How to Avoid Heavy Discounting in a Post-Lockdown World | eCommerce Matters Ep. 002

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In this episode of "eCommerce Matters" Philip Huthwaite, Founder & CEO of BlackCurve, and Dr Rob Horton, Product Director and in-house eCommerce Data Scientist at BlackCurve, discuss how eCommerce companies and retailers can avoid heavy discounting as lockdown eases, what key data set helps you keep an eye on discounting and why incremental price changes are essential in helping your company survive.

Hosts: Philip Huthwaite (CEO & Founder of BlackCurve) and Rob Horton (Product Director at BlackCurve).

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Podcast Summary

Introduction

In this discussion, we delved into the issue of heavy discounting in the retail industry, especially during challenging times like the COVID-19 pandemic. We acknowledged that many retailers resort to heavy discounts as a means to generate cash flow, reduce excess stock, or simply survive in difficult market conditions. However, we also recognised the potential negative consequences of this approach on overall business operations, profitability, and future growth.

Reasons for Heavy Discounting

One of the primary reasons behind heavy discounting is the urgent need to generate cash. Retailers often use deep discounts to attract more customers and increase sales, thereby injecting immediate funds into their business. Another motive for heavy discounting is the desire to quickly reduce excess inventory. When faced with changing market trends or seasonal shifts, retailers may heavily discount products to clear out stock and make room for new merchandise. Furthermore, heavy discounting can be seen as a survival strategy for businesses in challenging times, enabling them to maintain some level of revenue and mitigate potential losses.

Strategic Decision-Making

To avoid falling into the trap of heavy discounting, strategic decision-making is of utmost importance. It's crucial for retailers to "hold their nerve" and use data-driven insights to inform their pricing decisions. By thoroughly analysing market trends, customer behavior, and internal data, retailers can gain valuable insights into the optimal pricing strategies that will help them navigate difficult periods while maximising profitability.

Maximising Margins and Revenue

Instead of relying on heavy discounts, retailers should prioritise maximising margins and revenue. A viable approach involves extending the sell-through period by adjusting pricing based on data analysis. By accurately assessing the expected duration of stock availability and making incremental adjustments to pricing, retailers can avoid resorting to unnecessary heavy discounts. This enables them to maintain higher margins for a longer duration, ultimately contributing to improved profitability.

Understanding Your Inventory

A crucial aspect of effective pricing management is understanding your inventory. Different product categories may necessitate different pricing strategies. Core products with stable demand patterns may not require heavy discounts, while seasonal or low-demand items might benefit from strategic pricing adjustments. Retailers should conduct a thorough analysis of their sales history, identify patterns, and align pricing strategies accordingly.

Leveraging Data

Data plays a pivotal role in pricing decision-making. Retailers should proactively monitor stock levels, sales history, and market demand to optimise their pricing strategies. By leveraging data analytics tools and techniques, retailers can gain in-depth insights into customer preferences, demand fluctuations, and market dynamics. This allows them to make informed pricing decisions that align with their business goals and customer expectations.

Incremental Adjustments

Rather than making drastic step changes in pricing, retailers should consider incremental adjustments. By closely monitoring market responses and making smaller price adjustments based on demand, retailers can strike a balance between pricing competitiveness and profitability. This flexible and data-driven approach allows for better sell-through rates, improved cash flow, and optimised profitability.

Competitor Considerations

While competitor data can provide valuable insights into market dynamics, it should not be the sole basis for pricing decisions. Retailers must prioritise internal data analysis and deep market understanding. While competitor actions can be informative, retailers need to focus on their unique value proposition, customer base, and product offerings to determine the most effective pricing strategies for their specific business.

Conclusion

In conclusion, to avoid heavy discounting and maximise margins, retailers must adopt strategic pricing decisions. By leveraging data, understanding their inventory dynamics, and making incremental adjustments, retailers can achieve better sell-through rates while maintaining profitability and cash flow. It is through thoughtful decision-making, data-driven approaches, and a deep understanding of their own business that retailers can successfully navigate challenging times while optimising their pricing strategies.