Retailers are under increasing pressure to discount to keep up with competition and rising customer expectations, but there are signs that the whole process is coming unstuck.
The research, by payments provider Klarna, shows that discounting is no longer confined to the traditional winter and summer sales. The new rules of retail mean discounting has become a fluid and unpredictable phenomenon – with over half (57 percent) of consumers expecting regular sales.
The research of 500 British retailers highlighted the negative impact this can have on the bottom line of merchants. Over half of retailers surveyed (53 percent) say the ‘always on’ nature of sales is having a negative impact on profits. Ten percent say discounting cost them over £25,000 throughout 2017. This isn’t felt just by smaller retailers, but merchants of all sizes – in fact, it’s those with 100-239 employees that feel the burden most with 66 percent saying constant discounts are impacting profits.
The eCommerce channel is particularly vulnerable, with 56 percent of retailers saying the majority of their discounted transactions come from online trade.
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.”
