hard if they raise prices and reduce advertising, how does this all sort out? So, I think it's a, it's a huge brand to watch. Fortunately for them, they've got a pretty strong balance sheet. They got like $2 billion in cash, so there's no immediate crisis, (crossover talk), but they've got time and who knows, maybe, maybe they'd become an acquisition target.
Michael LeBlanc 05:04
Well, you weren't alone and I, I, I, I have always thought that, that they'd wind-up in somebody's camp like a Walmart or somebody but you know, I, I, your opinions kind of echo or in a different way one of our prior guests right Daniel McCarthy has been talking about Wayfair. He's been a Wayfair skeptic just on their cost of customer acquisition for a long time. So, you're not alone. I, we should say a quick couple of quick things about Shopify. So, first of all, they're Canadian. Second is, -
Steve Dennis 05:32
Never, never miss the opportunity. Should we talk about Celine Dion too, while we're, while we're at it?
Michael LeBlanc 05:36
Well, Alanis Morissette, right? Let's talk about Alanis in the last episode, that their business model is such that they, they do feel, I wouldn't call it disproportionate but of course, their, their business model is you, you, you particularly the Shopify Plus, which is Enterprise or their basic is they feel when there's a deceleration of sales, right? Because they're taking a percentage of sales, they're not a here's your here's our solution kind of company. So, it's not about sales, customer growth for them. It's about their, their actually would feel a deceleration of sales, right to their bottom line. And I guess the second thing I, I don't know if you noticed that the, it's kind of lost a little bit in the in the signal versus noise is they bought a big, big distribution company, like for a couple of billion dollars. Do you have any, did you notice that? Did you have any thoughts on, on them getting into the logistics business?
Steve Dennis 06:15
Yeah, I did see that and I think it's interesting I, I feel even though the, the business models are, are quite different in a lot of respects, I feel like there's a convergence kind of going on between the direction that Shopify is headed in the direction that Amazon is headed in, in, in aspects where, you know, trying to offer this full suite of, of products, obviously, coming at it from, from different angles and different sizes. But you have this, this rush to kind of control that, that last mile and improve supply chain is, is something we're seeing a lot of players move towards, I think, -
Michael LeBlanc 06:55
Well, on the other end of the spectrum, let's talk about the American Dream, which is kind of looking like a bit of a nightmare last year, that big New Jersey shopping mall, they lost $60 million dollars that it revealed in a filing like, like, wow, right?
Steve Dennis 07:09
Yeah, this, you know, not a lot of malls are being built, at least in, in North America and American Dream outside of, over in New Jersey, across from Manhattan was a, is a massive project, kind of like a Dubai style mall. They've got a ski resort and a lot of entertainment and it's huge. And lots of delays, they tried to open pretty much right as COVID was hitting. So, they've certainly been handed a lot of problems. But yeah, very, very big loss. You know, one of the things that was revealed in the article is that they are finally getting their ski resort, open, I believe this month, you know, perfect, perfect time, I guess to get out of the heat to go to go skiing in New Jersey. And they are apparently close to 85% leased. So, there are some improvements in terms of the revenue they should be getting and the traffic they should be driving. But yeah, that's a, that's a pretty massive loss for a company that's definitely had its issues.
Michael LeBlanc 08:06
Well, we're bouncing around a little bit. Let's get back to logistics. So, an interesting, fun fact, you pointed out that the UPS, FedEx and USPS volume increased 23 what is it, 23 and a half percent over the past two years that eCro-, eCommerce grew 50%. So, I'm not that great at math, but it feels like there's a lot of eCommerce going on that isn't shipped through or shipped to consumers doorsteps.
Steve Dennis 08:31
Yeah. So, maybe we should do a quiz as to what explains it. I don't know this, -
Michael LeBlanc 08:36
(Crossover talk), like a LinkedIn, a LinkedIn poll, right, everybody's doing a LinkedIn poll, (crossover talk). What did you have for breakfast?
Steve Dennis 08:39
(Crossover talk), a LinkedIn poll, (crossover talk), what, what? How, how do we, -how do we sq-, square this circle? Well, part of it is I'm sure some people have figured out is Amazon, has 40% of eCommerce, controls a good portion of its own shipping. So, as they have picked up handling of, of parcels, you do not see their numbers, while the numbers for, of packages that they ship themselves not using those services, you don't see that embedded in that number. So, that's part of the explanation.
