Is Your Brand Stuck in a Discounting Trap? Here’s How You Know and What You Should do Differently

Retail and Marketing directors are like Formula 1 team bosses.

As we’ve highlighted previously, managing the challenges of bricks and mortar versus ecommerce is a bit like trying to manage two ambitious drivers.

It can be easy to put too much weight on one at the detriment of the whole team’s performance. 

Because it’s not just a battle between these channels for consumer attention, but an internal battle for brands themselves. 

Brands are constantly trying to juggle the challenges of this inter-channel competition but also keep the brand reputation and the bottom line in check. This article discusses the challenges to brands and also includes a few tips on how brands can best avoid pricing themselves out of the market.

A new perspective on ecommerce

Brands can often get sucked into this mirage of ecommerce equals discount and therefore is the channel to get rid of old dead stock. 

This simply isn’t the case. 

As we move into a content driven world and our audiences have become increasingly used to online shopping, customers want the latest and most exclusive fashion or technology whether it’s online or offline. And brands simply need to increasingly offer the same brand experience online as they do in store.

This is not just reflective of e-commerce. In store sales have become an all year round occasion and the question is:

How can brands look at multi-channel as a holistic brand experience in terms of pricing and avoid diluting the brand’s reputation by pushing sales on either or both channels? 

Furthermore, it is more evident than ever that if you continue to discount online and don’t differentiate in store, you kill your high street business.

The impact this also has on other non-owned channels such as wholesale and franchise partnerships is also something to consider. Companies can effectively corner themselves out of the wholesale and franchise market by becoming competitors to themselves. The evidence here is found in the decline in the department stores. Brands were simply cheaper online and department stores couldn’t compete without a great online presence.

It is clear that pricing is a big challenge in an ever fragmented omni channel world. The question remains:

What can brands do in this space to avoid getting sucked into an endless spiral of discounting for the sake of discounting?

What can brands do to make sure they stay relevant, remain profitable, and do not impact the brand? (See Gap as a bad example of this.)

I have four tips for you on where to start to avoid this discounting trap.

Where to start tip 1 – Brand first

Treat your own managed environments as your brand experience innovation labs and within these environments push the boundaries on brand experiences. You can:

  • Offer exclusivity in certain products and collaborations
  • Build a unique branded customer experience
  • Offer personalization or customization
  • Make it an enjoyable experience. 

Ultimately, use your brand power in your own channels to differentiate from a market filled with re-sellers, online wholesalers and a world hooked on discounting. If you need to sale, bring it out twice or three times a year and build up some exclusivity around it but then put it away. 

Don’t plaster the windows with up to 50% off vinyls and ensure you use CRM as a way to illustrate sales! Once the time is up, take the stock off the floor.

Where to start tip 2 – Product development

Own your sale both online and in store. You can still sell out of season stock that is presented in an on brand way. All items won’t have 100% sell through so discounting is inevitable but managing it is integral. 

Having to discount can be an illustration that the product you created wasn’t right for the market for a number of reasons. Understand from your customer why and do better to meet the needs of your customer base! Invest in market and customer research (Nielsen, Mintel, EMarketer to name a few).

Where to start tip 3 – Inventory management

In a market defined by exclusivity don’t be afraid to sell out! Yes, we want to sell as many units as possible but strategies from the likes of Nike have shown that exclusivity in more product lines rather than large depth of inventory in small item numbers works in D2C. 

Demonstrating that reducing inventory risk by buying lower volumes and increasing newness can also have a beneficial brand impact as it shows high demand for your products. When you find a line that is a winner, bring it back out, evolve it and prosper. 

Where to start tip 4 – Manage your sale

A great example of this is retail’s secret enemy – Black Friday! 

Brands have increasingly started to develop goods specifically for Black Friday. Goods that can drive higher margins at a discounted price that doesn’t impact core lines for the brand, especially when we consider luxury products where items are not out the door at the rate of the high street. 

This doesn’t work so well for premium or luxury sectors but it at least allows high street brands to remain in some control. Another way to manage your sale is visual merchandising, don’t keep your sale at the front of the store or banners on your homepage for weeks on end, move it on.

Summary

The key takeaways in five bullets:

  • Don’t see ecommerce as the bargain bin for old stock but make it part of your multi-channel holistic brand experience.
  • Do this by offering exclusivity and unique, personalised, and enjoyable brand experiences.
  • Own your sale online and instore and if it’s not selling at full price go back to customer and market research.
  • Don’t be afraid to sell out.
  • Manage your sale by creating sale-specific goods and through visual merchandising.

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