Discounts during the 2019 holiday season were as rampant as ever.
Ultra-fast fashion retailers like Missguided and Boohoo were generous with their promotions, with 98% and 99% of their SKUs discounted respectively.
The rise in discounts and promotional marketing among industry leaders leave other retailers with no choice but to follow suit to gain a competitive edge in today’s oversaturated industry. Reports have shown that Gen-Z consumers are more price-conscious and will cross-compare to find the best deals online.
But discounting can be a double-edged sword. While promotions can help accelerate sales, retailers also run the risk of further profit loss when discounting is carried out without proper analysis.
In this article, we dive deeper into the latest promotional marketing and markdown methods used by industry leaders and share how to execute them while protecting profit margins.
1. Bundle Promotions
Bundle promotions are discounts that only apply when more than one item is purchased. This encourages bulk purchases and drives volume sales. Consumers’ willingness to purchase an item increases if the promotional offer is lower, despite having to purchase more than one item.
Buy 3 for the price of 2
This bundle aims to encourage more purchases for items within a similar category or price point. It can be applied to bestsellers, such as core items, to double sales or even to speed up stock movement for slow-movers.
However, it is crucial for the bundle items to complement each other in order to look cohesive. Otherwise, a bundle of mismatched items may look like a blatant clearance tactic to consumers.
Monki’s promotional bundle of socks and undergarments taps into the impulse shopping habits of consumers. The “3 for 2” landing page helps convert viewers to customers. Additionally, the items offered in this bundle are typically purchased simultaneously during checkout which increases the effectiveness of this bundle.
Discount for 2 or more items
The discount offered is the key highlight for this bundle. Although a deep discount is not necessary, it should be significant enough for consumers to justify purchasing more than one item.
There are many items that can be grouped together in this bundle (such as excess stock) that requires immediate action or bestsellers that show potential for a greater sales opportunity. Sacrificing a fraction of profit on high margin pieces is a small price some retailers are willing to pay in order to triple inventory movement.
For 2019’s 11.11, Adidas launched a bundle promotion to increase volume purchases. This motivated customers to take advantage of the 11.11 promotion, despite the bundle condition. This generated buzz and gave Adidas an opportunity to markdown on slow-movers while ensuring more revenue per order.
Ladder deals
The ladder discount strategy is another markdown practice that targets price-conscious consumers and encourages bulk purchases. Instead of offering a deep discount range (50% and more), retailers can opt to start off with a smaller range that progressively increases with more items purchased.
FashionValet’s 11.11 ladder deals strategy in 2019 started with a smaller discount range of 15%. To protect its profit margin, the retailer set a minimum requirement of five items purchased to achieve a higher discount offer.
Buy 1, Get 1 free
There are instances where retailers will have to leverage on the “free” keyword when discounts fail to deliver sufficient revenue. The buy 1, get 1 free (BOGOF) method is the fastest way to offload slow-movers while protecting profit margins. Retailers can opt to pair slow-movers with high-priced bestsellers to minimise losses.
Fashion Nova’s buy 1, get 1 free swimwear promotion was a markdown tactic to offload excess and stagnant stock as fast as possible. This was likely during a seasonal change, as swimwear’s popularity declines near the end of summer.
2. Free Shipping
When it comes to online shopping, shipping fees are a major deterring factor, especially for international customers. By absorbing the shipping cost, this tackles the hurdle of abandoned carts. A free shipping promotion can also motivate bulk purchases, especially when a retailer does not offer a flat-rate shipping fee.
However, do keep in mind the danger of offering year-round free shipping. Sales may increase but at the cost of a significant profit loss. Setting a minimum order amount can help reduce losses when a larger revenue is guaranteed.
Offering free shipping bundled with free returns can also be damaging to a brand. Consumers may purchase more with the intention of returning most of it, causing a dent on not only profits but also the environment.
Asos ran a free shipping promotion during Black Friday weekend, in addition to its store-wide 25% discount. This compelled shoppers to take full advantage of the promotion before Asos reverted back to its standard delivery fee.
3. Influencer Marketing
Brands’ promotional effort on social media fosters high visibility due to the extended reach. Acquiring the right influencer allows a retailer to tap into an untouched audience.
When opting for influencer marketing, it is vital for a retailer to look past the total number of followers and focus on the target audience instead. The content from an influencer should align closely with the retailer’s brand image. Micro-influencers may even yield better results due to their smaller but more concentrated audience.
Fitness brand, Body Angel Activewear engaged with fitness influencer, Laura Kasperzak, to promote its printed leggings.
Its choice of influencer was optimal as her healthy and active lifestyle was reflected on her social media content, which complements the brand perfectly. The personalised promo code from the influencer was also a great incentive for her followers to make a purchase after seeing the Instagram post.
