However, not everyone is merry.
According to Inside Retail’s Australian Retail Outlook, 49 per cent of Australian retailers consider discounting one of the biggest challenges facing them. Price cutting is a more significant concern than rental overheads and labour costs (which we’ve heard a lot about recently).
So, many retailers won’t be too happy to hear that last year, Black Friday and Cyber Monday grew 28 per cent year on year in Australia. Moreover, the momentum is only expected to continue this year.
If the market is up, why are retailers so glum? If we’re reading between the lines correctly, discounting pain is code for lower profitability. It’s all too common to throw margins to the dogs in a mad rush to capture a share of the pre-Christmas dollar. After all, November and December are when retail sales budgets are won or lost.
However, it doesn’t have to be this way if we take the time to be a bit smarter about our discounting strategy.
The sale period is a fantastic opportunity to capture the attention of customers who are conditioned and willing to shop. It can even contribute to healthy profit margins and the acquisition of new, long term customers. We’ve just got to be a bit smart about it.
Let’s explore some strategies to make the Silly Discounting Season work in our favour.
Specialised discount range
The blanket X per cent off all stock is no longer a smart option. It’s a lazy grab for attention. Consider applying discounts to aged inventory only. Or dedicate different sales events to different product ranges. Or apply discounts only to hero products to get people into your ecosystem (e.g. discount the printer, not the cartridges). And if you’re advanced, create merchandise ranges for the Silly Discounting Sales period and introduce a new product range for the pre-Christmas, full-price, last-minute rush. Don’t give away the farm every time.
Customer data is the new gold. Luckily, customer data is easily traded-in for discounts. Rather than give discounts to every anonymous customer, only make it available for members or fans. Bonds, BCF and Dan Murphy’s are great examples of retailers making loyalty a prerequisite to access special pricing. The benefit is two-fold. You will grow the customer base you can directly communicate with after the sales event. Plus, you will be able to track the term profitability of customers over time. The Silly Discounting Season could be the start of a beautiful long-term relationship.
Hide discounts online
It seems counter-intuitive. But why give away more than you have to? Only displaying discounted prices to visitors attracted by the offer will leave higher margins for oblivious but motivated customers. A great way of doing this is to attach discounts to coupon codes or create discounted landing pages for marketing. There’s no need to guard the discount fiercely – and in fact, you would want to give your best customers the heads up so as not to get them offside – but this strategy will retain some margin.
In November and December, retail websites are the hottest media properties on the go. Last year, popular sites such as Walmart, JD Sports and J.Crew all crashed under the weight of traffic. Let’s leverage that traffic. If you stock multiple brands, treat your website as a trading ground. Who is willing to pay for the home page exposure, offset the cost of the discount or form a partnership to email your customer base? Bonus points if they can provide an exclusive offer for you. In return, you will generate traffic, exposure and sales. Win-win.
Yes, it’s easy to slap a big red sticker on the product. Is that the best you can do? Think about other value-adds which may tempt your customers. These might include free delivery, extended warranties, gift-wrapping or installation services. Bonus points if it is added-value which is unique to you with a numerical value which cannot be directly compared or calculated. The perceived value of these value-adds is often higher than any markdown you can provide.
Are you shopping for yourself? Here spend an extra $20 and get a free lipstick. You deserve it. Are we shopping for Dad? We’ve packaged up $100 worth of goods for him. Job done. Buy one get one free. Free X with Y. Spend X save Y. It all amounts to bigger baskets and higher total margin. Think about who is going to be visiting, their task at hand and make it easy to spend with you.
Blasphemy! But seriously, whether you are playing the game or not, it’s an excellent opportunity to make your brand stand out. Spell & the Gypsy did this brilliantly last year when they explained how Black Friday discounting doesn’t align with their values. It got lots of attention – both positive and negative. With the Silly Discount Season so engrained in the psyche, it is an excellent opportunity to send a message whether or not you are discounting.
Whether we like it or not, the Silly Discounting Season is here to stay. We’ve dug this hole together. It’s no longer whether you will play the game but whether you do it in a smart way that will retain margin and build long-term customers.
Before you put that “30 per cent off site-wide” banner up, think how you might experiment with smarter discount strategies. I hope that this discounting season moves from being a big concern to being a significant opportunity for your business. Good luck!
Nathan Bush is the founder of eCommerce consultancy at 12HIGH. He was previously Group Digital Manager at Super Retail Group and was placed in the Top 50 People in eCommerce four years in a row.