Walmart delivery person dropping off a package.
This holiday season, Walmart is offering its Walmart+ members in select stores the option of products returns picked up from their doorstep. — Walmart

Why it matters:

  • Inflation has put consumers in a deal-seeking mood, and stores will respond in kind: Retailers will discount goods an estimated 18%, versus 15% in 2021, this coming holiday selling season, according to Salesforce data.
  • Businesses are tapping recession-era-tinged marketing moves to woo consumers across income levels facing price hikes and financial uncertainty.
  • To spur consumer spending, brands including Walmart, Target, and McCormick spices are offering loyal shoppers added conveniences like product returns retrieved from their doorstep; playing up buzzy, exclusive collections based on consumer trend data; and touting ways to whip up meals on a tight budget.

Whether or not the U.S. has slipped into a recession remains up for debate. No matter: A cross-section of businesses are sure acting like it has.

Brands from Walmart to Tommy Hilfiger to McCormick spices are trotting out inflation- and recession-fighting strategies, like pushing recipe meals “for pennies” and dangling limited-edition deals on upscale fare to stoke consumers’ spending impulses.

Here are five strategic (and adaptable) moves by brands to lure consumers facing price hikes and financial uncertainty.

Walmart: Leaning into loyalty with only-for-you offers

This holiday selling season, when stores generate a disproportionate amount of their annual sales, retailers will discount goods an estimated 18%, versus 15% in 2021, Rob Garf, Salesforce’s VP of Retail, said during the tech giant’s holiday preview event at its New York headquarters, attended by CO—.

They’ll lean into loyalty programs, for one, to counter the profit-eroding effects of deep discounts and grant rewards’ members special offers to differentiate from the onslaught of holiday promotions already hitting shoppers’ inboxes, he said.

Sometimes that will mean coming up with fresh ways to deliver convenience. The world’s biggest retailer, for example, is offering its Walmart+ members in select stores the option of products returns picked up from their doorstep. Members don’t need to provide a box or a label, they can simply hand off the return to a delivery driver, and Walmart says it will handle the rest.

Serving omnichannel shoppers this holiday by eliminating friction from the purchasing process is one “opportunity for retailers to relieve [profit] margin pressure,” Garf said.

[Read: What Businesses Must Know to Establish an Effective Pricing Strategy Today]

“Scarce products appeal to consumers for both tactical and psychological reasons,” the report found. “Tactical scarcity” builds anticipation and expectation for a product or service, such as time-based offers like Old Homestead’s $99 steaks or seasonal fare like pumpkin spice lattes, that if missed, don’t come around for another year.

McCormick: Cutting internal costs and touting recipes for ‘pennies,’ like 30-minute taco casseroles

As spice maker McCormick feels the sales-dampening effects of price-sensitive consumers grappling with cost increases, particularly for essentials like food, it’s moving to both boost productivity and reduce internal costs — from closing its headquarters in the Netherlands to “aggressively driving the elimination of supply chain inefficiencies,” said Lawrence Kurzius, CEO, during McCormick’s June earnings call.

The brand is also showcasing the affordability and versatility of its food flavorings to consumers. “We're launching digital messaging highlighting the value of our product by making a great flavorful meal economically,” Kurzius said. “We add flavor for only pennies per serving and recipes like our 30-minute taco casserole are family and budget-friendly answers to what's for dinner.”

[Read: Secondhand Surge: Inflation, Product Scarcity, and New Tech Platforms Fuel Resale Market]

Target: Tapping consumer intelligence and trend insights to inform its product mix

To combat inflation, Target tapped price markdowns to prune perishables and dated seasonal inventory, making way for in-season items, holiday fare, and exclusive merchandise collections, said Lakshman Lakshmanan, Senior Director of the consumer and retail group of Alvarez & Marsal, a professional services firm specializing in business transformation.

Leveraging customer intelligence and trend insights, the discounter took a “calculated risk” by aggressively reducing its open-to-buy — the purchasing budget for inventory orders for a specific time-period — on general merchandise categories, he said.

Target instead is leaning into “exciting newness” for the peak fall and holiday selling seasons by playing up its signature, buzz-generating partnerships (think the wildly successful Missoni line that broke the internet), such as its toy collaboration with FAO Schwartz, as well as fall fashion collections from Sergio Hudson, La Ligne, and Kika Vargas. The idea is to “drive an apparel category that would otherwise likely see consumers pulling back their spend,” Lakshmanan said.

 People grocery shopping and buying McCormick spices.
Spice brand McCormick is tackling inefficiencies within its supply chain and also showcasing the affordability and versatility of its food flavorings to consumers. — McCormick

Old Homestead: Selling a rare restaurant deal on upscale steaks via the ‘scarcity’ model

According to Salesforce’s Garf, inflation is changing the behavior and expectations of low-income to affluent shoppers. “Consumers are feeling the burn; it’s hitting at all income levels,” he said at the holiday preview event.

As inflation impacts the fine-dining sector (restaurant menu prices are up 8.8% from fall 2021, according to the National Restaurant Association), upscale steakhouse Old Homestead, a fixture in New York City’s Meatpacking District since 1868, promoted $99 steaks as a rare (pun intended) bargain in September.

“Our porterhouse for 2 weighs about as much as a standard dictionary,” according to an Old Homestead Facebook post. “And for a limited time only, we're selling it for just $99! We don't know what you're waiting for. Book your reservation today.”

The promotion tapped the timeworn demand-fueled-by-scarcity model, common when selling luxury fare. Indeed, 71% of consumers say a product appeals to them because it’s rare or limited, according to a report by Kearney Consumer Institute (KCI),Reimagining the Scarcity Model.”

“Scarce products appeal to consumers for both tactical and psychological reasons,” the report found. “Tactical scarcity” builds anticipation and expectation for a product or service, such as time-based offers like Old Homestead’s $99 steaks or seasonal fare like pumpkin spice lattes, that if missed, don’t come around for another year.

Merchandise perceived as scarce can also have a psychological pull, offering a way for consumers to express individuality, identity and signify their status, just as “fewer options can make the [buying] decision easier,” the report said.

 Models for Target wearing pieces from their fall designer collection.
To combat inflation, Target tapped price markdowns to make way for in-season items, holiday fare, and exclusive merchandise collections. — Target

Tommy Hilfiger: Leveraging the instant-gratification lure of ‘see now, buy now’ to reduce reliance on discounting

The scarcity model also presents risks. Although creating “artificial scarcity” by limiting production quantities and tapping limited-edition fashion product drops, for example, can boost full-price sell-through, “restricting the amount of merchandise available also caps profits,” Susan Scafidi, Founder and Director of the Fashion Law Institute at Fordham Law School, told CO—.

That’s why more fashion houses are capitalizing on a “see now, buy now” strategy to both whip up product excitement and “reduce the reliance on discounts to lure consumers, and instead, persuade them to buy full price,” she said.

Tommy Hilfiger did just that during New York Fashion Week in September, whereby every style on the designer’s physical runway was simultaneously available for purchase through Hilfiger’s “See Now, Buy Now” concept, including digital product exclusives on hot gaming platform Roblox.

“‘See now, buy now’ is the newly amplified mantra of Tommy Hilfiger, among others, and post-pandemic consumers seeking newness and immediate gratification — or simply return-to-office clothes that fit — are more focused on real-time shopping than on end-of-season bargain hunting,” Scafidi said. “Keeping prices steady but lowering the average discount rate raises profits in a way that is less visible to consumers than the sticker shock we've all experienced at the grocery store or the gas pump, and direct-to-consumer sales have the added benefit of eliminating the middleman,” she said.

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Published November 09, 2022