‘If I don’t, someone else will’: Discounting dilemma for SMEs as Christmas closes in
Thursday, December 6, 2018/
The dust has settled on Black Friday and Cyber Monday and retailers across the country are already in the thick of Christmas trading.
Customary discounting is in full swing, or, to be accurate, never really stopped.
Christmas is undoubtedly an extremely important time for retailers big and small, but as product discounting becomes more ubiquitous, SMEs can find it more difficult to keep up.
Ruby Wang, founder of online skincare retailer Nudie Glow, participated in Black Friday and Cyber Monday, experiencing a record sales day.
However, the small business owner tells SmartCompany the pressure to participate in discounting creates a difficult balancing act with product margins.
“If I don’t do it customers will go to someone else,” she says.
“It’s hard for us, we can’t really compete with the big companies … we decided to go with a lower discount because we can’t afford to have a big sale.”
Competition heats up
Big retailers such as Myer, David Jones, Cotton On and many others went in heavily on Black Friday and Cyber Monday, and are continuing to discount in the lead up to Christmas.
Myer, for example, is currently discounting clothing, toys, lingerie and accessories, in some cases by as much as 30%.
Others in Wang’s skincare category, such as Priceline, swiped 50% off cosmetics on Black Friday, and continue to regularly discount, with half-off fragrance discounts this week.
It’s a sign retailers are feverishly competing for consumer wallets, with $51 billion expected to be spent over the silly season this year, according to Australian Retailers Association (ARA) data.
That would represent a 2.9% increase on last year, which is unlikely to be enough to offset a difficult year for the sector.
Wang says she tries not to do too many sales, worried customers are increasingly waiting for things to be discounted before buying anything.
“We don’t want people to just wait for a sale or feel ripped off when they pay full price.”
“Even after our sales end, we have some customers asking for a refund if they didn’t get a discount.”
For Kate Vandermeer, co-founder of retailer TheSuperCool, Black Friday and Cyber Monday also saw a spike in online traffic.
TheSuperCool ran a relatively modest promotion which saw the business offer free shipping to customers.
“We do have less capacity as we are a small business. We are not wholesalers selling at retail, so there is less margin,” Vandermeer tells SmartCompany.
“We also work really hard to curate the brands we work with and don’t feel at this crucially busy time of year, that we should have to discount stock for increased revenue.”
Vandermeer doesn’t think discounting holidays are a disadvantage for small businesses through, saying SME retailers can participate in those sales in their own way.
When should you go on sale?
Not all small businesses are participating in 2018’s shopping holidays. Last month, SmartCompany spoke to Citizen Wolf about its concerns regarding overconsumption and the effect discounting has on the environment.
Vandermeer says many of TheSuperCool’s customers are fairly conscious of the issue.
“Our message to other SME retailers is to do what feels right and is on brand for your message as a business,” she says.
“What does your brand stand for? Are you an online business only? Then maybe you could offer a gift with purchase instead of discounting?
“We believe in adding value and not discounting where possible, so for us adding value by offering free custom gift wrapping and free shipping is adding value.”
Wang’s advice for SME retailers is to discount responsibly when it makes internal business sense.
“As a small business owner, don’t get pressured into the sale just because everyone else is doing it, you really need to work out your objective to doing a sale,” she explains.
“For me, when I decide to go on sale, it’s to get rid of old stock or reward customers and introduce them to new products.”