But I think the more interesting part of the explanation, going back to the conversation we had with, with Nancy King at Target is that the growth in eCommerce is where it's ordered. It's not necessarily how it's fulfilled. So again, we've been talking about this idea that it used to be for the most part that if you ordered online, it was shipped to your home or office through the mail. But that is not so much the case now because of local home delivery, from store stock, or from customers going to pick it up. So, we're really seeing this kind of divergence in some cases between how something is ordered and how something is fulfilled.
Michael LeBlanc 09:49
All right, so that's, that's a wrap on our E News. Let's get to, let's get to the, the, the body so to speak of this, this episode with the promiscuous consumers idea. So, you know, you and I have been attached or been around loyalty for a long time we've been watching pricing strategy. So, I'm really kind of keen to get your thoughts on this. And, and what is it that sparked, you know, this is not a new issue, what is it that sparked this in your mind that we should talk about this today? What are some of the things that are going on that are top of mind for you that you wanted to start off with?
Steve Dennis 10:21
Well, I wanted to talk about this idea of the "promiscuous shopper" for a while. Partially because there's this bigger issue, which I think we'll, we'll get into a little bit more, you know, trying to understand how some of these struggling brands are going to actually drive the top line and do it profitably. The particular thing that prompted the timing was this news, that Kohl's, which has been pushing its rewards program was going to up its rate, basically, its cash rebate, from 5% to 7.5% after testing it for a bit. And it started to make me wonder, well, you know, if you're going to, now layer on top of all the other promotional stuff, you do, you know, essentially a higher cash back reward. What does this really mean for their profitability? What does this really mean for their customer mix? So, tha-, that's kind of what I wanted to dive in to today and talk about how to how to think about it. What are some of the challenges to overcome and maybe what some companies can do to improve their overall customer economics?
Michael LeBlanc11:31
Well, there's certainly a lot of moving parts, right? You got loyalty programs, which, ironically, don't really create loyalty. In my experience, they do a bunch of other things, if done well. You've got credit card programs, you got buy now pay later programs, like there's a lot of levers to pull in trying to create this mix of customer loyalty or visits or whatever, you, you know, whatever you think about that. Now, what's your experience in, in loyalty programs? Canada, as it happens is a loyalty crazy country, there's actually more loyalty cards out there than there are Canadians, like the average Canadian has like four or five loyalty program cards in their, in their wallet, what's your experience of, of loyalty and how have you used it in your career? And what's your advice to your clients around the best ways to use let's call them classic loyalty programs? Or, you know, buy something, get some points or get a discount? Wha-, what, how do you sit on that?
Steve Dennis 12:20
Well, I've had, I've had quite a lot of experience, going way back to my Sears days where, you know, our, our efforts were largely, it's not exactly a loyalty program, initially, but we had a very substantial percentage of our sales done on the Sears card and that really gave us a lot of data. And that gave us some positive economics. Because when you put something on your Sears card, not to get too in the weeds on this, but you didn't have to pay the interchange fee, to Visa, MasterCard, American Express. So, for us, it was both a customer data leverage play, as well as saving some, some money. We also used it because we could grant credit to people that weren't so credit worthy, -
Michael LeBlanc 13:06
Closed loop system, right?
Steve Dennis 13:07
Yeah, closed loop system, (crossover talk), -
Michael LeBlanc 13:20
Really get a (inaudible), yeah, yeah, -
Steve Dennis 13:21
Yeah, get people in. In, in 2004 when I was at Neiman Marcus, or I guess a little bit later than that. We were working on redoing our loyalty program and that program was originally also just on a private label credit card business, we had a much more elaborate program where not only were there essentially cashback sort of rewards, but there were various benefits that, that you could get through, through the loyalty program.
Steve Dennis 13:35
But for us, it was an absolutely also a big data, leverage data leverage play. So, I think there's a lot of things going on, you know, you do have programs that are essentially cashback programs, they really reward frequency and to your point, they don't necessarily, in fact, in many cases, they don't actually create loyalty. They're just a thinly veiled discount, as well as a, a way to leverage customer data.
