By drawing on the experience of traditional retail, and taking advantage of the unique opportunities presented by the Internet, e-retailers can look brightly at the future in spite of a gloomy economy.
Although Internet sales is one of the few retail channels that is actually growing, plenty of e-retailers are preparing to launch major Christmas sales despite the traditionally generous spirit of the season. The urge for posting flashing sales banners both here and there, of course, stems from the gloomy economic climate and grim prognosis for the future.
But in the face of an economic recession, it takes more than a traditional sale to continue to drive profits while still retaining current customers, as well as recruiting new ones. E-retailers have a unique advantage in the undertaking of this task, but to be successful they must learn from traditional strategies often applied by the brick-and-mortar grocery stores around the world. A typical example is when these stores divide their product ranges into the following categories: traffic drivers, profit drivers and loyalty builders. A traffic driver is a product that the store’s target audience needs to purchase often, and that it perceives as being expensive. Profit drivers are other products that are important to the target audience, but which they do not purchase as often and thus, are not as price sensitive towards. And finally, loyalty builders are the more luxury oriented consumption products.
The logic is simple. By offering a reduced price on the so-called traffic drivers, you can attract more customers to the store, and once they are there, they may as well pick up the profit drivers. During their visit, they will be exposed to the luxury goods—creating a positive experience and thus, urging the customer to revisit that particular store again in the future. This strategy allows the retailer to maximize customer acquisition, whilst only reducing the price of the traffic driving products.
E-retailers can also apply a more sophisticated version of this strategy. By allowing their most popular, top-selling products to act as traffic drivers by exposing them in sales campaigns, they can drive a maximum number of visitors to the site. This is where their advantage over the brick-and-mortar stores comes in. By using behavioral-based marketing, the e-retailer can control the extent to which the customer also picks up those important profit-driving products during his or her visit. By exposing the customer to products that one knows other visitors with similar behavior are interested in, and all the while applying business rules to regulate which products should be presented depending on profit margins, etc., the e-retailer can control exactly which products are exposed to each individual visitor—in real time.
Through the application of old and tested strategies combined with the latest technology, e-retailers can increase turnover and market share while not sacrificing any profit margins. And this during times when most physical stores are struggling with sales banners and red price tags.
Pontus Kristiansson is CEO and founder of Avail Intelligence.
Tags: avail intelligence, blog, christmas, cross sell, e-commerce, Electronic Retailer, loyalty builders, pontus kristiansson, profit, retail, traffic drivers, upsell