Short-Term Discounting Causing Long-Term Effects for Retailers

Mike Callender, Executive Chairman, REPL Group & Diane Wehrle, Retail Intelligence Expert, Springboard

Historically, retailers could look forward to regular calendar dates when footfall would increase and the sales would roll in. Previously, Boxing Day, Easter and Bank Holidays, were key dates in retailers’ calendars, holding the promise of profit.

However, in recent years, as shopping habits have changed, the importance of these dates has faded. Now, records are showing a year-on-year decline in footfall and sales over the Christmas period have dropped. According to Springboard, sales across all major store categories declined by 5.6% in December 2018 from December 2017.

This comes as shoppers look to Black Friday to fulfil all their Christmas shopping needs and bag a bargain and are putting pressure on stores to maintain these low prices all-year-round, despite profits already struggling.

Springboard’s retail intelligence expert Diane Wehrle commented: “Sales driven by discounting are now the norm. It’s expected, especially in the run-up to particular times of the year like Christmas. As consumers, we’re all guilty of thinking ‘Only 10%? I think I’ll wait until they reduce the item I want by 20%’. This is a serious issue for retailers as lower margins inhibit investment.”

Ultimately, this is unsustainable and is resulting in retailers fighting against each other in a competitive market to win over consumers.

Yet, rather than focusing on discounting and the race to the bottom, retailers should be working together to look at the reasons people enjoy the in-store experience. They must entice consumers back to the high street.

We have even seen from the success of retailers that have refused to cut prices and come out on top in the Christmas sales figures that discounts aren’t always necessary to attract customers. In fact, many retailers that have been engaging in what’s frequently being referred to as “short-term reactive discounting” have failed to see the same success.

“This reactive discounting might be a quick fix, but, in the long term, it won’t achieve the results retailers desire and will leave them without the funds needed to invest to improve the situation”, added Mike Callender, Executive Chairman, REPL Group. “Instead, retailers must begin to adopt new technology, work to understand the drivers behind falling footfall and spend and respond to the changing retail landscape.”

According to Diane, “By facing the challenge head-on and establishing the type of differentiation that consumers now demand, retailers can ensure that the high street doesn’t just survive, but thrives.”

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