Steve Dennis 14:00
So, I think there's a lot of different ways to think about these sorts of programs. But if you get back to this idea that you're trying to create, hopefully, an overall profitable customer mix, you know, you're trying to acquire, grow and retain customers that will contribute value to the enterprise. The concept of the promiscuous shopper is really those customers that do not have the potential really to be loyal, that they switch between brands that are acceptable to them, largely based on some sort of promotion, you know, the promotion could be a big sale. It could be, for example, perhaps in the case of Kohl's reward program or other rewards programs, because they like the cashback that you give them or any number of other kinds of promotional leverage. And the thing to be careful of is you know, every I'm sure every retailer has some customers that are a lower margin than the average. That's just the way averages work, right? But they're still contributing value. But what you have to be careful about is you don't have too many of these customers that have poor or even negative customer lifetime value.
Michael LeBlanc 15:16
Mm hmm. You know, in Canada, it's an interesting situation, because the print flyer, and high low pricing is, is used by a couple of very successful retailers. So, there's two sides of the story I, I recall at Canadian Tire does, you know they put 10 million flyers on the street. And, and when you look at the flyer, the first couple of pages are all high-low pricing, the rest is kind of regular pricing, and it's been very successful for them. For others, I feel like they've created a, you know, they've created a habit, so to speak, if we can use that genre of, of language, and that, that without feeding that habit, the customers just disappear, like and then the customers just hold off, they say, well, I'm not going to buy it, because at some point, it's going to go on sale. And I guess that's the risk, right, that you're the architect of your own misery, so to speak, customers won't come to your door unless they see a deal. And perhaps that, that's part of what you know, JCPenney has been struggling with and, and may have to deal with is folks walk through that door when there was a deal and otherwise didn't, right?
Steve Dennis 16:14
Yeah, well, a, a good chunk of, of retail operates on more or less some version of a high-low pricing model. So, this is not new. This has been around for a long time. So, yeah, whether you're talking about Macy's, Kohl's, Sears, etc. There's, there's lots of these retailers that fundamentally mark it up to mark it down, you know, half the store is on sale at any given time, and so, -
Michael LeBlanc 16:42
24 weeks of the year, right? (Crossover talk). How does the pricing strategy, or the pricing laws, again, now we don't want to get in the weeds, but in Canada, it's a mix of time and, and volume? So, you can't have an item on for longer than, you know, 24 weeks, or if that becomes officially the regular prices. Are there's similar kind of constraints and guidelines in, in the United States?
Steve Dennis 17:03
Yeah, there's some federal stuff, and there's some state stuff, I think, as a practical matter, the way it works out, too, if you're a national retailer to kind of accommodate all the different state regulations is, for the most part, you can't be on sale more than about 50% of the time, but there's some other tests that states use. But essentially, you know, you've got a good chunk of the store on sale at any given time. And yeah, we've taught people that, you know, basically, you'd be an idiot, to not buy it on sale, in some shape or form.
Steve Dennis 17:34
You know, Bed Bath and Beyond is kind of famous for their, they don't really do high-low pricing, per se, but they have this 20% coupon. So, you know, you don't buy anything unless you've got the coupon. And I think it's gotten, you know, just you've got sort of this two sides of, of the addiction, right, which is you've got consumers addicted to getting what they think is the lowest price, you know, the hot price, the hot deal, and you've got retailers that have set themselves up in this model for years and years and years, and kind of have the sense that if we don't promote it, we're unlikely to sell it. And then, you know, over time, with, you know, the internet, the ability to very easily discover what the best deal is, or, you know, to have a browser extension that alerts you to the best coupon, you know, like this technology has only, I think, reinforced this idea that you'd be silly not to check out what other offers there are, particularly for more expensive products.
Steve Dennis 18:38
So, we're kind of in this frenzy of discount. So, you know, they're, I don't think there's inherently anything wrong with the idea, you know, particularly if it's intrinsic to your business model, that you're offering a low price or you're offering hot deals, you know, the whole (crossover talk) industry, whatever. Yeah, right. I mean, I think all of that is fine. But the problem of really chasing and trying to seduce the promiscuous shopper is that, you know, you can end up having too high a percentage of your customer base, that is essentially this promiscuous shopper that, you know, they're just not that into you basically, that they're, they're.
