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Transaction marketing reshapes retail in 2011

BY CSA STAFF

Transaction marketing gained widespread acceptance among retailers in 2010, as they began to recognize marketing in the electronic banking channel as a far more cost effective way to encourage repeat business, increase the average transaction sizes and drive same-store sales. It enabled retailers to overcome the marketing waste associated with other channels — like Groupon — and consistently provided compelling and measurable return on their marketing investment. The coming year will be even more exciting for transaction marketing as it is evolving in ways that stand to reshape the retail industry by providing unprecedented insight into consumer purchasing and behavior, mobile delivery of offers, increased consumer reach and prepaid cardholder targeting.

The bottom line is transaction marketing affords unprecedented insight into consumer activity and purchase behavior and it will require marketers to re-evaluate the effectiveness of their loyalty programs. For the first time in the history of the retail industry, marketers will be able to quantitatively know, for example, how loyal their “most loyal” customers truly are because they can see how that customer’s average ring or purchase frequency compares to that customer’s activity with a competitor.

Many retailers have traditionally measured loyalty by purchase frequency and the amount spent with the retailer, however, transaction marketing has shown us that these measurements are wrong; they simply identify the biggest spenders in a category and rarely, if ever, predict how much of a customer’s spend a retailer successfully captures or might capture. Beyond driving profitable top-line growth, insights gained by specifically measuring consumer spending, available only through transaction marketing, will continue to give retailers unprecedented levels of insight into consumer activity, loyalty and purchase behavior.

As transaction marketing platforms partner with leading mobile financial services providers, retailers will see consumers embrace transaction marketing offers presented through their mobile devices. This mobile evolution will be invaluable to marketers, considering the exponential customer adoption of the mobile banking channel. Transaction marketing’s extended reach will improve the visibility of offers, as consumers will be able to view and redeem them while they are on the go. Plus, offers will be even more accessible to younger market segments, such as Gen Y, who are naturally more inclined to bank through their mobile devices compared with older generations.

In 2011, the number of financial institutions using transaction marketing as a customer rewards channel will reach a critical mass in terms of adoption. Last year, hundreds of financial institutions partnered with transaction marketing platform providers. As a result, retailers are now able to present targeted offers to more than 10 million households directly through their bank accounts. Such partnerships are expected to continue increasing in numbers.

This year, we will see retailers have the ability to effectively market directly to underbanked consumers for the first time. The growing number of consumers who choose prepaid cards as alternatives to traditional bank accounts with debit and credit cards represent a significant and rapidly growing market segment that has been very difficult for retailers to reach. Similar to debit and credit card users, prepaid cardholders can view offers through online and mobile access to their prepaid card activity and redeem them through the simple use of their card.

This underbanked market segment is estimated to be 60 million strong and, through transaction marketing, retailers will be able to reach them directly, gaining valuable insight into their brand loyalty and purchase behavior.

A better way to market is possible through transaction marketing as it provides retailers with a methodology to overcome many of the challenges and shortcomings long inherent with on-line and off-line channels. By aggressively targeting the right consumers through arguably their most trusted online venue — their own bank accounts — retailers that leverage transaction marketing in 2011 will be at the forefront of the evolution that changes the economics of acquiring and retaining customers.

Scott Grimes is CEO of Atlanta-based Cardlytics, a transaction marketing company that unites banks and merchants to offer new ways of reaching consumers. He can be reached at [email protected].

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White Christmas takes toll on Dec. dept. store sales

BY CSA STAFF

NEW YORK — On the heels of a strong November, some department store retailers reported surprisingly weak December revenue. Results were impacted by a blizzard in the Northeast, which took a bite out of sales after Christmas.

The results raised some worries that the holiday season might be less stellar than some had hoped. Still, much of Wall Street still predicts that November and December spending will show the largest annual increase since 2006.

