Retailers should consider ditching discounting, Klarna research

Discounting is no longer confined to the traditional winter and summer events and has become a fluid and unpredictable phenomenon, with 57% of shoppers expecting regular sales. That’s according to a survey by Klarna involving 1,000 UK consumers and 500 retail decision makers.

53% of the latter said the “always on” nature of sales was having a negative impact on profits and 11% stated discounting cost them over £25,000 throughout 2017. This applies to merchants of all sizes - in fact, it’s those with 100-239 employees that feel the burden most with 66% saying constant discounts are impacting profits. The e-commerce channel is particularly vulnerable, with 56% of retailers saying the majority of their discounted transactions come from online trade. 

Luke Griffiths, Managing Director at Klarna UK, says: “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.”

Andy Mulcahy, Strategy and Insight Director at IMRG, notes that events such as Black Friday have instilled in shoppers’ minds the idea that there are times of year when desirable product ranges will have their prices slashed. The impact of this was particularly apparent in October 2017, when heavy discounts were already available across multiple retailers, as they tried to stimulate activity among shoppers who were holding out for Black Friday.

"Using discounting as a means for triggering activity is nothing new, the difference today is that it seems to be more regular and more widespread than was the case previously. That said, getting the basics right – selling items that genuinely appeal to the target demographic, optimising areas of the experience, providing leading service – remains the most effective method for increasing sales in a way that is far less reliant on discounting," he says.