Insights
Feb 18, 20197 min read

Smoooth Sessions UK: The Discount Trap, Social Selling and Customer Experience.

Fredrik Thambert headshot

by Fredrik Thambert

The discount frenzy around Black Friday has become a monster to the retail industry. How can merchants think different? That was a hot topic of discussion at Klarna Smoooth Sessions in London.

Almost two months have passed since last year’s peak season for the retail industry. What conclusions can we draw? And what trends can we expect to see more of in the future? That was the theme of the discussion at Klarna Smoooth Sessions in London last week where merchants and experts shared their insights from Black Week and the Christmas shopping period. One thing was clear from the beginning: Discount culture has spawned a race to the bottom for retailers who depend on sales in the last quarter of the year.

Smoooth Sessions featuring: Edith Bowman (moderator), Lauretta Roberts (The Industry), Kirsty McGregor (Drapers), Luke Griffiths (Klarna), Victoria Watmough (Klarna), Mark Dugdale (Links of London), James Gold (Skinnydip).

 

“I’m not a big fan of Black Friday,” said Mark Dugdale, E-commerce Director at the jewellery brand Links of London, who was one of the panel members.

He then described how the shift towards heavy discounts during Black Week has had a dramatic negative impact on Christmas shopping.

“It gets crazy for a week at the end of November which causes big challenges from a logistical point of view, and massively affects margins. After that, it goes super quiet for about three weeks and all the retailers start to panic, beginning their Boxing Day sales earlier. A lot of businesses are making their profits in the last quarter, and that is now under threat. Something has to change because it’s not sustainable.”

Fellow panellist James Gold, Co-founder of Skinnydip London, agreed that the Black Friday discounts have gotten out of hand but saw no easy solution.

“I don’t think it’s sustainable, but I don’t see what the alternative is,” he said.

“There’s an expectation of discounting among consumers, so now it’s all about who can be the first to offer them. People started to come into our stores at the beginning of November asking when we would start the Black Friday sale. It’s a scary time for the industry,” James Gold concluded.

Victoria Watmough, who is the Head of Merchant Development at Klarna in the UK, pointed to the fact that Black Friday is no longer just one day.

“Black Friday has become Black Week if not Black Month. A lot of retailers started their sale earlier last year, and looking at the numbers you can see that they had a bigger impact,” she said.

“A lot of retailers don’t know what to do with Christmas now, which used to be the big thing. November has become the biggest trading month in the calendar, and the problem is that the discounts are getting deeper and deeper,” said Kirsty McGregor, Deputy Editor at Drapers magazine.

A conclusion by Lauretta Roberts, CEO and Editor-in-Chief at TheIndustry.fashion, is that merchants need to make up their minds.

“You have to either embrace Black Friday or ignore it. But to be able to ignore you got to have a differentiated product – something that people can’t buy elsewhere.”

So what are the options for merchants who want to get out of the discount trap? The panel of experts brought up a few key areas where retailers should channel their energy and focus on improving.

1. Sell Directly to Consumers on Social Media

Traditionally you either had to set up a store on the high street or sell your products through department stores. Then, e-commerce came along and made it possible to sell online through websites. Selling directly through social media is the third retail revolution. Instagram, in particular, is a key channel for fashion and beauty merchants.

“If it wasn’t for Instagram I wouldn’t be sitting here today,” said James Gold.

Skinnydip was early to adopt influencer marketing and has been successful in reaching their target audience with relevant and engaging content.

“The great thing about social media is that you can go direct to consumers, give them exactly what they want and let them complete the purchase with as few clicks as possible.”

2. Rethink Brick-And-Mortar

“The High Street isn’t dead – but it must evolve,” said Kirsty McGregor, Deputy Editor at Drapers magazine, which also was the consensus among the rest panel members.

“Oxford Street feels the same today as it did a decade ago. The pace of change has been too slow. Today you must offer something unique to your brand, and a reason for consumers to come. Customer experience is the new brand marketing,” said Mark Dugdale at Links of London.

In the coming years, there will be new and innovative retailers opening up stores where others have failed.

“We are going to see more niche brands pop up for shorter periods of time and disrupt the High Street. They want a physical presence as well and not only to sell online,” said Lauretta Roberts.

3. Customer Experience is the New Loyalty

Everyone knows Amazon is a giant, making life difficult for smaller retailers. But there’s still room for other companies, especially the ones selling apparel, accessories and other lifestyle products.
“Amazon is the first place I’d go to for so many things – but not fashion,” said Kirsty McGregor.

Customer experience is the new loyalty, hence Amazon’s huge market share. However, retailers can emulate the great experience but choosing the right tech partners, such as Doddle or HubBox for collections, Klarna checkout + Instant Shopping button and Nosto‘s personalisation.

“Each individual company has to tailor their package around whatever they do best and try to offer the greatest customer experience possible,” James Gold said.

The main question to ask yourself as a merchant is if the technology at hand is helping you to solve customers’ problems.

“Klarna is a great piece of tech that we use. An example being the Black Friday that happened the weekend before payday. We managed to benefit massively from having Klarna, which allowed customers that normally wouldn’t spend the money to buy from us,” Skinnydip Co-founder James Gold explained.

Want to know more about Klarna’s products? Take a look here.