"It’s not shaping up to be a blowout holiday for retailers. It’s slow and steady," said Ken Perkins, president of RetailMetrics.

Macy’s missed the Wall Street mark with a same-store sales gain of 3.9%. Analysts expected a same-store sales rise of 4.5%. But the combined November and December figure rose 4.6% and the retailer is maintaining its profit outlook for the fourth quarter.

“Sales in December were strong at both Macy’s and Bloomingdale’s, consistent with our high expectations, despite snowstorms that disrupted after-Christmas shopping along the East Coast,” said Terry J. Lundgren, chairman, president and CEO of Macy’s.

Kohl’s Corp. also fell short of expectations. The company’s same-store sales rose 3.9% in December, compared with the 4.3% increase analysts expected. For the five weeks ended Jan. 1, Kohl’s said total revenue climbed 5.9% to $3.19 billion. Online revenue surged 66%.

At JCPenney, same-store sales rose a better-than-expected 3.7% surpassing Wall Street’s expected 3.3% gain. It was the chain’s best holiday sales gains since 2006. Total December sales increased 2.3% to $2.96 billion, with the chain’s off-mall and newer stores, including its Manhattan location, outperforming the company average.

Higher-end retailers turned in strong results as affluent consumers returned to spending. Both Saks and Nordstrom outpaced estimates. Nordstrom reported an 8.4% increase in December same-store sales, while, Saks said same-store sales rose 11.8%.

JCPenney same-store sales rose 3.7% surpassing Wall Street’s expected 3.3% gain.

Other department store same-store sales results include:

Dillard’s same-store sales rose 7%.

Bon-Ton same-store sales edged up 0.1%, citing severe snowstorms for its weak performance.

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Sales mixed in December; Limited and Abercrombie lead specialty field

BY CSA STAFF

NEW YORK – After coming off a strong November, U.S. retailers found their momentum largely waned in December, with sales impacted by a still-cautious consumer, early discounting and a blizzard that crippled the Northeast in the days immediately after Christmas. But while many chains missed Wall Street’s heightened expectations for December, the retail industry still turned in its strongest holiday performance since 2006.

The International Council of Shopping Centers said its index of December same-store sales rose 3.1% versus a year ago, short of the 3.5% rise expected by analysts.

The overall season was good, but the strength came from the beginning of the season," said Michael P. Niemira, chief economist, ICSC, in an Associated Press report. "This is kind of a wake-up call. It’s back to reality."

Thomson Reuters, which tracks same-store sales for a group of 28 national chains, said total sales for the group were expected to post a 3.4% increase in same-store sales for December, following a 5.6% bump in November.

Still, if retailers hit the 3.4% mark, it would be the best showing since December 2006, when same-store sales rose 4.7%.

Strong online sales, which many retailers don’t include in their monthly figures, also brightened the holiday spending picture as well. Consumers spent 13% more online this holiday season, ringing up a record $30.81 billion in spending, according to comScore.

On the apparel front, Limited reported a 5% rise in same-store sales, beating analysts’ expectations of a 4.6% gain, and Buckle, which recorded a 6.1% same-store sales gain, when a 4.5% gain was expected. Abercrombie & Fitch’s same-store sales soared 15%.

Among those that didn’t fare well in December was Gap, whose same-store sales dropped 3%, missing Wall Street expectations for a 2.6% gain. Net sales were flat at $2 billion.

By division, same-store sales at Gap North America stores fell 8%. At Old Navy North America stores the figure was down 2% International results declined 4%. The one bright spot was Banana Republic North America, where same-store sales edged up 1% in December.

American Eagle saw same-store sales plummet 11% and total sales fell 6%. Analysts expected a same-store sales decline of 1.7%.

In other apparel same-store results for December:

  • Aeropostale same-store sales slid 5%.
  • Urban Outfitters same-store sales were flat.
  • Zumiez same-store sales rose 9.2%, but missed Wall Street expectations of an 11.5% gain.
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