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Despite positive movement from some early indicators such as consumer confidence, the economic environment is as tough now for retailers as it was several months ago, thanks to high unemployment rates, continuing mortgage and credit crises and newly frugal consumers. However, instead of the massive retrenchment of several months ago, when many retailers cut back on their marketing, merchants are once again testing the waters with new strategies. ?
Consumer confidence posted another large gain in May after improving in April and now stands at 54.9, according to the Conference Board Consumer Confidence Index. So far, however, this hasn't translated into sales for most retailers, except for those successfully delivering value-based messaging.?
Macy's reported sales for the four weeks ended May 30 decreased 9.5% and same-store sales were down 9.1%. JCPenney said comparable-store sales dropped 8.2% during the same period while total sales declined 6.7%. Aeropostale, on the other hand, which markets value-priced apparel to young women and men, posted a 30% gain in net sales during the same period and a 19% gain in same-store sales.?
"Retailers went through denial [about the economy], now they're in acceptance mode and making plans to manage the new reality," says Zain Raj, CEO at Euro RSCG Discovery North America and global retail practice leader at Euro RSCG Worldwide. ?
Those plans include a renewed focus on making shopping more convenient for consumers across channels, Raj continues. "Even the laggards are now realizing that it is imperative to provide a single view to consumers across channels," he says, adding that while the trend existed previously, it has been "accelerating dramatically" as a result of the current economy. ?
According to industry sources, retailers such as JCPenney, Lowe's and Best Buy are just a few that have integrated their offline and online businesses into one marketing organization over the past nine to 12 months. ?
"My clients have shifted their focus from a few months ago, when it was all doom and gloom, to now asking how they can generate demand," says Kevin Hillstrom, president of database marketing consultancy MineThatData. ?
One of his retail clients will test a new catalog strategy this fall and mail one large catalog to two million of its better customers instead of having two smaller catalogs — one for existing customers and one for acquisitions and reactivations — go out to 1 million names each. "Basically, they are cutting out any acquisition strategy in recognition of the fact that customer acquisition hasn't performed well over the past few years and budget cuts need to be made," explains Hillstrom. ?
The Internet is another area of focus for many multichannel merchants, as e-commerce sales continue to outpace in-store sales — albeit at a somewhat slower rate than before. ?
"A lot of multichannel merchants are trying to figure out how to grow their Web sites and take advantage of the one channel that is growing," said Sucharita Mulpuru, senior analyst at Forrester Research. As a result, many are allocating more of their marketing budgets toward the Web.?
But with e-commerce conversion rates still hovering around 3%, many retailers are not only considering how to drive traffic to their sites but also looking into ways to drive conversion, according to Forrester's recent Trends 2009: US Online Retail report. Retailers are focusing more intently on improving the onsite experience rather than customer acquisition.?
"Customer loyalty is a big focus for many retailers right now," said David Gruber, group product marketing manager for Adobe Flex, a software development kit developed by Adobe Systems to develop and deploy cross-platform rich applications. "By providing a more engaging online experience, it allows the customer to choose that retailer first to shop and engage with as opposed to the Google approach," he explains. ?
In one example, online shopping solutions provider Allurent is working with Adobe technology on a tool for retailers that would allow customers to upload a photograph and color match it to specific items in the merchant's production selection. In another, the process of "paging" through an online catalog is being speeded up to the point where it's similar to flipping through a physical catalog. "This allows people to see lots and lots of products quickly and compare them," says Gruber. ?
For all the talk about loyalty and focusing on customers, not enough retailers are doing a good job when it comes to CRM, says Raj. ?
Retailers "keep on saying they are doing CRM, but really they're just sending promotional e-mails to customers," he explains. However, very few retailers are sending relevant offers or following any of the other best practices of CRM, Raj said, pointing to recent research done by Euro RSCG that found while 90% of retailers say they are actively engaged in CRM, only about four out of 100 are actually taking the necessary steps for a CRM program. ?
The industry will closely watch the results of retailers renewed efforts to reach consumers over the next few months in hopes of some sign that consumers are ready to shop again. ?
Many will look to the back-to-school shopping season as a possible bellwether of what's to come for the holidays, says Jay Suhr, SVP, creative services and account planning at agency T3. ?
"I wouldn't be surprised if you didn't see a spike for back-to-school, due to a combination of pent up demand and federal tax relief," he says.?
However, he adds retailers are looking for the "little victories" this year and aren't expecting big things for the second half. ?
Hillstrom agrees: "Compared to the 2008 holidays [when sales had already started to plummet], there might be slight increases for the holidays, but customer behavior has fundamentally changed from two years ago and it's not going back," he says.