Retailers are being urged to ditch continuous sales tactics, after new research revealed that ‘always on’ sales are damaging profits.
More than 53 per cent of retailers surveyed by leading payments provider Klarna, admitted that regular or continuous discounting is hitting the bottom line. In total, some 57 per cent of the 500 British retailer respondents expected ‘regular sales’ throughout the coming 12 months. That is despite one in ten retailers saying that discounting cost them over £25,000 during 2017.
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.
“But our research also shows how retailers can win over customers without slashing prices. Instead of discounting, merchants would do well to focus on perfecting the customer journey - from an inspirational browsing experience through to a seamless checkout phase, with multiple payment options and one-click repeat purchase options.”
And it isn’t just the smaller retailers who are feeling the pinch. In fact, it’s those with 100-239 employees that feel the burden most with 66 per cent saying constant discounts are impacting profits. The struggle for UK retailers has been seen recently with household names such as Maplin falling by the wayside. The eCommerce channel is particularly vulnerable, with 56 per cent of retailers saying the majority of their discounted transactions come from online trade.
Andy Mulcahy, Strategy and Insight Director at IMRG, the UK’s industry association for online retail, added: “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.
"That said, getting the basics right – selling items that genuinely appeal to the target demographic, optimising areas of the experience, providing leading service – remains the most effective method for increasing sales in a way that is far less reliant on discounting.”