The Discount Is Dead, and What Retailers Are Doing Instead

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By Krystina Gustafson

For more than a year, retailers' play-calling has centered on deluging shoppers with discounts and other money-saving bargains-a tactic that resulted in a sea of sameness from one brand to another.

While it's true that deals are still prevalent, with retailers like Bloomingdale's and J.C. Penney (JCP) ramping up their promotions at the end of the month, several companies are tapping into more unique tactics to lure shoppers.

Whether it's a short-term strategy such as better-targeted emails, or a long-term bet on delivering better customer service to shoppers, below are four ways retailers are adjusting their game plans to be less focused on price slashing.

1. Making Retail More Than Just Shopping

Shoppers -- millennials, in particular -- have become more interested in collecting experiences than spending money on physical goods, said Virginia Morris, vice president of global consumer and innovation strategy at Daymon Worldwide. As a result, smart retailers have recognized that creating a sensory experience in their stores can help create buzz by engaging consumers, and encouraging them to spread that experience across social media.

She pointed to a recent campaign by The North Face as an example. Last month, the outdoor apparel retailer launched a virtual reality initiative at its Chicago store, through which shoppers are virtually placed in Yosemite National Park and Moab, Utah, via 360-degree 3-D audio and video. The technology is expanding. "It's all about that thrill-seeking, man-over-nature kind of approach," Morris said. "For a lot of these brands yes, lots of eyeballs are great, but what I want as a brand is I want a connection."

2. Getting Customers Into the Stores -- Now!

It can be tough to get shoppers to part with their hard-earned cash when they know the dress they're eyeing will still be there next week -- and there's a good chance it'll be on sale. In fact, one differentiator that's helped make fast-fashion names including Forever 21 so successful is that it stocks a wide variety of merchandise but in a more limited quantity. Therefore, if consumers don't snatch up an item they want quickly, they know it could be gone the next time they visit the store.

Target tapped into this buy-it-now mentality with its recent Lilly Pulitzer for Target collection, which had shoppers lined up around the block ahead of the limited-edition collection's launch. Although the retailer received some backlash from consumers, who were upset that the items were nearly sold out the first morning, analysts said the collection's popularity showed that Target is starting to get its mojo back. "Bottom line, we believe the buzz is more likely positive than negative to revitalize Target's fashionable, signature category brand image," Cowen & Co. analyst Oliver Chen wrote in a note to investors following the launch.

3. Focusing on the Product, Not the Price

It's easy to get sucked into the habit of promoting your brand on price, not product. Although the number of email promotions traditionally ticks lower following the holiday push, the first quarter saw a 12 percent year-over-year increase in the number of email campaigns with offers for more than 50 percent off in the subject, according to Experian Marketing Services. Experian's Spencer Kollas said that new deliverability standards are rewarding brands for sending more relevant messages.​

Specialty apparel retailer Express is one company that's shifted away from messages focused solely on discounts. Instead, its recent email blasts focus on new arrivals, the latest trends, and how to wear them. Liz Crystal, chief marketing officer at Express, said the retailer is also better segmenting its messages to highlight specific categories or products that shoppers are interested in. The changes are part of a company-wide campaign that started in 2015. "As a brand we are focused on being a fashion authority and communicating fashion trends and categories that are relevant to our customers," Crystal said.

4. Playing the Long Game

Several retailers are taking a longer-term approach to improving the store experience. Earlier this year, Walmart announced that it would raise its hourly pay for 500,000 employees to $9. In following months, TJ Maxx parent company TJX Cos. (TJX) and Target (TGT) followed suit.

While the raises will weigh on the retailers' cost structures, analysts viewed the moves as an investment in their workforce-and therefore, an investment in their stores. That's because boosting employee pay encourages sales associates to stick with the retailer longer, thereby lowering turnover costs and resulting in a better-trained workforce. "A happy workforce helps build the brand," Morris said.

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