15% off is a common personalised promo code assigned to influencers as the discount depth will not disrupt a retailer’s profitability heavily but is still significant enough to encourage sales.
Besides product placement posts, retailers can also use influencers’ high reach to highlight promotions. This method allows markdown campaigns to reach a wider audience and to be shared among peers.
Fashion Nova leveraged consumers’ high media consumption by utilising influencer marketing for its most recent Black Friday markdown. Instead of sponsored ads and email campaigns, Fashion Nova turned to Instagram stories while using the “swipe up” function for direct access to its sales page.
4. Seasonal Markdowns
Seasonal sales are promotions tied to key calendar events, most prominent during global holidays. This boosts visibility for retailers as consumers would already be on high-alert for the best holiday deals. Themes and marketing collaterals should reflect the festivity well to resonate better among seasonal shoppers.
Mid-season sales are also an option for retailers to generate extra sales. This helps maintain inventory momentum when the initial buzz from new seasonal launches simmers down. Mid-season sales can also act as a precautionary measure to increase sales when certain items or styles show signs of decline. Waiting for a key date, such as year-end sales, may be too late, resulting in greater loss.
New Year deals have ended but retailers in the East have yet to put a halt to the promotions. New clothes are a common tradition during Chinese New Year, which creates ample opportunities for retailers to leverage on. Cotton On’s promotional banner incorporated rat prints, a frequent symbol of prosperity for The Year of the Rat.
Aggressive discounting is ubiquitous throughout the year-end holiday season when shopping gains drastic momentum. After all, reports have found that the holiday season contributes 30% to a retailer’s yearly revenue.
Missguided’s deep discount margin of 70% is a key example of how retailers can offload off-season items on a large scale to make way for new collections. The extra 10% offer is also an added benefit to further motivate purchases.
5. Promotional Codes
Promo codes can be used by retailers to track the effectiveness of a promotion. For example, a retailer can determine which promotion generated the best response while running multiple markdown campaigns. This information allows the retailer to run similar campaigns based on its initial success and to target specific segments of its customer database.
Pomelo’s 25% storewide promo code was in conjunction with Chinese New Year. This promo code helped encourage consumers to purchase from its new collection, leveraging on the influx of shopping during Chinese New Year.
First-time order promo codes give new shoppers an extra push.
Monki’s promo code was an incentive to convert a viewer into a customer. Promo codes can also be an effective way to revive customer loyalty for shoppers who haven’t made a purchase recently.
6. Time-Bound Sales
Also known as flash sales or pop-up discounts, time-bound sales are offered for a limited time only to evoke urgency and impulse shopping from consumers. Retailers can take this opportunity to apply deeper discounts on excess stock that needs urgent attention.
Retailers can opt for flash sales to clear slow-movers without having to wait for a key retail event such as Black Friday weekend.
Although certain retailers base their business model on time-bound sales, caution should be taken to avoid overuse of the promotional method which could tarnish a brand’s image.
Knowing which day to launch is crucial, as it can make or break the campaign.
The chart above provides insight into the most popular discount range and discount launch day from Pull & Bear, which is within the 20-29% range on Fridays. Benchmarking against competitors allows retailers to deeper understand market standards for common markdown practices.
Asos planned its flash sale around the payday period to leverage consumers’ increased shopping habits. The short time frame created a sense of exclusivity and the 20% discount was a quick booster to drive sales.
In conjunction with 11.11, Bobobobo launched a limited time only flash discount on top of their current markdowns.
Despite the shallow discount range, “ends soon” created urgency among consumers to make immediate purchases given the limited 10% off bonus.
7. Choose What You Pay
Described as “It’s not a sale-it’s better” by Everlane, this unconventional method allows consumers to call the shots. It leverages transparency, which harnesses strong brand loyalty over time.
Research has found that in certain situations, consumers do not always opt for the lowest price. By giving consumers control, they feel empowered and instead become more conscious customers.
Everlane is a brand that prides itself on its strong ethical values. This discounting method bolsters its brand image by sharing where profits go to for each reduced price. This level of honesty may compel consumers to even opt for the higher price and help convert them into loyal customers.
Conclusion
Retailers aim to maintain full price but discounts are often inevitable in the current industry.
A way to boost discounting is to target specific consumers, such as inactive or new shoppers, instead of offering blanket deals that appeal to all. Consumers are now savvier than ever, and a too predictable cadence loses engagement quickly.
By having better targeting, it helps break consumers out of the cycle of waiting for price drops before making a purchase. A well-structured markdown approach, with the correct pricing and product backed by data, helps retailers steer clear from the possible damages of reckless discounting.
About the Author
Leong Kexin
Leong Kexin covered the fashion industry as an independent writer before joining Omnilytics. Now she reports on key retail events and educates the market on the critical role of data analytics in fashion.
