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Win The Back-To-School Sales War

July 20, 2009

Win The Back-To-School Sales War

By John Roach, Editor, Retail Solutions Online

A few retailers were so eager to launch their back-to-school sales this year they started in early July — they probably would have started even sooner if the last school year weren't still in session. The back-to-school shopping season is that important to the retail industry. It's second only to the holiday season in total sales, and last year Americans spent $54.1 billion on back-to-school-related items, according to the National Retail Federation (NRF).

This year, however, parents are going back-to-school shopping for the first time since the recession struck. They're facing its lingering impact and almost double-digit unemployment, and, unlike last year, they will shop without a stimulus check to assist them. As a result, back-to-school spending is expected to drop this year to $47.5 billion, according to an NRF survey.

Consumers this back-to-school season will be comparison shopping and discount hunting like never before. Retailers can counter this price-focused approach with several strategies of their own to drive store traffic and foster sales as the season progresses.

1. Apply e-commerce best practices to your brick-and-mortar locations.

Many retail websites list their best-selling items on their homepage, such as the Barnes & Noble 100, the iTunes Top 10 and Top 100, and Amazon's Bestsellers, directing customers to what's popular. Do the same with the merchandise in your store. "The cardinal sin of retailing is the failure of the retailer to tell the shopper what to buy," says Herb Sorensen, author of Inside the Mind of the Shopper: The Science of Retailing.

Sorensen has extensively researched the retail sector and believes most retailers — excluding high-end ones — should gives customers more direction to help them when they shop. Retailers should follow Amazon's lead and tell shoppers what's selling and what they'll most likely want to purchase. "Amazon carries 50 million books, but when you get to their site, they immediately tell you which one to buy," Sorensen told me.

Your top-selling items — the top 5% — have the greatest potential for increased sales, according to Sorensen. Tell shoppers what they are and put them on convenient, high-traffic pathways. "Retailers may look at the top-selling items and think, ‘So what else can we sell them?' Stop thinking like that," he said. "Instead, think: How can I sell more of what I know customers want?"

2. Initiate relevant promotions early in the back-to-school season.

Instead of opting for desperate buy-one/get-one offers later in the season, consider early promotions to entice consumers to your destination. Apple is offering college students a free iPod touch with the purchase of a Mac. J.C. Penney launched a new website in June for teenagers who back-to-school shop for themselves. The site consolidates its teen microsites like Decree and Arizona with newly launched teen ones such as RS by Sheckler to drive early back-to-school purchases. The new site also serves as a means to communicate its in-store promotions, according to CEO Myron "Mike" Ullman.

"Retailers need to offer some kind of incentive to get the traffic early in the season," Jeff Edelman, director of retail and consumer advisory services at RSM McGladrey, told me. "Your selling season is just a couple of weeks, and if you miss your plan in week one, odds of making it up in the next several are not great."

3. Optimize your space planning and adjacencies.

As the season advances, evaluate your planograms for effectiveness and consider alternatives that could spur sales. "Space planning is a big issue during back-to-school season," JDA Software VP retail industry strategy Jane Fazzalari told me. "If you change the adjacencies or the location of a product, you may not need to implement a markdown. It could just be the product location."

Retail software can be particularly effective in this strategy. For example, JDA's Space Planning software application helps retailers maximize sales through cluster and store-specific assortment management, and make the best utilization of retail space. Using such software, retailers can then strategically position their products where they're more likely to appeal to consumers, whether that's higher on a shelf or in a different aisle.

4. If all else fails … use effective markdown strategies.

As the back-to-school season winds down, retailers ultimately will need markdowns to clear inventory for the 2009 holiday season. Markdown optimization software is one of the best ways to time price reductions effectively in order to sell merchandise at the highest profit margin. The Wall Street Journal reports 21% of retailers already use markdown optimization software, with another 33% planning to implement it within the next 18 months, according to NRF.

Such applications can help you gauge when it's best to markdown your prices and gain sales volume versus waiting until demand has dwindled. A 30% markdown in August may prevent a 60% markdown in September. Wal-Mart and Gap are among many top retailers who apply markdown optimization strategies at the individual store level during the back-to-school season.

Retailers analyze final back-to-school results in mid-September and use those figures to forecast for the holiday season and finalize their holiday orders. Retailers who proactively counter consumers' price-focused outlook now may find themselves benefiting not only in the short term but also in the all-important upcoming holiday season.

Have a comment about this article? Let me know. Visit our blog, our Twitter page, or contact me at jroach@vertmarkets.com.

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