Steve Dennis 19:17
You're acceptable, but it's the deep discount, and in some cases, the layering on a promotion. So, if you think about Kohl's, for example, you can go in there just about every day and see half the store, probably that's 30-40% off. And then if you use your Kohl's card on top of that, you're getting another 7.5%. So, there's this real risk that you know, you're driving more and more of your business to people that are overly price sensitive.
Steve Dennis 19:50
So, that's, that's really the issue. And I think, you know, in this day and age, part of the problem is for those promiscuous shoppers you know, if they don't get the incredible dis-, deep discount, they don't shop with you at all. But those strategies carry over to the rest of your customer base, you know, you're basically giving them more of a discount than they might need to actually shop with you.
Steve Dennis 20:15
So, you know, given that this is the way, particularly the department stores, the moderate department stores, there are plenty of other apparel retailers, you know, the Gap you know, you can go down the list of dozens of retailers that have this promotional strategy, have rewards programs, etc. The problem is that they can't drive a lot of their business without these discounts. And yet, they struggle to be able to grow market share, and earn a reasonable rate of return. So, I think we've, you know, we've created this monster, and I suspect that we're still seeing a lot of retailers that are kind of working on the wrong program.
Steve Dennis 20:55
You know, you're coming with these or the wrong part of the business, they're coming up with these marketing and promotional strategies, when what you really need to do is try to figure out more ways to make customers intensely loyal. You know, again, to your point, I mean, these programs in and out of themselves don't create loyalty. They're more levers to pull. But if, if the customer is just not that into you or not enough of them are not that into you, you know, that's, that's the problem. And you know, you really can kind of create this race to the bottom.
Michael LeBlanc 21:24
Okay, here's the magic question, let's, let's be solution oriented here. I mean, there's been many retailers who have tried to get out of this habit or tried to break their consumers out of this habit or tried to, you know, get away from the promiscuous consumer. As you sit down and you think about it, I'm sure it's not the first time someone has asked you. Okay, so how do I get out of this?
Michael LeBlanc 21:44
Like, you know, do I go cold turkey, which seems to be not so great, because then suddenly sales collapse. Like, how do you actually get out of this corner, where you're driving sales, from promotions or loyalty bumps, and then start migrating to, I don't know, if it's an everyday low price, but start migrating to a place where people come to you because they love you or they want your products? Like, how do you start easing off that, you know, easing off those strategies?
Steve Dennis 22:15
Well, I don't, I'm not aware of many, if any real great examples of retailers that have made a major shift, you know, if they're high or low, have made a major shift to a different pricing strategy over time. We've got examples of, of disasters, we had some limited disaster, I guess, when I was at Sears, when we tried to do this in one of our divisions. There's very much the famous JCPenney example, when Ron Johnson was there.
Steve Dennis 22:44
So, I, I, I think if, if you're going to try to really change your overall pricing and promotion strategy, you need to test it, you need to assume it's going to be a multi-year process. I just can't imagine you're going to fundamentally wean your core customers off a pricing strategy that they've gotten used to. So, I think from a strategy standpoint, tread carefully, go slowly.
Steve Dennis 23:09
I think the, the bigger opportunity, though, so, not that you take a change in strategy out of, out of the question, but you may be mitigated is you have to really figure out fundamentally through research, why you're not acquiring the customers that you think are valuable, why you're not retaining them, why you're not growing them? And most of the time, the answer is not likely to be your pricing strategy. It's likely to be the experience, the merchandise.
Steve Dennis 23:38
So, again, I think it goes back to if you're trying to create loyalty, if you're trying to create great customer lifetime value, what are the key levers because I think throwing extra discounts is, is really addressing a symptom, you know, not the root cause. So, I think you've got to start, like so many things with really great insight, customer insight, you have to go down to, you know, you have to have some sort of actionable segmentation to understand because not all customers are the same.
