Indy retailers feel ‘always-on’ discounting pressure
Written by Peter Walker
Independent retail discounting levels have increased by six per cent over the past two years, as market pressures continue to drive product markdowns.
This is according to UK customer transaction data from retail software provider Vend running from September 2016 to October 2018 with a sample size of 600 retailers.
In the past year, discounting levels have grown by 10 per cent, but the percentage of discount that retailers are applying to their products has not increased.
Encouragingly, throughout this time sales volumes and spending have also seen a boost, with sales volumes up five per cent year-on-year, and spending up nine per cent.
“The growing demand for discounting has really been impacting big-box retailers like John Lewis over the past year, so it’s not surprising that independent retailers are also feeling that same pressure,” says Higor Torchia, EMEA country manager for Vend. “But it was clear in our data that discounting is changing.”
From 2016 to 2017 retailers were discounting very frequently, and prices were fluctuating up and down a lot, according to Vend. Whereas in 2018 discounting levels have generally remained steady, with much bigger spikes happening every now and then.
“As we know, frequent discounting can be hugely detrimental to retailers, especially indies who often have small margins – it’s likely these retailers are trying to fight back against ‘always-on’ discounting, and instead create more strategic sales campaigns at key times,” Torchia added.
December continues to be the biggest discounting month each year, as well as the biggest sales month, however outside of this time there was a positive correlation between discounting and consumer spending.
Torchia explained this is probably due to discounts working well as a marketing tool, where retailers promote an upcoming sale to their customer base which drives those customers in-store to spend more than they usually would.
Fashion and apparel stores were those that discount the most, showing the biggest spikes in discounting levels across the year, while most other retail types remained steady.
Fashion and apparel retailers also seem to apply the biggest discounts to products when they do have a sale (18 per cent on average), followed by sports and outdoor stores with a 12 per cent discount, speciality food and drink (eight per cent), home, lifestyle and gifts (eight per cent) and health and beauty (five per cent).