One thing is certain \u2013 the heavy product discounting from that period changed forever it seems the shopping habits of the consumers.<\/p><\/blockquote>\n
\u201cBargain hunting<\/strong>\u201d is no longer used to describe an occasional activity, it has become the norm.<\/p>\n Some brands like the Gap are in permanent discount mode<\/strong>. I am not sure there is a customer left that buys any of that brand\u2019s products at full price anymore. But, make no mistake \u2013 this is not happening because they are permanently on the brink of collapse (though a few times they have been) \u2013 this now is a brand strategy.<\/p>\n Appealing to the shoppers who like to know how big a saving they are making when shopping, pretending to have everything permanently on sale is just the new way of getting shoppers through the doors.<\/strong><\/p>\n Just as some brands have discovered a new way to grow via outlet retail, the emergence of outlet retail villages and shopping malls is no longer news.<\/p>\n It is no longer the place where serious brands who didn\u2019t want to damage their reputation would send old unsold stock. Now, this is just another retail channel for which many brands design and manufacture lower priced product lines.<\/p>\n What started for many brands as a trial<\/strong>, has evolved into a permanent alternative stream of revenue. So much so that some brands now have a few select flagship stores to maintain the image of higher priced positioning, but make their turnover from the lower priced goods they sell through a vast network of own outlet shops.<\/p>\n Most other brands, those who want to keep to the traditional model of retail and especially those that are mid-market positioned use any possible event as an occasion for a \u201cpromotion\u201d \u2013 valentine\u2019s day, mother\u2019s day, father\u2019s day, Black Friday, Cyber Monday,\u2026.you name it\u2026.there is a reason for a promotion outside of what used to be the traditional sale times.<\/p>\n \u201cThere are too many luxury and premium brands selling very similar products. Some of them reduce their prices without announcing it because it\u2019s embarrassing and devalues their brand\u201d says Milton Pedraza, a New York-based luxury consultant<\/a>.<\/p>\n While it is clear why brands use discounts and \u201cpromotions\u2019 to clear stock in today\u2019s tough retail times we live in, it raises questions about long term survival and overall brand strategy.<\/p>\n Can brands really survive long term and grow (not shrink) by lowering their prices? What is the true cost of this business strategy, especially to younger and smaller brands? And more to the point – what is the lasting effect such practices leave on the brands and consumers?<\/p>\n Before we look into the lasting effect, it is important to look into how and why this heavy discount strategy exists. Why do so many (large) brands discount so heavily?<\/strong><\/p>\n The main reason is that in today’s oversaturated retail landscape it is much harder to grow and show growth. But, if you don\u2019t show growth then as a business, especially those that are larger and under the scrutiny of the financial markets, alarm bells sound off.<\/p>\n Growth is often measured by looking at the rise in revenue compared to the last year. <\/em><\/p>\n If there is no increase, the brands are seen as stagnant. News go out in the press and that affects consumer confidence in the said brand and ultimately leads to customers going to shop elsewhere. Because let\u2019s be honest, no one wants to be associated with a loser.<\/p>\n So to show continuous growth in revenue in a tough market, brands are often under pressure to reduce costs and prices and operate in permanent discount mode to attract current and new customers.<\/p><\/blockquote>\n Continuous growth in revenue equals confidence.<\/p>\n That is how investors, bankers and other financial institutions see the rise in numbers in a simple excel sheet. That confidence they get from the numbers (regardless of how they got to be what they are) means they feel happy to arrange for loans and investments.<\/p>\n The new money injected into the business allows brands to open new shops, which in turn helps show continuing growth.<\/p>\n But, the reality<\/strong> is that often this strategy results in unnecessary overexpansion, which in turn leads to financial strain and trouble.<\/p>\n So in conclusion \u2013 any short-term gains are long-term pains.<\/strong><\/p>\n Lastly, let’s not forget the kudos CEOs get from showing business growth and the big bonuses they award themselves.<\/p>\n While this explanation may be simple, it still serves to explain what fuels the thinking behind the permanent discounting mentality.<\/p>\n The side effect<\/strong> of this, however, is that small brands feel that they have to compete or lose business to the bigger brands. Hence, they too start discounting, not fully (or at all) realizing the operational and thinking strategies of the large brands.<\/p>\n While for the larger brands discounting is a strategic move to get more cash, for smaller brands it often is a case of \u201ckeeping up with the Joneses\u201d and leads (ultimately) to no good.<\/p>\n So why are fashion retail discount strategies bad for business?<\/p>\n Let\u2019s examine the reasons why as a small brand and especially one that sees itself as premium, you should not discount their products and without a good reason<\/strong><\/p>\n If you are dreaming of creating a luxury or premium brand, discounting your products often (or even at all if you can manage it), is bad news.<\/p>\nFashion Brands and Their Discounting Strategy<\/h3>\n
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<\/a><\/p>\nBut doesn’t that speak also of brands churning out products that are perhaps not needed on the market?<\/h3>\n
1. Brand Devaluation<\/h3>\n