Many retailers use discounting as a substitute for marketing. Discounting is a race to the bottom – and inevitable unprofitability.
Discounting is only appropriate for in the following two scenarios:
- strategic retail promotions (e.g. introducing new products)
- too fix buying mistakes (bought too much or wrong products) and it is not moving
Q: How do you know when a product is not moving?
A: When the stockturn (or sell-through rate) is below the benchmark for that category – and only then. (Never rely on instinct, use your POS.)
Beware the tipping point. Frequent discounting will lead you to a point where customers perceive you to be a discount store. Unless this is your strategy, make sure you manage discounts prudently.