Cashbacks VS Discounting: Escape the retail winter blues
As Australia shivers through one of the coldest winters on record, the economic outlook remains just as frosty. The combination of chilly economic conditions and rising cost-of-living pressures has subdued consumer confidence and stunted retail growth.
In market conditions reminiscent of the Global Financial Crisis, retailers are grappling with the dual impact of a slowing economy and reduced consumer spending. Rising costs and a conservative spending attitude among consumers have led to stagnant or declining sales, presenting a significant challenge for businesses trying to maintain their sales targets and keep revenue flowing.
‘Retail sales have hit a plateau, showing minimal growth and reduced spending, especially in non-essential categories.’
This noticeable shift in consumer behavior is widespread, affecting both small and large retailers. The sector is navigating the unpredictable terrain of changing spending patterns and cautious consumer behavior. In response, many retailers are instinctively resorting to heavy discounting. However, this tactic often leads to diminishing returns and competitive price wars, further accelerating a 'race to the bottom.' Continuous discounting lowers the Average Selling Price (ASP), erodes profit margins, and compresses the ASP across categories, thereby diminishing brand differentiation and overall retailer performance.
In these challenging times, forward-thinking and adaptability are critical for businesses aiming to weather the ongoing economic storm. Offering 'value-added' opportunities is more important than ever to stand out from the competition and attract consumer attention.
Cashbacks: The smart alternative to discounting
Savvy retailers are turning to cashbacks instead of falling into the trap of destructive discounting. Cashback incentives offer several advantages: they enhance perceived value, encourage higher and repeat spending, and protect brand integrity.
Maintaining retail price points and protecting bottom-line margins is more beneficial than continuous discounting. Cashbacks engage and encourage consumer action without eroding ASP and margins.
Consumers perceive cashbacks differently than discounts. Cashbacks are seen as a reward or bonus, creating a positive consumer experience and a tangible financial benefit. This 'windfall' allows consumers the freedom to spend or treat themselves, increasing satisfaction and loyalty. It also fosters a positive perception of the brand or retailer offering the cashback.
An added benefit of a cashback is the collection of valuable consumer information. This data can be used to drive greater engagement and loyalty and provide critical market insights into consumer behaviors and preferences.
Introducing Roilti BUILDER (Beta)
The arrival of Roilti’s new BUILDER suite of solutions, enables brands and retailers to drive sales opportunities and long-term growth by deploying smarter, more sustainable incentive solutions.
Roilti BUILDER Cashback incentives empower retailers by providing;
Speed & Certainty: Plan and launch fixed logic campaigns to market quickly.
Ease of Use: Ready-to-go solutions tailored for rapid deployment.
Tried & trusted, fixed logic mechanic: Gift With Purchase/Cashback enables unique value propositions, setting you apart from competitors who rely solely on price discounting
Create a competitive edge: In a saturated market, Cashbacks distinguish a retailer’s offerings and motivate cost-conscious consumers looking for added value.
In summary, while discounting may seem like an immediate solution, it can have long-term negative impacts on a retailer's profitability and market position. Cashbacks, on the other hand, offer a strategic alternative that can maintain profitability, enhance consumer engagement, and gather valuable market insights.
Talk to us about how quickly and easily a Roilti BUILDER Cashback can be deployed or arrange a demonstration and learn how to give your next incentive offering a clear competitive edge and avoind the discount winter blues.