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Expectation of constant discounts hits retail profits, while some shoppers say their focus is on the experience: study

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Retailers say they are feeling the pressure to offer cut-price sales at any time of the year, and that those sales are hitting their profits. But, the study from payments provider Klarna, suggests, a significant minority of customers do not enjoy sales, and say they are less likely to shop with traders that are always running sales.

Discounting is no longer confined to the traditional winter and summer sales, according to the study, and more than half (57%) of consumers now expect regular sales.

More than 500 retailers were surveyed in the study – and more than half (53%) said the ’always on’ nature of sales was hitting profits. Some 11% said discounting cost them more than £25,000 throughout 2017, with 66% of those with between 100 and 239 employees saying constant discounts are impacting profits. More than half (56%) said most of their discounted transactions come from online trade.

Commenting on the research, Luke Griffiths, managing director at Klarna UK , said: “Discounting can be a significant source of stress for retailers of all sizes – from the impact on profits to the operational difficulties that come with managing sales activity. Many merchants will discount to shift unwanted stock, so part of the solution is to make better, more educated purchasing decisions.

“But our research also shows how retailers can win over customers without slashing prices. Instead of discounting, merchants would do well to focus on perfecting the customer journey - from an inspirational browsing experience through to a seamless checkout phase, with multiple payment options and one-click repeat purchase options.”

Klarna also surveyed consumers to better understand customer attitudes towards discounting and how it influences their behaviour. The results showed that 18% of respondents only shop when there is a sale on – with millennials (23% of 25-34 year olds) and Gen Z (22% of 16-24 year olds) most likely to wait for sales to shop, compared to 11% of over-55s.

But more than a quarter (28%) say sales are too stressful and avoid them altogether, and 45% say they would be more likely to shop if they were sent a personalised offer. A quarter said they were less likely to shop regularly with a retailer who always has sales on, and 38% say that constant sales make a brand look cheap and unfashionable.

“Providing an exceptional customer journey at any time of year is vital," said Griffiths. "It’s clear that merchants and consumers are increasingly disillusioned with discounting and should look instead to ‘surprise and delight’ shoppers in the everyday user experience. They can do this with features such as a mobile-optimised checkout, one-click purchases, deferred payment options and personalisation.”

Andy Mulcahy, strategy and insight director at etail trade association IMRG , said: “In recent years, events such as Black Friday have instilled in shoppers’ minds the idea that there are times of year when desirable product ranges – as distinct from the excess stock that is typically reduced to clear during seasonal sales periods – will have their prices slashed. The impact of this was particularly apparent in October 2017, when heavy discounts were already available across multiple retailers, as they tried to stimulate activity among shoppers who were holding out for Black Friday. Using discounting as a means for triggering activity is nothing new, the difference today is that it seems to be more regular and more widespread than was the case previously. That said, getting the basics right – selling items that genuinely appeal to the target demographic, optimising areas of the experience, providing leading service – remains the most effective method for increasing sales in a way that is far less reliant on discounting.”

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