In Europe, promotional sales are far more regulated than in the United States. In France for example, retailers have long been limited to offering price deals only twice a year, during the summer and winter sale seasons. During the financial crisis, in an effort to spur consumer spending, France implemented another option for retailers, allowing them to hold midseason sales for any two weeks they chose, outside the sales seasons. Just a few years later though, the government has voted to rescind that option, citing retailer frustration and customer confusion as its motivations.
The option of midseason sales, referred to as “floating weeks,” promised to increase retail sales. Many customers suspend their shopping until the biannual sales seasons roll around. The idea was that by extending sales into alternative weeks, retailers could induce reluctant shoppers into stores to purchase at other times as well. In addition, because the floating weeks could be determined by each retailer, they could achieve a form of differentiation, rather than issuing discounts at the same time as every other competitor was doing so.
The plan did not quite work out as intended. Many retailers never offered floating week sales, citing the high costs of marketing the sales and the potential for customer confusion. Moreover, the new option led French customers to start acting more like their U.S. counterparts, searching for sale offers regularly instead of just during the sale seasons. These expectations reportedly harmed retail revenues. As the head of the French Federation of Retail Associations complained, “The sales were something exceptional, and then became commonplace. This new law will turn things back the way they were, where stores can sell their collections at full prices and sell off the rest during the sale seasons.”
For customers who have grown used to the idea that sales might occur more frequently though, the new law promises to be less popular. Rather than finding a deal at any particular time, every French shopper must now wait, along with everyone else, for the start of the summer or winter sales season.
- How are markdowns handled differently in the United States and in France?
- Why is it different in France?
- From a retailer’s perspective, which system would you prefer? Why?
Source: Marion Halftermeyer, The Wall Street Journal, June 26, 2014