Instead of Promotions, Focus on Disaster Relief
In recent years, during the process of "deciding the battle at the terminal" in the public casual wear industry, choosing good store locations, opening large stores, and luxurious renovations have caused enormous operating pressure. But an even bigger pressure lies ahead: discount promotions have become a daily task in competing for the market. The intensity is increasing, and companies are trapped in high-cost competition, sometimes even having to take risks with strategies that guarantee losses.
Many casual wear brands misunderstand promotions as merely "discount sales" without any rhythm or skill. "Promotions" have turned into "maintenance sales," losing efficiency while also causing brand recognition and loyalty to completely disappear.
Brand F has been involved in casual clothing franchising for many years. To expand its market, it opened an image store on Guangzhou's Shangxia Jiu Street. In 2003, end-of-season clearance sales using 60% and 70% discounts could reach a daily sales volume of 50,000 yuan, despite an imperfect product mix, but still profitable.
By 2004, promotions often included "buy one, get one free," making it hard for daily sales to exceed 30,000 yuan.
Entering 2005, regardless of the size of the brand, the entire street was offering discount sales. New products were marked down by 20%, holidays saw 30% and 40% off, and end-of-season clearances were directly 60% off. Despite Brand F's more complete product lineup and increased fame, daily sales struggled to reach 10,000 yuan, resulting in significant store losses, forcing them to close their doors.
For third- and fourth-tier shops using discount promotions, basic mistakes abound. For example, a county-level specialty store would normally sell around 1,500 yuan per day, but to increase sales or clear out old inventory, they would offer 60% or even 50% discounts, raising daily sales to about 1,800 yuan.
However, the store manager didn't realize the problem: product sales increased by 90%, but sales revenue only increased by 20%, and the store's gross profit margin dropped nearly 70%. In fact, this store sacrificed 400 yuan in profit and gave away nearly half of its clothing just to gain less than 400 yuan in cash flow.
Using such high costs for promotions simply to increase cash flow is not worth it; borrowing money would be better. If the goal is to clear inventory, it would be better to donate the clothes to disaster-stricken areas.
Combination Promotions Weaken Discount Images
To discount or not to discount? Many companies have been racking their brains over this question. Let's see how Brand F significantly increased sales through combination promotions.
In 2005, the terminal competition among casual wear brands in Guangdong reached a fever pitch, especially in first- and second-tier business districts where large stores competed fiercely: mall promotions reached levels like buy 100, get 80 free, or buy 200, get 200 free. Street shops basically offered buy one, get one free, and end-of-season sales went straight to 60% off. Even so, sales did not increase significantly.
Brand F's main store in South China — located in Dongguan — had two floors with a total operating area of 160 square meters. According to the usual practices of casual wear operations, the first floor sold regular-priced items while the second floor sold discounted items, with daily sales ranging from 13,000 to 22,000 yuan.
In July, discount trends in various business districts became increasingly intense, and casual wear brands began full-scale 60% and 50% off promotions. Sales at Store F dropped to just over 8,000 yuan, prompting the company’s self-operated department to propose a plan for a store-wide 60% off sale.
Store-wide 60% off!
The plan was quickly rejected by the marketing core team for a simple reason: there was no certainty it would boost sales, the cost was too high, and the store would inevitably suffer significant losses.
Marketing core staff quickly conducted on-site research with store supervisors and proposed a new plan:
1. Convert the first floor into a discount zone: "Full-store 80% off, spend 100, save 50, and get 50." Combining discounts, savings, and gifts, they aimed to clear summer inventory from previous years.
2. The second floor remained the regular-priced area, with all items at 80% off for the current season's new arrivals. Additionally, cash vouchers (worth ten yuan) obtained from shopping on the first floor could be used within three days to purchase items on the second floor, with a limit of two vouchers per item.
3. Through posters and flyers, the promotional information was densely disseminated one week in advance.
The promotion started on a weekend in early July, and the scene was bustling: Saturday sales reached 47,000 yuan, and Sunday reached 52,000 yuan.
The promotion continued for two weeks. On the first floor, 6,756 pieces of out-of-season inventory were sold with an average discount of 39%; on the second floor, 6,238 pieces of current-season products were sold with an average discount of 52.8%. Average daily sales reached 28,000 yuan, achieving a cash recovery of 397,800 yuan.
Compared to before the promotion, the product gross margin decreased from 56% to 24.32%, with a gross profit growth rate of 26.15%, increasing gross profit by 25,300 yuan, and net profit...