Tips to avoid the pitfalls of discounting

Recently embarking on a shopping mission, I visited two major city shopping centres. Without exception, every retailer I visited was discounting in some shape or form.

I acknowledge competition is fierce out there and we know from the recent Australian and New Zealand Online Shopping Report that offshore online shopping in Australia has increased by 20% in the last year to $7.2 billion, now representing 45% of Australia’s total online shopping spend.

Add to this mid-season, end of season, end of financial year, pre-Christmas and post-Christmas sales and there’s barely a month in the year that isn’t a regular sale period for many of our major retailers. People are starting to pay full price less and less often, preferring to wait until one of these sales come up, and there’s never long to wait!

So why is the retail sector so full of discounting? Is it because we aren’t offering real alternatives to our customer base? Or is it because we’ve always done what we’ve always done? Excessive discounting over sustained periods of time is an unhealthy business practice, often creating the unfit perception that we experience today. People begin to lose trust in the brand, believing that people won’t buy at full price and that margins must be too high.

While some discounting is necessary and should be used as a sales-building strategy, as distinct from an inventory clearance play, “fit” retailers are constantly innovating and refining their customer experience, thus avoiding the need to discount for clearance. Let’s take a look at some implementation strategies employed by these fit retailers:

They value innovation – Innovation is a high priority right down to executive KPIs. Why does the majority of innovation occur with new market entrants? Why do we not really value innovation in our retail delivery to market? Rather than slicing prices willy-nilly, it’s becoming increasingly important for retailers to create value in their offer.
Innovative and exciting in-store experiences are becoming more and more important in creating a value-added offer without discounting the price of the product itself. For example, employing the use of celebrity appearances, fashion shows and so on.

They inspire, lead, and manage their customers in new ways – fit retailers interact with their customers in an entirely different manner to the way they did three to five years ago.

Have a think about the following. Does your business really focus on:

  • Having a website that fulfils customer orders? (The ability to do business with you 24/7 is the order of the day)
  • An actively managed and appropriate social media strategy?
  • Knowing and rewarding your top 100 customers by spend?
  • Advertising your value-added offers to your customers – e.g. tailoring or home delivery?
  • Measuring your service levels – reward, service and sales growth becomes the culture of the business?
  • Customer service before profit?
  • Creating an extraordinary in-store retail experience?
  • Understanding competitive trends and consumer behaviour in a way that identifies meaningful trends you can capitalise on?
  • Creating a culture of ideas/implementation brilliance and recognition of the ideas whilst challenging the norms of the existing customer experience?
  • Really understanding the science of retailing with best practice technology and measurement disciplines?

The key message here is to innovate in all the offerings to create a direct and rewarding personal experience for your customer, thereby creating powerful brand advocates by just being extraordinary.

Fitter retailers understand this and rather than allowing their profits to drop during difficult financial times, they increase service levels and training of staff to generate motivated, confident employees, which in turn goes a long way to generating motivated customers.

In conclusion, the key to reducing or avoiding discounting is all about the CUSTOMER:

C Customer focus and ethos is critical
U Understand exactly where your money is made and how
S Strategy is important
T Tactical delivery at every customer touch point is even more important
O Ovations are deserved for an outstanding retail experience
M Multichannel your retail offer – your customers want to do business with you 24/7
E Entertain, engage and enthral your customer and price will be forgotten
R Remember me, I am your customer, reward me for being loyal and I will return

Happy ‘fit’ retailing.

Brian Walker is the managing director of Australasia’s leading retail consultancy, Retail Doctor Group.






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