Retailers Play the Value Card to Capture Consumer Spend

Whether a retailer rang up a sales symphony or lagged behind this quarter, they all evaluated a common make-or-break factor: the significance of delivering value to the customer. And if that value didn’t strike a chord with the customer, they weren’t window shopping — they sought a better deal elsewhere to bag the most savings for their money.

Retailers across different sectors approached and implemented the delivery of value to customers in various manners. But the success varied, with some strategies proving effective while others indicated a need for adjustments.

Best Buy recognized that customers were gravitating toward value and focused on promotions and in-store experiences to generate incentives for customers to reach the checkout counter.

“We are excited about the promotions and deals we have planned for all customers and budgets, including special promotions and early access to deals for our My Best Buy Plus, and My Best Buy Total members,” Best Buy CEO Corie Barry said during the company’s latest quarterly earnings call on Nov. 21.

To stimulate consumer spending, Best Buy has ventured into providing curated gift lists and launched a new feature called “Yes, Best Buy Sells That” on both the website and app. This feature enables customers to discover the latest in technology and gift items, spanning categories such as pet tech, baby tech, and electric vehicle chargers.

Read more: As Deal Seekers Surface, Best Buy Introduces Curated Shopping and Store Experiences

Then there’s Nordstrom, once renowned for its luxurious runway presentations and exceptional service. However, in the face of financial challenges, the company has been progressively exploring discounts as a strategic approach.

In the third quarter, Nordstrom inaugurated 11 new Rack stores, and an additional one was introduced in the early fourth quarter, for a total of 19 for the year. CEO Erik Nordstrom conveyed this information to analysts during the retailer’s third-quarter earnings report on Nov. 21. According to Nordstrom, the new store openings have garnered a strong customer response and positive feedback.

In general, Rack stores are a profitable investment, delivering returns that exceed their initial capital costs, along with a short payback period. These stores are also the main catalyst for acquiring new customers. The company expects the digital channel of Rack to contribute to overall profitability for the entire year.

“We also know that our Rack customers value convenience, and we believe our stores are underpenetrated,” Nordstrom said.

While off-price retailers are witnessing a surge in demand, Nordstrom’s focus on discounts and value-driven choices to align with consumer preferences through Nordstrom Rack has not thrived as anticipated.

In fact, Nordstrom Rack experienced a 1.8% decline in net sales compared to its fiscal performance in 2022, raising questions about the product assortment in the retailer’s network of 258 Nordstrom Rack locations across the U.S.

Read more: Nordstrom’s Off-Price Destination Falls Short on Value

Next, there’s Kohl’s, which found that it had an excess of cold weather inventory. In reaction to the decline in sales, the retailer is prioritizing beauty and gifting categories as dependable sources of revenue.

“While I don’t like blaming weather for performance, the fall transition period has historically proven to be when Kohl’s apparel-intensive business is most sensitive to weather fluctuations,” Kohl’s CEO Tom Kingsbury said on an earnings call on Nov. 21. “We experienced a fairly significant divergence in performance on a regional basis.

“Store sales in our Midwest, mid-Atlantic and the Northeast regions where the weather impact was most apparent were down low- to mid-single digits in Q3, while all other regions increased low-single digits,” Kingsbury added.

However, he said that the Sephora business is projected to achieve $2 billion in revenue by 2025.

“The partnership with Sephora is phenomenal,” he said. “And we really feel that the numbers we put out there will be achievable in the near future.”

In the quarter, Kohl’s registered a growth of over 70% in total beauty sales.

Read more: Sephora Keeps Kohl’s Registers Ringing as Other Categories Weaken

On a brighter note, Abercrombie & Fitch issued an optimistic report on Nov. 21, revising its outlook upward after experiencing a 20% surge in quarterly sales. The company revealed a net income of $96.2 million for the three months ending Oct. 28. When comparing year-over-year figures, sales increased from $880 million to $1.06 billion.

“While the macro environment remains challenging and uncertain, we’ve proven that we can deliver growth across brands and regions if we stay focused on our customer and execute our playbook,” said Abercrombie CEO Fran Horowitz on a call with analysts.