Gerry Harvey, (Harvey Norman) was recently bemoaning the culture of discounting in our retail sector. He was saying that retailers had lost the plot and didn’t know how to sell real value anymore. He said they had fallen foul of a culture of constant discounting as the only way to attract customers, which was tantamount to business disaster and a degradation of the retail sector. I happen to agree with Gerry in this instance.
He went further by saying that retailers were failing to find out what customers really wanted and what they really valued. He said retailers weren’t offering choice – a range of options of different value and therefore were not selling. He went on to say that while a ‘sale’ may attract customers to a store, you still needed to put the effort into selling. Selling doesn’t happen by itself.
I’m not a retail expert, however, discounting, sadly, appears to be main stream in Australian retail businesses. Rather than a ‘sale’ being a rare event, it now seems, everywhere you turn there is a ‘sale’ or discount war waging. In short, over the last 10-15 years the consumer has been habituated to look for cheap, cheap, and cheap. The real value to, we, the consumer, of having a range of products and services to choose from across a wide value scale, seems to be lost in a mentality of it must be ‘cheap’.
It begs the questions “How has this come about?” and “Who started this discounting avalanche?” It wasn’t always this way. I recently had the opportunity to visit the exhibition ’til you drop – shopping, a Melbourne History’ (now closed) at the Victorian State Library which is about retail shopping in Melbourne across the last 100+ years. I found it quite an enlightening and educational experience. For instance:
“In the 19th century, ‘retail therapy’ had a different meaning from how we understand it today. Shopping was often promoted as combining commerce with intellectual or aesthetic benefits. Influenced by British morals and values, the display and purchase of goods were expressions of taste and self-improvement.” This is certainly a far cry from ‘cheap, cheap, cheap’ we now hear.
It seemed that shopping in the 19th century had a higher purpose to it. Perpetual discounting sadly does not.
Constant ‘discount sales’ erode margins and low or no margins means a business is not profitable and therefore not sustainable. Gerry and other retail experts will tell you that there is a time and a place for discounting – moving old stock, stock liquidation, seasonal or special events for instance. Discounting should NOT be seen as a regular occurrence or constant ‘way of life’ as this will affect the buying patterns of consumers i.e. people will wait for the ‘sales’ instead of buying across the year. They will pick their way through the plethora of ‘sales’ on offer every day, meaning no one has to pay full price for anything across the year which in turn forces retailers to enter a never ending loop of discounting.
Discounting in any business sector, retail or business to business, may increase turnover initially, but as a constant strategy comes at a cost which, in the long term, may create more severe problems than we had intended. This may include poorer sector and business performance, less investment in new ideas and products, loss of jobs, business closure, decreased diversity, poorer quality products sourced in place of better quality offerings, which can lead to increased customer dissatisfaction, and less choice as a result.
Less choice means we end up only getting access to products that are of a lesser quality. This creates poorer product performance, a diminished product life, and increased and unnecessary consumption, resulting in greater costs than if one had invested in a better product or service in the first place.
Who wants to pay for more ‘crap’? In a world where more and more people are conscious of overconsumption, you can see that this journey down the ‘cheap’ road doesn’t lead to a very good place.
Maybe retail needs to return to its ‘higher purpose’ roots. Another excerpt from the ’til you drop’ exhibition bears this out:
“While bargains are always popular, when standardised brands replace some specialty and locally produced items the quality of products can become less reliable. Today, many shoppers are returning to smaller stores selling organic or locally-grown and made produce. Supermarkets are, in turn, following this trend and promoting gourmet sections and their own ranges of organic and specialty products. The fact that consumers are becoming more aware of the impact of goods and shopping trends on the environment can be seen in new approaches to packaging and transportation. People are increasingly recognising that more sustainable shopping practices can reduce their ‘shopping footprint’.”
This is why I propose that a climate of perpetual discounting may potentially lead to the erosion in our quality of life and may limit our ability to make the right and best choices for ourselves, our families, our businesses, our communities and the environment. Is our culture of ‘discounting’ potentially leading us to a false economy? If so, ultimately, this will ‘cost’ us a whole lot more.
Gerry, I suggest you and your retail mates take a collective look in the mirror and do a bit of reflecting on the potentially larger issues ‘constant discounting’ may be creating for us all. And while you are at it, why not pay a visit to the ’til you drop’ exhibition which has some great pearls of wisdom about creating real value in retail.
Special thanks also go to Andy and Errol, my fellow tennis parents who work-shopped this article with me one Sunday morning as our sons played tennis.
Remember everybody lives by selling something.
Author: Sue Barrett, www.barrett.com.au
New Article Email Notification