Online Store Discounts: When It Is Profitable, and When It Is at a Loss

Everyone makes discounts. Why would they do that? When discounts are really needed, and when they can be replaced by other buns for customers, we will consider in this article.

Why do you need discounts at all?

Only lazy people don’t make discounts. Promotions, coupons, sales are sure to be held in every online store. Mostly they’re made for several reasons:

• to sell off a seasonal product;
• to attract a buyer at a bargain price;
• create a certain reputation: we love our customers and we don’t spare discounts for them;
• to reach the buyer before making a purchase, even if the discount was not originally planned;
• sell off the rest of the goods, unsaleable or stale goods.

By the way, discounts up to 5-10% are perceived by buyers as insignificant. This is not a discount at all – so, a sign of attention or conventionality, thinks spoiled client. And he, as always, is right! Significant in the eyes of the buyer is a discount, which starts from 15%. That’s a delicious piece, that’s the figure that will make buyers queue up in your online store.

Of course, smaller discounts are also a marketing tool, they can and should be given. Just keep in mind that they will not produce a stunning effect. People are used to making small concessions.

Types of discounts

Seasonal – when you need to sell winter goods (sports equipment, skis, skates, snowboards, outerwear) or summer goods (inflatable swimming pools, swimsuits, tents and braziers);

festive occasions: New Year’s Day, Thanksgiving, etc;

Partnership – discounts on presentation of a coupon from a partner;

Wholesale – when the discount is given only if several goods are purchased;

Contractual – if the buyer meets the seller’s terms and conditions. For example, make a prepayment and get a discount of ten per cent, leave your contact details and get a discount or a change as a gift, buy two pairs of shoes and get the third one for free;

Promotional – when the online store starts an advertising campaign to celebrate the release of expected goods or new arrivals.

When is it profitable to make a discount?

When the result will exceed the cost. Here are the four most common ways to make a discount and stay profitable:

1. If you make a discount, increase profits. Let’s say you bought a cheap 200 pairs of stylish spring shoes and now have to sell it. If you sell without discounts – shoes may not pay off until next year. And there it will become out of date and have to arrange a sale for half price. So make a discount of at least 10%. So you will not lose anything, just buy: the buyer will be pleased to save money, and you as a seller will increase their profits and come out on top. Even if at first the discount will help to increase profits slightly, in the long term it will work for you;
2. If with the help of discounts you sell out unnecessary stale goods, which no one takes. The reasons for this may be mass: things can go out of fashion, phone models and gadgets – to become outdated, seasonal goods – to dust for needless. It is profitable not to sell such goods anyway, but if you make a discount – chances to find buyers will increase significantly. Remember also that in the world of sales is customary to make discounts on last year’s collections, and buyers are well aware of this. Many are waiting for the thing to become cheaper to buy it. Take advantage of this and ruthlessly get rid of excesses – new products are already waiting for their time to take their place;
3. If you attract new customers. Competition in online stores is huge, and buyers sit on the Internet and monitor prices. So it is worth making a product at least $5 cheaper or make a discount on shipping with shipping calculator – people will come to you and make an order;
4. If you make customers permanent. It is not enough just to attract a new buyer – it is important to make sure that he did not go to competitors. The Internet is like life: no one owes anything to anyone. If today the goods are cheaper at you, and tomorrow – at your competitor, the buyer without a shadow of doubt will go to him and will be right. To save it, develop a system of cumulative discounts: for example, the first order – 5% discount, the second – 7%, the third – 10%. It will be profitable for the buyer to buy from you: he will know that the size of the discount depends only on him. The maximum size of the discount you set yourself: make sure that he was not a loss to you. At the same time, remember that not all customers reach the maximum discount.

When is it unprofitable to make a discount?

There are times when discounts become evil for a salesman. It happens in the following cases:

• when the owner of an online store does not really understand why discounts are needed at all, and acts on the principle: everyone does, and I will;
• when the seller concedes to the customer’s discount requirements without even offering him other options;
• when he understands, but he makes the discount at random. “If the goods are not sold, I will reduce the price by half, and suddenly they will be taken apart.” It will be bought, but the profit you do not receive and go to minus;
• when the seller is afraid that they won’t buy his goods without a discount, and tries to keep the buyer. It turns out that the discount is used as the last argument in the dispute buyer-seller;
• when the seller wants to keep up with the competition and makes the discount to be as good as it is;
• when the seller can’t sell: instead of communicating with the buyer and motivating him to buy, it’s easier for him to make the discount and close the deal.

So, the size of the discount depends on many factors. Try it, experiment, play with the markups and the size of the discount and find the perfect balance!