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'Always on' sales hit retailer profits

Continuous discounting can have a negative impact on bottom lines and also affect consumer attitudes towards a particular brand, a new survey has revealed.

Just over half of retail respondents (53%) say that the practice damages profits, with 11% admitting it cost them more than £25,000 last year.

The poll by payment provider Klarna surveyed 1,000 consumers and 500 British retailers.

Retailers with between 100 and 239 employees are most likely to report negative impacts, with 66% saying profit margins are directly hit by ‘always on’ sales.

Ecommerce channels are particularly vulnerable, with 56% of retailers revealing the majority of their discounted transactions are made online.

Many merchants will discount to shift unwanted stock, so part of the solution is to make better, more educated purchasing decisions.

Luke Giffiths, Klarna UK

Luke Griffiths, managing director at Klarna UK, said: “Discounting can be a significant source of stress for retailers of all sizes – from the impact on profits to the operational difficulties that come with managing sales activity.

“Many merchants will discount to shift unwanted stock, so part of the solution is to make better, more educated purchasing decisions.”

Younger shoppers wait for sales

Almost a fifth (18%) of consumers say they only shop when there is a sale on, with this figure rising to 23% for millennials (25 to 34) and 22% for generation Z (16 to 24).

Bargain hunting is not so prevalent in older generations, with only 11% of over-55s saying they prefer to shop exclusively during sales periods.

More than a quarter (28%) say that sales are stressful and they avoided them altogether.

Personalised offers popular

The research also found that consumers are now demanding more personalised sales tactics, with 45% stating they are more likely to shop if sent a personalised offer.

Andy Mulcahy, strategy and insight director at IMRG, the UK’s industry association for online retail, said: “In recent years, events such as Black Friday have instilled in shoppers’ minds the idea that there are times of year when desirable product ranges – as distinct from the excess stock that is typically reduced to clear during seasonal sales periods – will have their prices slashed.

“The impact of this was particularly apparent in October 2017, when heavy discounts were already available across multiple retailers, as they tried to stimulate activity among shoppers who were holding out for Black Friday.

“Using discounting as a means for triggering activity is nothing new; the difference today is that it seems to be more regular and more widespread than was the case previously.”

 

 

Readers' comments (2)

  • darren hoggett

    Discounting means a lack of faith in your product and a lack of confidence in the people running the business.

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  • Discounting is easy marketing. Yet it does nothing for loyalty. Quite the opposite.

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