No. I didn’t see any signs like that today. But I might just as well have.

“All Merchandise 60% Off!” 

“Storewide Savings! Up to 80% Off!”

“Everything Must Go!”

“Save Big! Save Now!”

“Everything marked down today through Jan. 12th!”

Um. Yeah. Like I believe THAT.

Here’s the problem(s)…since desperate retailers already marked down their merch before Christmas, they didn’t have much in the way of margin to deal with after Christmas. No problem…now they’re simply taking a loss on everything, just in order to move out the old merch to make way for the new. 

“Collosally stupid” doesn’t begin to describe this.

We have a situation where retailers are losing money on their current inventory, won’t have enough money to stock up on new merchandise, and have successfully educated their customers that if they just wait, prices will get even lower. Explain to me just how this is a viable business model? 

Panic, my friends, is not pretty. 

Here’s a tip: when you discount your products, all you’re really doing to tell your customers that they weren’t worth what you were asking in the first place. Now that may well be true – some merchandise has some serious margin. For instance, in the retail music biz, guitar strings are practically a commodity. If you’re willing to order in bulk, you can get discounts from the warehouses like 50+30+20+10. On a $12 set of strings, you’re paying about $3.03. You can make some serious scratch on that kind of deal. Unless you discount them to your customers. On the other hand, some items (like, say, Dresden tympani) only have a 10% margin. Discount them, and you’d better make sure your customer’s paying the freight (literally), as you’ve got nothing there to work with. However, if your products are priced reasonably to begin with, when you discount, you set expectations of the customer, that they can get a better deal. That is marketing suicide. 

I don’t know what’s going to happen in the future. But I can promise you one thing. If retailers don’t snap out of this Discount-Mania! they’re all playing with, we’ll have a lot fewer retailers, a lot fewer products, and an economy in the tank for years to come.

This entry was posted on Friday, December 26th, 2008 at 8:26 pm and is filed under advertising, marketing.You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.