Why Do Stores Even Offer Discounts?

Tony

Stores are constantly trying to incentivize customers to visit their stores and purchase things from them. Below, we will be going over some of the specific reasons stores typically look to offer discounts to potential customers.

Reasons Stores Offer Discounts:

1. Get Customers Through The Door.

The main reason a lot of businesses look to offer discounts to potential customers is to get them either through the doors of their brick and mortar locations or to their website. Stores know that they are going to be able to up-sell you and/or sell you other things once you visit the store whether physically or online. This is why a lot of stores implement a ‘loss leader’ strategy which is discounting a certain item in order to get customers to visit the website or to visit the store.

2. Move Products.

Another reason a lot of retailers are going to be running various promotions throughout the year in the form of discounts is to really move the products that they aren’t selling. This is a very important thing for retailers to do because it can dictate whether or not they are going to have the shelf space for newer and hotter products on the market. Thus, if a product doesn’t sell quick enough, they will typically look to discount it until it gets off their shelves. Having shelve space is something that is important for brick and mortar retailers. When it’s online retailers that are offering promos, they are likely looking to free up some of their storage space. A lot of retailers might be running low on storage space or they might even pay for storage from a third-party company. Therefore, they might want to simply let go of products after a certain amount of time.

3. Lower Profits.

Another reason a lot of stores tend to offer promotions and discounts is that they are still making money off of them even when you apply the promotional offer. Retailers are typically making a specific margin on a product that allows wiggle room for a discount or promotional offer. Therefore, they are not going to be losing money a majority of the time when they end up offering discounts to their customers. This is something that many have a misconception about. Retailers are typically going to make money on the products they sell even at a discount. It is only when the product gets deeply discounted and is placed on clearance when the retailer might be taking a significant loss on it.

4. Competition.

Another major reason a lot of retailers are going to be offering all kinds of discounts on various products throughout the year has to do with the increased competition they are faced with. Obviously, if a competitor is selling the product for a better price, it is going to incentivize the retailer to lower its price on it. That way, they will be much better able to attract potential customers and make sales.

Overall, there are plenty of reasons retailers end up offering all kinds of discounts on products and/or services. One of the main reasons they are doing it is to simply get rid of the old inventory so they can free up the valuable shelf space for something that is brand new and just entering the market. Retailers have complex algorithms that really allow them to better control their inventory. This inventory management software usually tells them when its time to cut bait with a particular item or product and when to put it on discount. Along with this, they have competition they have to compete with. Therefore, they are willing to discount products to attract customers.