Retail America on Sale

In 2010, three billion coupons were redeemed out of the hundreds of billions that were printed, but that’s only the tip of the discount iceberg. Not only is retail America awash in coupons, it’s also awash in discounts, sales, doorbusters and loyalty programs. Such ideas as strategies and slogans have all but disappeared in retail marketing, as store after store across the country has focused its media guns on sales and more sales.

Many high-end stores are joining the rush to slash prices, with retailer, Lord & Taylor, advertising, “60 to 80 percent off. Save big all over the store,” and Saks Fifth Avenue touting, “50 percent off already reduced prices, for a total of 65 to 70 percent off.” Even the venerable, Brooks Brothers, trumpets, “Savings up to 50 percent off regular retail prices.” In fact, 50 percent off seems to be the magic discount. The Atlanta Journal-Constitution runs a weekly column under the heading, “This week’s big deals,” the vast majority of which are 50 percent off or, “buy one, get one free,” in everything from soup to plastic surgery. Like most marketing fads, the coupon craze is typical of the follow the leader thinking rampant in the marketing community. That is, ‘If everybody is using coupons, then coupons must be an effective marketing tool.’ They are in the short term. It’s easy for a company to check sales and redeemed coupons to decide if its program is financially successful or not. Yet what happens in the long term? How many customers will a company lose tomorrow because they stocked up on sale products today?

The end of a bubble is often marked by a spectacular development, and the coupon bubble reached a climax last December 3, when news began to circulate that Groupon had rejected a $6 billion buyout bid from Google. A shade more than two years after its founding in November 2008, Groupon is worth in excess of $6 billion? Or maybe $15 billion, the figure quoted in a New York Times article about a planned Groupon initial public offering. The Groupon concept is to give consumers the opportunity to buy coupons for something like 50 percent off regular prices. Then Groupon splits coupon sales 50/50 with local retailers. It sounds like a great deal for Groupon, a lesser deal for consumers, and a road to ruin deal for local retailers.

Presumably, all those consumers who bought products and services for 50 percent off are going to be happy to return to their local retailers and return to buy those same products and services at full prices. That’s not going to happen. What is going to happen is that those same consumers are going to go back to Groupon and wait for the next 50 percent off sale. In marketing, the advantage is being different. When everyone else is running sales, it’s hard to be different by running a sale. Today, a chain can be different by not running a sale. The biggest beneficiary of the coupon craze is Walmart, which seldom runs sales or issues its own coupons. Someday, some leading consumer packaged goods brand will run an anti coupon campaign that could shake up the industry. “No coupons. Never issued them. Never will.”

In the past, discount devices like coupons were effective in broadening a brand’s customer base, especially if a company could keep them out of the hands of its regular users. With the advent of social media, that’s getting more difficult. The word about deals can spread rapidly. Look at a website called, Coupon Sherpa, a source for online coupons, grocery coupons, printable coupons, restaurant coupons and coupon codes to over 5,000 stores. Its slogan is, “Never pay full price again!” Is that the future of retailing in America? Only time will tell. The preceding was adapted from a column in Ad Age by Al Ries, chairman of Ries & Ries, an Atlanta based marketing firm.