RetailBiz Special OP/ED by Damien Cantelo

With continued deep discounting, countless brand closures and ongoing profit slumps from major Australian retailers, the question has to be asked, have retailers gone too far with discounting and what is the impact of this behaviour?

Last Christmas saw the major department stores take the unprecedented action of going on sale the week leading up to Christmas in what is usually their strongest revenue and margin period. D&B analyst Gareth Jones commented on this trend, “Five years ago, discounting was a seasonal tactic that was primarily limited to post-Christmas and end of financial year periods. However, discounting is now the norm as consumers have become accustomed to sales and unwilling to buy at full price.”

With continuing merger discussions between David Jones and Myer — a move which would have been unheard of a few years ago — there is clearly a significant change going on at a macro level. If discounting doesn’t work, the next question is: what will?

You only need to step inside an Apple store to see that retailers who focus on value and experience are fairing much better than most. At a more tactical level, there are a range of promotional options at retailers’ disposal, including value-added offers such as loyalty programs, gift with purchase and buy one get one free.

But what’s really at play here? Engagement.

The ability to connect with a customer on a deeper level is emerging as the key currency in winning over customers in this ever-changing retail landscape. One of the leading contenders for driving engagement is gamification.

Gamification is designed to increase the level of interaction between consumers and brands through a range of game-like activities. It has been identified by technology analyst Gartner as a rapidly growing area, and, according to the firm, over 70 per cent of the Forbes Global 2000 companies will roll out one or more gamified application by the end of 2014.

Marigo Raftopoulos, a gamification expert at RMIT in Melbourne, defines the approach this way: “Gamification is all about the art of engagement and motivation. It’s focusing on what’s important to people: giving them autonomy, control and influence over their destiny.”

While gamification is intended to be fun and offer an experience beyond a simple transaction (think of location-based app FourSquare, which allows customers to check-in to local businesses and locations to earn points and gain recognition as regulars), engagement doesn’t need to exist in a vacuum as an activity that has no clear commercial purpose. In the retail space, this means finding gamification solutions that will drive brand engagement and loyalty while also driving sales and improving margins in the long term.

There are new kinds of gamification concepts emerging such as Buy to Win. This approach, which we’ve developed, allows retailers to drive sales without discounting by instead offering customers the chance to instantly win their purchase for free. The concept has been successfully run online and more recently as an in-store solution to help create excitement at the checkout and boost bricks-and-mortar sales.

With the ongoing structural pressure in the retail landscape including online growth and competition from overseas, there is certainly no silver bullet here, but retailers need to look at alternatives to stay ahead, and engagement through gamification should be part of that equation.

Damien Cantelo is CEO of Wynbox.

Quote of the Day

"In March, the H&M Group total sales including [sales tax] increased by 13 percent in local currencies compared to the same month last year. The total number of stores amounted to 3,216 on 31 March 2014 versus 2,853 on 31 March 2013."

Shortly after the gala opening of its first Australian store in Melbourne, H&M reveals it is having a strong start to 2014.

Image of the Day

Staying in Melbourne, Dick Smith is opened its second 'Fashtronics' store in Bleak City today: