Many retailers believe discounting is what will keep them in business, however, they might have set themselves up for failure instead.
So have retailers trained their customers to think that if a product they want isn’t on sale, it’s just a matter of time before it will be?
“The most frightening statistic for retail is that only one in four online shoppers are comfortable paying full price online, with 73 per cent of online shoppers stating that most or all of their online purchases are discounted items,” says Grant Arnott, managing director of Power Retail.
“The genie is well and truly out of the bottle, as consumers have now become conditioned to purchasing only on sale.”
Also, promotions outside of discounting such as free shipping and free returns are no longer perceived as value-adds, says Arnott, but instead are expected to be part of the offering. “The pressure on profitability is extreme.”
According to the ‘Discounting – A Race to the Bottom?’ report, only 33 per cent of online shoppers’ last transactions were bought at RRP. Further, 80 per cent of online shoppers check prices online, with 49 per cent checking with two or more stores before buying an item.
However, while consumer expectations of discounts are increasing, a proportion of online retailers have successfully decreased the size of the discounts they offer by adding value to all aspects of the customer journey, from website and mobile UX through to delivery and return options.
“It has been brutal enough for the retail sector, and the discounting race to the bottom is only going to accelerate failure if left unchecked. With the majority of online shoppers declaring they won’t pay full price, and that percentage likely to increase, it’s a grim road ahead. The defence from retailers should be differentiation, exclusivity, quality and loyalty.”
• Be strategic about sales events: instead of a sitewide discount that may deliver a sugar hit in sales but will kill profits, take time to select specific products to focus on for discounting. Go extra hard on those and you can find a sweet spot that is attractive to customers without killing profits.
• Exclusive and personalised offerings: competing on price alone is unsustainable. Retailers need to tailor their product offerings to deliver exclusive, compelling products and experiences that customers will be prepared to pay a premium for.
• Back up pricing with excellent customer service: to gain and retain trust from customers, it’s not only about price for customers. However, if price is the only differentiator you use, it’s a game no-one wins.
