The Take: Knowing Customers Digitally and Physically Could Rescue Retailers from Fire Sales

What’s News

Earlier this week, Target reduced its quarterly earnings forecast, citing plans cut to prices to reduce growing inventory. Like other retailers, such as Walmart and Macy’s, Target is a victim of changing consumer demand that has shifted away from stay-at-home pandemic items. Returning to the office and a desire to travel, tempered by higher inflation, has refocused consumer demand away from furniture and sweatpants.

SAP’s Take

“The challenge with retailers is that they’re very bad at watching what’s going on in the news,” said Robin Barrett Wilson, SAP executive advisor, Fashion and Retail Strategy. “The minute the news starts to talk about going into a recession, they start to get very nervous.”

The change in consumer demand is likely manifold. U.S. consumers, housebound for two years, are itching to travel. Many are going back to the office either by requirement or voluntarily. In addition, their pockets are shallower as pandemic-driven government subsidies end and inflation prevails. Demand for furniture and home appliances have waned, while consumer spending on dressier clothing, staples and travel has grown.

Retailers can think of today’s overstock as early Christmas merchandise. They can also adopt technology that allows them to plan under various economic scenarios. As the inputs change, the results and suggestion change. Retailers can use that information to help them respond to the economic landscape farther down the path. For example, geospatial technology can add layers of weather-related information, including activities that respond to weather, a factor that could kill a retailer’s season.

“If we’re combating what’s going on with the economy,” Barrett Wilson said, “don’t just slash the prices. That’s old-school.”

These tools can help retailers think and plan more locally, and respond efficiently to local store demands, because if consumers don’t want to be home, yet face rising costs that could restrict traveling, then the neighborhood can step up and become the source for enjoyable experiences.

“Do something interesting in the local store to get people out of the house, and do something interesting and do something fun,” Barrett Wilson said. “What can you do in your neighborhood? Because stores are not going away.”

Some actions could be simple. If a store is near a beach community, bring beach items up to the front to amplify the location of the store.

Retailers also could adopt new technologies that make shopping more of an interesting and fun experience, and they should continue to look to the future to guide today’s decisions.

“Go and do something in a pop-up store within a store for the metaverse,” she said. “We have to start thinking really creatively.”

Ilaina Jonas, Senior Director of Global Media Relations, SAP
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