The problem with seasonal discounts

I believe it was the great philosopher Dolly Parton who once observed: “It costs a lot to look this cheap."

While Dolly may have been discussing personal appearance, that quote should give ecommerce brands like ours reason to take a long, hard look in the mirror.

You’ve probably started getting Black Friday emails from marketplaces and other platforms you use. I know I have. Everyone wants to know if you’ve got your plan in place for your enormous seasonal sale. Are you ready for Black Friday? What discounts will you be offering?

My approach — and my advice — is to lean on Dolly’s wisdom. Making your brand look that cheap often comes at a very high price for profit margins, ad spend, and brand value.

You end up in a race to the bottom, putting yourself under increasing pressure to offer ever steeper discounts.

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Top 10 reasons to offer seasonal discounts

1. To clear stale inventory
2. I lied — there’s only one reason to offer seasonal discounts

That’s it. Moving inventory you need to shift is the only good reason for discounts.

I don't care if people have told you to have a yearly sale to encourage new buyers to the product. I don’t even care if you did it last year and had a huge spike in sales. I’m adamant that seasonal sales only harm brands in the medium to long term.

You’re probably familiar with the traditional product life cycle. But with multiple markets and a global customer base at our disposal, I’m not convinced that decline and discount are foregone conclusions for ecommerce brands. Certainly, it’s something we can delay. When summer ends in the northern hemisphere, could your must-have swimwear still sell at full price in Australia rather than with 70% off in Europe?

It’s worth saying that I’ve never had an ecommerce venture selling perishable goods — maybe that would change my take slightly. If you sell goods with a short lifespan, I’d love to get your thoughts.

Usually, I’m the sort of person who’s open to differing opinions. I’m so forceful on this point because I think a large proportion of ecommerce SMEs have had the wool pulled over their eyes. And the reason it cuts so close to the bone is that I’ve been among them…

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My discounting disaster

One of my ecommerce businesses was ticking along very nicely. I wasn’t going to be floating it on the stock market in the near future, but it was generating a nice income. How could I turn that into an even nicer income? More customers, of course.

I fell right into the trap I’m warning you against. People had been buying boxes of my product. I started offering 3 for 2 deals to make them even more enticing. Then — in what I now know to be part of the inevitable spiral to the bottom — I lowered the price point across the board.

Order numbers increased, and it was mission accomplished from that point of view. But the order value was in sharp decline. Even worse, it was soon clear that I’d devalued my product in the eyes of customers who’d bought at the original price.

You probably don’t need me to tell you, but I can confirm that that business doesn’t exist anymore.

I hope this bit is helpful to you because it still hurts to put it into writing.

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A sting in the tale

Tucked between Amsterdam and The Hague is the delightful Dutch seaside town of Noordwijk, with its historic buildings and seemingly never-ending strand beaches. It was on a beautiful August day in these gorgeous surroundings that I was forced to concede TWO more good reasons for discounting.

Max and Constantin from Full Circle Clothing, the manufacturer of my clothing products, came for dinner at my hotel. Amid beautiful scenery, busy filling myself with a delicious hot soup and wary of the succession of angry hornets visiting our table, my anti-discounting defences were down. They went straight for our shared weak spot: sustainability. (Max and Constantin, that is. The hornets only wanted our drinks, and I’m unsure of their sustainability policy.)

There will always be some imperfections in manufacturing processes. When you’re making clothes, these often affect entire size runs. You might end up with a full run of size medium sweatshirts that have a slight problem with the stitching or material.

Is this unavoidable waste? Does imperfect mean unsaleable? Or could I be selling products with slight imperfections at a discounted rate? This could provide an entry point to my brand for people who can’t afford full price and don’t mind a missed stitch or two.

As I batted away yet another of my yellow and black tormentors, I had to admit that Max and Constantin had a point. We went on to discuss how these imperfect products can also form the basis of product lines made from offcuts.

For my second discount concession, I was reminded that our business model effectively has a discount baked in. Following Full Circle Clothing’s lead, I’ll let customers return worn-out clothes in exchange for 25% off their next purchase. Since this has a practical purpose and is designed to fight textile waste, I guess I’d thought of this as something completely different than a Black Friday sale. But I’ll accept it’s still a discount.

The bottom line is that we want to avoid waste. Discounting is a good option in these circumstances.

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Some discounting takeaways for you

OK, so my mantra to only discount your products to get rid of inventory is more of a plea than a takeaway. With that in mind, I’ll leave you with some thoughts to frame what to do if you’re going to ignore that plea:

• Have a clear strategy for why and how you’re discounting — don’t just do it because everyone else is
• If you’re going to offer a discount, create a separate collection section on your site with a funky brand of its own, like IKEA’s Circular Hub
• Avoid building a lookalike product to sell at a discounted rate to your regular product line
• Think about how reusing or cutting waste can create an entry product to make people feel part of your brand at a lower price point
• Don’t be afraid to remove products from your store, wait for the market to refresh, and then reintroduce them at full price further down the line

A lot of these thoughts formed during my conversation with Max and Constantin. I guess that shows the benefits of having people as a sounding board for your ideas. I’d really like to create a similar situation here, so do send me your own take on discounts to community@juni.co.

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