Spike in promotions trips US retailers

American retailers are relying heavily on discounts and promotions so far in 2016, continuing the poorly performing holiday discount strategy and pulling the promotional “lever” far too often, according to the DynamicAction Retail Index: Spring 2016, released on Monday at the inaugural Shoptalk conference in Las Vegas.

According to the Index, retailers sold less at full price in Q1 2016 vs. a year ago, with full-price sales down 4 per cent for the quarter and orders using a promotion up 63 per cent. March was an especially promotional month, with an 86 percent increase in orders using promotions compared to 2015.

Retailers found it harder to convert first-time buyers into second-time buyers, with those conversions down 6 percent compared to last year.

The Index also found that while revenues were up 10 per cent in the first quarter compared to 2015, retailers’ ability to control profit has been unstable in early 2016. Retail profits were up an average 5.2 per cent year-over-year in Q1, however most gains occurred in January, with increasing volatility in February and March.

“The antiquated strategy of retailers relying exclusively on their promotional calendars to run their operations has fostered an ingrained need for discounts by consumers, who are increasingly being trained to wait for promotions or discounts prior to making a purchase,” said John Squire, CEO and co-founder of DynamicAction.

“In order to have any hope of being prepared to answer customers’ needs and shareholders’ expectations during the holiday season of 2016, retailers must right now focus on curbing the promotional addiction and utilizing their full data set to better manage their inventory and their operations.”

The DynamicAction Retail Index: Spring 2016 is an analysis of more than $5 billion in consumer transactions and benchmarks retail trends in key categories from January-March 2016 in comparison to the previous year.