Question of the week #25
I spent a semester of college living in Los Angeles as an intern for Robinsons. I worked for an incredible woman who was a buyer for the mens department. She was tough, had lots of chutzpah and was super smart. I had two roommates. One came with me from college and she worked at Robinsons too. It was part of the college program, one semester working in your field of choice. The other was an old friend who I went to camp with as a kid. She refused to split the cost of the newspaper being delivered every day but she would take it after I was finished and cut out the coupons. I always found that whole concept of cutting out coupons interesting.
Then I went on to work at Macys after college where the One Day Sale became part of our lives. That one day would send sales soaring yet the clientelle that came in the door that day was different than the other days. The volume would be there but many times the margins made that day were not in line with the volume created. It was a mixed bag.
Fast forward the Internet comes along and companies like Gilt and Groupon are built on the premise of deals. That is why I chose this question as the question of the week.
I am not a fan of the custom rewards apps. I am not a fan of rewards unless they are some kind of kicker for coming to the store/restaurant over ten times and you get something just to say thanks for being a good client. The issue with rewards if that there is this perceived notion that you can build your business on constant deals and sales. You can't. Customers who love the daily/monthly deal through services just follow those deals. They have absolutely zero loyalty to your business. They are shots in the dark just like the One Day Sale. If you can't offer them a deal every time they walk in they are not interested in your business. In order to give away those deals you have to do more volume in order to cover the slashing of your margins.
Gilt Groupe built a business around the deal. Trust me, I know how big the business is but how long does that concept last. The original basis was that manufacturers had merchandise that they had to get rid of because it came in past the date or they made it and nobody bought it for their store. Gilt Groupe is the perfect place to quickly get rid of the inventory and recoup the costs. The following year when those manufacturers are looking at anniversarying that sale they need to figure out how to do it. I am pretty sure they end up manufacturing goods at a lesser quality in order to make those numbers. That is not high end merchandise at a bargain but low end merchandise at the right cost.
I'd rather see a business figure out how to grow by providing a real service to their clients that want to return for the food, the merchandise, whatever it is because they are loyal customers. There is no doubt that airlines use this method in order to fill the seats in the plane. Every day the price is different. I always have this fantasty that everyone stands up before the plane takes off and says what they paid for their ticket. It would be so eye opening. Bottom line, I believe that creating a killer brand with loyal customers is worth a lot more in the long run than the constant sale and deal to draw them in.