Steve Dennis 24:10
And I think when it comes down to promotions, generally, you want to move. I mean, this is, you know, there's some tradeoffs in terms of what is easy to execute, but you, you want to move towards more personalization. You know, the, like, if I were at Kohl's before I would add another 2.5%, I would ask myself, how can I take that 2.5% and invest it in more targeted promotions, you know, invest it in maybe, -
Michael LeBlanc 24:37
Or, or, and how do I give 5% to the customers that have the potential to be great, but not give a little bit to everybody, but give a lot to the, you know, the high potential, could be great customers, like those kinds of strategies really are, can be quite successful.
Steve Dennis 24:52
Exactly. Exactly. Right. Because you don't you know, if you give the 2.5% to everybody, and, and you've got a certain percentage that don't, don't need it, you're just, you're just leaking money that you don't need to. But if the other customers need a little bit more of a push, because maybe you're trying to get them to try out a new department or come more frequently or whatever, then yes, you go with that higher rate. So, it should be much more segmented, and ideally much more personalized.
Steve Dennis 25:17
And you know, my experience when we did a lot of this stuff at Neiman Marcus, but subsequently in some other consulting clients is sometimes what's going to get that customer to shop more frequently, or cross shop, or add that extra item on a trip is not about price, it's about letting them know about a new brand, or maybe it's giving them access to an event, or, you know, some sort of exclusivity. So, and those, those things may cost you less than, than a discount, and, and it may not reinforce this, you know, may reinforce this idea that you're special, as opposed to, you know, you're promiscuous, and I just got to, you know, we're just negotiating, essentially. So, -
Michael LeBlanc 26:03
It's, it's a lot harder to do, right? I mean, it takes a lot, it's a very different orientation then to say we're given across the board, high low pricing, we're going to take a price cut, it's, you know, you know, it's Presidents Day, we're taking a big deal. All of which are, can be part of the mix, but if, you know, getting down to the, you know, in my career, I've deciled customers, you know, figured out who's the, you know.
Michael LeBlanc 26:23
If 10 is the best, who's the six, seven and eight, maybe and put all or most of my marketing dollars towards them to the degree I could to get them up because they had potential and then figure out, you know, these one, two and threes, you know, okay, I'm not, I'm not going to not sell to them. But I'm also kind of, how, how can I not spend a dime on these people, right, that kind of, you know, it takes a bit of, it takes a bit of thinking, as you said, a lot of, a lot of work, and then actually a different orientation, right?
Steve Dennis 26:49
Well, I think that's, you know, I, I'm not trying to be too, too smart about it. But I think a lot of the retailers that have not embraced really leveraging customer insight, and more personalization, they're very short-term. And in some cases, they're just lazy, like, it's super easy to change the rate from 5% to 7-5% 7.5%. It's super easy to run the, you know, extra 10% off for the weekend, right? Like, that is easy to do. And most people know, you know, most retailers know, you know, they can point to well, you know, when we added the extra 10%, our sales went up. But that's not the right question.
Steve Dennis 27:28
Are you building more customer value? Lifetime customer value? That's the question. And, thankfully, particularly over the last several years, like, you know, this was a lot harder to do this work, when I first was getting into it 20 years ago, I'm sure it was the same thing for you, like you know? You didn't have the tools to do it, you didn't have the technology. So, it's very, very expensive, and often, much harder to really measure your results.
Steve Dennis 27:52
Now, the tools are much better. And, and you know, data is cheaper to store, like all, all the things to implement this more one to one marketing sort of strategy are much more doable in today's day and age. So, any retailer that is not pushing on this personalization front and is really still relying fundamentally on these mass promotions. It's, it's just such an old way of thinking about things. And again, you know, my fear. And I know this is true at JCPenney's, and I know this is true at Macy's, they have a very high percentage of their customer base that is these promiscuous shoppers.
Steve Dennis 28:28
And, you know, that is slow, lingering death. So, yeah, you can say, hey, it's hard to do this more sophisticated analysis, it's hard to figure out what customers want and tailor it to it. But you know, what else is hard is going out of business slowly over a number of years, like that's, you know, we've, we've seen this happen with plenty of other retailers that didn't focus on being more relevant to customers, but you know, did the quick and easy stuff and you know, slowly or that frog, you know, the proverbial frog boiling in water.
Steve Dennis 28:56
And you know, that, that's another reason why I'm so negative on the moderate department store space. I mean, a lot of it has to do with the distribution issue of being in, being in malls. But a lot of it has to do with fundamentally about the, the sea of sameness they offer in their merchandising, but it's also this reliance over reliance on chasing these promiscuous shoppers.
Michael LeBlanc 29:19
Well, and I guess getting back a couple episodes, we chatted about Marc Rosen and his new gig at at JCPenney, and he was saying, you know, I'm done chasing new customers. So, I think some of that was nested in his thinking. You know, the idea is, as you said, thoughts and prayers, it's a tough thing to get out of, and I can't, I can't imagine combining with another retailer that basically has the same strategy is going to make it a whole lot easier, right? You get the very too similar strategy. So, I guess that's also another thing that got us thinking about this promiscuous consumer idea or trap or whatever you want to call it, yeah?
Steve Dennis 29:49
Yeah, I mean, we'd be interested. I mean, I was very familiar with this data way back when, when I was at Sears. I hadn't had the opportunity to get into this very much in recent years, but it would be interesting, to know what percentage of customers are shared among Macy's, Dillard's, Kohl's, JCPenney, my expectation is a lot. And you know, plus or minus a bunch in a very precise number.
Steve Dennis 30:19
But, you know, my guess is the majority. And if you looked at the gross margin, that those shared customers pay, my guess it would be significantly less than the average gross margin, because they are not inherently loyal to either one of those brands. And because the product offering is so similar, in a lot of cases, they go where the best deal is. So, you know, when the Ralph Lauren underwear or whatever is on sale at Dillard's that week, you know, I go there, if it's, you know, Ma,- at Macy's, you go there, you know, there's, there's so much of that, where the product is the same, the experience is the same, many of these stores are at the same mall.
Steve Dennis 30:59
So, you know, you're not really changing the location dynamics very much. So, it's, it's a weird problem.
Michael LeBlanc 31:04
And with eCommerce you can shop online, (crossover talk), -
Steve Dennis 31:06
Right, and eCommerce is very easy, right? You know, to see and you know, and then you get, you know, maybe, maybe you get the credit card, and you get an extra 10% or something like that. But again, you're, you may be driving your margin down and not necessarily growing your lifetime value very much, if at all.
Michael LeBlanc 31:21
Well, it's, it's complex, and it's tricky, but it is figure out-able, I guess, if you have people like you on your side, on their side. So, and this episode has been about the, the issue, and we'll probably get to talking more about it in the rest of season. And certainly in, in season five, it's not a new issue, but it's one that's got to be tackled, because it is, you know, it is leading to, you know, as we think about the retail environment, which is, is you know, as people shift to buying, right back to the beginning of the episode, right? People shifting buying to more services and experiences, and we've had a good run at it, high inflation.
Michael LeBlanc 31:57
So, all these things need to come in, come into play now in the post, in the post COVID era. All right. All right. Well, let's leave it there, great discussion on the promiscuous consumer. Certainly not an issue that is new, nor is it an issue that will be solved over the next couple of weeks over the summer. So, I'm sure we'll be revisiting and talking about the different ways that retailers are tackling it well into season five. So, let's leave it there.
Michael LeBlanc 32:20
If you liked what you heard, please follow us on Apple, Spotify, or your favorite podcast platform so you can catch up with all our great interviews, like our discussion with Target, SVP, Nancy King on their innovative approach to harmonize retail. New episodes will show up each and every week. And be sure and tell your friends and colleagues in the retail industry, all about us.
Steve Dennis 32:39
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win and Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 32:50
And I'm Michael LeBlanc, producer and co-host of the Conversations with CommerceNext podcast, The Voice of Retail podcast, keynote speaker and host of the all-new Last Request Barbecue cooking show on YouTube. You can learn even more about me on LinkedIn, or at meleblanc.co.
Safe travels everyone.
SUMMARY KEYWORDS
customers, retailers, eCommerce, talk, sales, loyalty program, crossover, JCPenney, discount, consumers, loyalty, Sears, Kohl, promiscuous, shopper, people, retail, strategy, programs, create