The Dangers of Discounting
I’m concerned about the retail industry. Earlier this month, a Federal Reserve survey reported that retail sales had weakened in many areas because of winter storms. As retailers report their first quarter results over the next few weeks, I’m sure we’ll see the fallout from the bad weather. We’re already seeing the aggressive price promotions that retailers have bowed in order to make up for the losses. And that’s what really worries me. The last thing retailers need right now is to rely too heavily on discounts. While price discounts can indeed spur immediate traffic gains, becoming overly committed to discounting produces long-term margin headaches.
Thanks to long print lead times, I actually wrote this month’s QSR Magazine Brand New Perspectives column awhile back when discounting at restaurants was on people’s minds . But it seems it’s a great message for retailers now. Please take a look at, To Discount or Not To Discount.