Much has been written about the difference between top-line retail revenue and gross margin. While retailers are always focused on driving "butts through the doors", there has been an ever-increasing pressure on profit. A new normal exists where the year-over-year comps might never hit the aggressive targets by retail pundits (NRF and others) but they will continue to drive billions of dollars in revenue; making money on those billions is the real focus.
There is no doubt that the latest in web technology is driving a fundamental shift in consumerism and how people are amortizing their hard earned dollars over a variety of retail entities. Areas of shopping innovation such as: Flash Sales, Penny Auctions, Group Buying, Deal of the Day, Geo-check in deals and more are slowly training the consumer to have new levels of expectation.
The impact these new ways of shopping will have on retailers will be seen squarely in the margin they are attaining on each product they sell. Big-box retailers have always struggled with training the consumer to wait for an item to go on sale, usually advertised in their Sunday circular, and get them to buy sooner so that the product demands full margin. Some retailers are in worse positions that others as it relates to a trained consumer. These retailers price on a model called Hi-Lo. Something is always 50% off (see Kohl's) and some items will be full-price in hopes the consumer won't "cherry-pick" the item on sale and will fill their marketbasket with full-price items.
These new ways of shopping for consumers will further train them to look for special deals, innovative methods of buying and sharing with their friends. Retailers (and brands) will need to find a better method of pricing to balance the demands of the consumer to feel like they are getting a deal with the demands of their stakeholders on profit.
