Target is taking a huge leap of faith in believing its customers won’t abandon it in lieu of lower prices this holiday season. It says it will “opt out” of the price wars during the major holiday season that’s soon to begin. And it says it’s OK if it loses sales to its rivals such as Wal Mart.
We’re not interested in driving sales for the sake of sales, so you might see us lag competitors in terms of comp-store sales increases,
said John Mulligan, executive vice president and chief financial officer of Target. This comment was made during the Goldman Sachs’ Global Retailing Conference this past Wednesday. So what is its game plan? It intends to build on its “expect more, pay less” motto and it also has teamed with Neiman Marcus department stores with the goal of providing “upscale and trendy exclusive collections, most notably a new fashion and home line”.
The upper management team decided its strategy during the massive holiday season -which usually begins in October, amps up the day after Thanksgiving and ultimately winds down after all of the massive holiday clearance sales – will be to play by its own rules. It cited the Neiman Marcus co branded collection as something that will bring “fashion and differentiation” to the typical retail offerings for middle America.
It’s how we complete in the marketplace and not focus so much on the lowest price of a 44 inch television.
That’s a healthy attitude, but the question is: do Americans share that attitude? After all, folks are still struggling to recover from a recession that the government continues to insist has long since been over. Mulligan admits it’s going to be challenging, especially considering all that’s left for a solid profit this year is the holiday season. He said the “ultra competitive nature of the holiday season, as it relates to driving sales” will be a tough mountain to climb. But there’s more to this dynamic, specifically the macroeconomic picture.
Uncertainty for Retailers
Factors ranging from a “very cautious consumer” to the confusing and impending fiscal cliff and, of course, the presidential election “creates even more uncertainty, and uncertainty we don’t think is good for retailers,” he said. For those reasons, he says the massive department store chained has reduced its inventories in case the holiday season proves to be dismal. He admitted, “We have not built in a lot of good news about the economy” into the business plan. We are seeing what the consumer does. Our business will be planned appropriately, given what’s going on in the world.”
In a time when retailers are announcing the emergence of no-fee layaways, such as what Toys R Us is offering this is likely a bigger gamble than Target anticipates. Not only that, but a recent survey of the nation’s biggest retailers shows they’re not focusing on high end co-partnerships with big name department stores that traditionally aren’t part of the typical American family’s buying patterns. Instead, many retailers are turning to technology.
Retailers not only recognize the importance of offering eGifts, they have significant plans to expand these offerings this year, just in time for the holidays. Most believe eGifts are great tools for building loyalty with their customers and almost half plan on ramping up their mobile apps in time for this year’s holidays. This is great for credit card and debit card users who are focused on convenience and safety.
More than 25 major retailers shared their plans for the holiday season for the purposes of the survey with one notable exception: Target. Not only that, but those brands, including Best Buy, Gap, L.L. Bean, Starbucks, Wal Mart and The Home Depot shared insights and predictions for the season. All agreed it’s mobile gifting, social gifting and electronic gift cards that shoppers are turning to. And these retailers are banking on it.
Just more than 65% of those retailers believe e-gifting is the best tool available today for building consumer loyalty and building relationships with those consumers. Almost half of those retailers say improving their mobile shopping apps is a top priority. More than 60% say that it is important for eGift Card delivery to be instant and half say that a combination of personalized video, text, photos and multiple design options are important features for eGifts. This is poles apart from what Target is banking on.
Will it truly come down to a higher end home furnishings strategy competing against egifts that are personalized, convenient and instant? It’s possible.
Retailers are in sync with consumers who want instant and personal gifting options along with easy mobile capability,
said David Stone, CEO and co-founder of CashStar.
Insight from top retailers at our conference reflects that eGifts continue to be an important part of retailers’ strategy for eCommerce growth in a challenging economic environment.
So what’s your personal gift giving strategy for the upcoming holiday season? Let us know what you think.
- FTC Warns of Prepaid Card Scams – May 23, 2013