Small retailers warned of negative impact of price discounts

Small retailers risk damaging the future of their business if they use drastic discounts to increase their short-term revenue...

04th March 2014

Retailers warned of discounting riskExperts have warned small retailers not to resort to drastic price cuts across entire product ranges in order to increase short-term revenue. The Institute of Promotional Marketing has said that the overreliance on discounting as a form of promotional marketing is not sustainable in the long-term, and damages brands and businesses.

IPM’s latest research found that UK retailers spent £55 billion on promotional marketing in 2013 – £40 billion of which was dedicated to price-based promotions such as percentage discounts or 3-for-2 offers. The rest of the figure is made up of value added promotions, where retailers and brands are able to give the customer something extra – perhaps loyalty tokens and other non-price incentives.

Head of Insight at IPM, Paul Godwin, warned retailers and marketing teams of the imbalance in the figures. ‘Promotional activity has changed from being a means to generate interest in brands [or products] to something that actively discourages brand purchase, unless there’s a deal.’

Godwin states that increasing numbers of consumers are becoming ‘immune to discounting… when everything is discounted, nothing is.’ Instead, Godwin believes retailers should focus on improving customer loyalty and give customers a reason to return to their shop.

Small retailers should implement or upgrade retail software to apply discounts more effectively. Retail software provides you with the point-of-sale information you need to decide which products and product lines will benefit most from a discount, improving their effectiveness and reducing your customers’ immunity to discounting.

Take a look at the range of retail and point-of-sale software that Integrity Trader can provide for your small or medium retail business.

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