Strategies to drive profitability and shopper engagement

More than three years after the COVID-19 pandemic shook the world, retail is struggling to keep up with unpredictable consumer behavior.

One of the more unfortunate fallouts of the economic headwinds are high-profile bankruptcies which have shaken up the retail industry: David’s Bridal, a 73-year-old company with about 300 stores and Bed, Bath & Beyond, which filed for bankruptcy in April, announcing plans to lay off 9,000 employees and closing 300 stores.

The reasons for any bankruptcy are complex and vary, but brands that want to future proof their viability and profitability might find some helpful takeaways from Bed, Bath & Beyond. For example, did the nationwide home goods retailer’s propensity for providing generous coupons and discounts lead to the company’s demise?  The answer is complicated.

The perpetual discounting strategy played a role in the failure of Bed, Bath & Beyond because their customers were “trained” to rely on coupons, which impacted revenues by decreasing margins and Average Order Value (AOV).

However, other factors, such as the pandemic and the ability to find better deals on Amazon and from mass merchandisers such as Walmart and Target compounded their problems. And some experts believe that Bed, Bath & Beyond did not make the e-commerce transition quickly enough, and by the time that the e-commerce revolution took hold, and they responded, it was too late.

A key priority for brands is keeping customers happy and encouraging repeat visits. The question is how to prioritize delivering what customers want without compromising margins. Brands should use recent retail bankruptcies as teachable moments that will help them refocus their efforts on achieving profitability by delivering a better shopping experience and building customer engagement.

Consider AI a necessity in retail

While inflation is easing somewhat, many consumers are struggling to make ends meet, which has driven retailers to rely on a discount pricing strategy for customer acquisition and retention. While this approach may be a successful approach in the short term, it will result in slashing margins, and decreasing revenues as a result.

While all the buzz is about ChatGPT and other generative AI tools right now, there are many questions and challenges that must be addressed before intelligent chatbots are ready for retail primetime, including the potential for misinformation, hallucinations, the lack of personalization, privacy and security concerns, among others.

While the generative AI kinks are being worked out, brands can employ AI and machine learning now to boost their business results by using it to recommend the right products for the business and customer.

Discounts with a purpose

When it’s time to launch special promotions or Black Friday sales, consider trading discounts for customer data. Our recent consumer survey found that 52% of shoppers aren’t deeply concerned about providing personal information if they receive deals and offers in return. Encouraging anonymous, or guest shoppers, to create accounts in exchange for discounts is another good way to collect first party data.

Do communicate how and when you’ll use customer’s personal information – transparency is key to building customer relationships based on trust.

Invest in a content strategy

Savvy shoppers don’t just depend on product descriptions and the recommendations to make purchase decisions. Brands must invest in sustained, comprehensive content programs that provide shoppers with more background on the brand and what they stand for.

Blog posts, peer reviews, frequently asked questions (FAQ) and high-quality images and videos all provide a solid foundation for building a loyal community and can also help consumers, especially those “on the fence,” make an informed purchase decision.

Social proof in the form of product badging or peer product reviews can be powerful because they provide insights and comments from shoppers just like themselves. In fact, a recent survey conducted by Harris Interactive found that 87% of people are influenced by reviews.

And a 2021 survey by Power Reviews echoed the impact of peer reviews with respondents agreeing that reviews impacted their purchase decisions more than any other factor including price, shipping cost, and recommendations by friends or family.

Retailers must fight the urge to use perpetual discounting as a customer acquisition and retention strategy. This approach can easily backfire because customers will come to expect discounts every time they shop, and it may be hard to reverse course.

Instead, brands can use AI to increase product margins, revenues and AOV through better 1:1 personalization. With a sound content strategy that provides product information and peer reviews that give shoppers the confidence to make a purchase, retailers will be in good shape, creating a sustainable, long-term roadmap to profitability.