THE DIRTY SECRETS OF DISCOUNTING.

Seasonal sale periods have almost become a thing of the past in fashion retail and shoppers are now inundated with promotions all year round. It is an unprecedented level of discounting, with deeper and deeper reductions year on year. As consumers, it’s hard to resist a good sale. See something that’s 40 or 50 percent off and you may want to grab it before the price goes back to normal or the product sells out. Retailers know that. But is that ‘sale’ price really a special, reduced price?

the dirty secret of discounting

AN OVER-SATURATED RETAIL LANDSCAPE.

Before we answer that question, it’s important to understand why heavy discount strategies exist. The main reason is that in today’s competitive retail landscape it is much harder to grow. But, if you don’t show revenue growth then as a business alarm bells sound off. Revenue growth equals confidence for investors, bankers and other financial institutions, and that confidence translates into loans and investments.

If there is no increase, the business is seen as stagnant. News go out in the press and that, in turn, affects the collective consumer confidence in the retailer and ultimately leads to customers going to shop elsewhere. Because let’s be honest, no one wants to be associated with a loser. And the path of least resistance to growth is always that of lowering prices; which is why retailers often end up operating in a permanent discount mode.

Oversaturated landscape

THE DISCOUNTING EPIDEMIC.

In today’s unstable political and economic climate, all customers, those with economic means and those without, like to think twice before buying. Impulse purchasing is at an all-time low. Many people now buy only when a product is discounted, cornering retailers into offering earlier and bigger deals to keep them interested.

Consumers have changed the way in which they shop. ‘Bargain hunting’ is no longer used to describe an occasional activity, it has become the norm, and consumers have not only become more conscious when it comes to what products they purchase, but also savvier and less brand-loyal as a result.

Discount epidemic

IT’S ALL ABOUT PSYCHOLOGICAL WARFARE.

Retailers are well aware of this consumers' behaviour, and also know that the sight of a sale releases consumers on a spending frenzy and they feel amazing doing it. As you enter a shop or visit a website you are being targeted by psychological tactics to tempt you to part with your money. When you are excited by a bargain, this interferes with your ability to clearly judge.

Most discounts work on the principle of urgency, as the discounts are only available for a specific period of time. If you don’t buy the product now, at the discounted price, you are likely to miss out on saving some money. There is urgency involved. According to the Pleasure Principle and the Regulatory Focus Theory people seek pleasure and avoid pain. The anticipation of missing out on a discount is definitely a pain people will want to avoid, and exactly why discounts work.

fashion's psychological warfare

A CAREFULLY ENGINEERED ILLUSION.

The common assumption is that retailers stock up on goods and then mark down the ones that don't sell, taking a hit to their profits. But with many retailers having entered a permanent sale mode, that isn't typically how it plays out. The proof is that in recent years customer discounts have continued to increase, while retailers’ profit margins have remained flat.

The reality is that retailers, in order to protect their margins, work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want. So a lot of the discount is already priced into the product, which means retail discounts generally aren't discounts at all.

So it makes more sense to think of the ‘full’ price as a mark-up, where only a few consumers will bite. The sale prices are, more or less, the product's normal price, or the price at which retailers expect to see the product move off the shelves. Instead of discounting products in order to clear languishing inventory at the last minute, retailers work on maintaining an average sale price for an item, which will be much lower than its full price.

Engineered illusion

THE PERCEPTION OF A BARGAIN.

But retailers don’t stop there. In many instances, prices are entirely fabricated. So when shoppers head out in search of bargains, they witness retail theatre. To the point that over the years Amazon and many other major retailers have been repeatedly accused by Consumer watchdogs of unfair and deceptive practices by cynically marking up the retail or regular price and then offering a ‘sale’ at a discount when the products were never sold at the regular prices, or when the reference price is an older, higher ‘was’ price. The claiming of discounting something from a certain price when virtually nobody charges that amount is considered false advertising violating laws in many countries.

Plenty of studies have actually demonstrated that the average discount that customers enjoy has increased exponentially compared to a decade ago. The twist, however, is that they aren't saving more. In fact, the average price paid by customers stayed about the same over that period. What changed was the initial price. The motivation to make discounts look larger than they really are is to create a perception of a great bargain through a fictitious price comparison, so shoppers stop doing the research or internet search and they purchase that item. This is not a new or unique phenomenon. It just usually goes unnoticed. In fact, some products were never even intended to be sold at the original price.

the perception of a bargain

SLOWING DOWN THE FASHION CYCLE.

At UNTAMED STREET we believe that luxury products should be priced ethically and fairly all year round. We strive to change the way people engage with high-quality products, creating an answer to the luxury trend of inflated pricing, built-in obsolescence and perma-sale mindset.

We don’t do Winter sales, Summer sales, Spring sales, pre-season sales, Black Friday, Single Day, flash sales, etc. We only offer small and exclusive discounts as a real gesture to our customers, one that decreases our margin as this is not built in our initial price. As a digital native brand selling direct-to-consumer, we are able to offer our artisanal products at an unbeatable price, unseen in traditional luxury.

 

editorial team.

 

*        *

 

'Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs’.  United Nation’s World Commission on Environmental Development.

  

*     *     *

 

At UNTAMED STREET we embrace craftsmanship. UNTAMED STREET collections are all artfully handcrafted in Italy, in the Medieval town of Montegranaro, Marche with locally sourced materials. Producing high-quality, handcrafted products is a collaborative enterprise with our suppliers - small, family-owned workshops whose obsession for craftsmanship matches our own.