In times of economic crisis, many brands automatically turn to discounting to stimulate sales.
That might work for larger brands with greater purchasing power, but for small businesses with already tight margins it can be a slippery slope.
Still, consumers expect discounting, some as high as 30%, which puts othe onus on small businesses to look for ways to offer incentives without discounting themselves out of business, experts say.
“Retailers are fighting a Darwinian struggle for survival,” says Burt Flickinger, III, president of Manhattan-based Strategic Resource Group, a retail and consumer goods consulting firm.
Even before the pandemic, many small businesses were struggling due to Amazon driving consumer expectations and unfair practices tied to manufacturers and distributors giving promotional allowances and pricing concessions to large retailers over small independents, he says.
On top of that, “consumers are expecting discounts of unprecedented proportions too,” Flickinger says.
A recent survey by ChickAdvisor found that the sweet spot discount to encourage consumers to buy was 30% followed by 20% in the second spot.
But that doesn’t mean smaller brands must concede.
“Everyone is managing as best as they can right now, and, of course, straight discounts are not always possible for every business,” says Shauna Mueller, Digital Marketing Strategist for Toronto-based ChickAdvisor, an online ratings & reviews platform.
She suggests smaller retailers look into offering free shipping since surveys show that is the number one incentive consumers needed to make a purchase. In addition, product sampling is a great vehicle to spread brand awareness, Mueller says.
Roberta Perry, owner of ScrubzBody Skin Care Products in Farmingdale, whose storefront is closed due to the pandemic, said she is still filling online orders. Perry said offering free shipping definitely helps with sales during these times.
In mid-March, she removed her over-$65 order minimum for free shipping, which was supposed to be only temporary. But after getting a great response from customers, Perry extended it until the store reopens.
“I am not a discount brand, and only run one sale a year, so I thought free shipping was a better way to go [than discounting], she says.
She also alerted customers via email that she would send a free soap gift as a “virtual hug.”
“I include one in every box, along with a personal note,” Perry says.
It’s also wise to look for alternatives rather than jumping to straight discounting, says Nicole Penn, president of EGC Group, a marketing and digital services firm in Melville.
That doesn’t mean you can’t offer discounting at all, Penn says.
“You could certainly offer some discounts when appropriate,” she says. “You just don’t want to price yourself out of your business.”
Penn suggests a giveback of some sort rather than a discount like free shipping; alternatives like surprise gifts, a point rewards program and a free consultations.
EGC’s client, Country Carpet in Syosset, is doing just that.
While its Syosset store is closed, it has kept in contact with customers with weekly e-blasts, has done virtual tours on FaceTime of its showroom and offered free design consultations.
As far as discounting, "our prices are competitive, but we do accommodate when needed,” Country Carpet owner Harris Cohen says.
If you do discount, try to do it strategically, experts say. Perhaps do it for limited hours or on certain items not your entire inventory.
The bottom line is, “it’s really important to maintain the premium or prestige value of the brand...," Flickinger says.
Sueanne Shirzay, owner of Long Beach-based Sueanne Shirzay Jewelry, a designer and seller of artisan jewelry, understands money is tight, so early on she came up with a “Box of Cheer,” offering specific designs [not her entire collection] at a greatly reduced price.
Shirzay also had a 30% off happy hour for limited hours on her website and did a trunk show online with items that are older stock or overstock discounted up to 50% off. She’s also extended her return policy, allowing returns three weeks after purchase rather than her original one-week policy.
“I hardly ever get returns,” but it’s still important to reduce shopper anxiety, she says.
Two months before the pandemic she also added a payment feature called Afterpay, which allows customers to pay in four payments (one payment very two weeks). That’s very helpful now, she says.
“It’s really about putting yourself in your customer’s shoes,” Shirzay says.
Consumers' top incentives for buying
• Free shipping with no (or very low) minimum spend
• Flat discount on entire purchase (eg. 20% off entire cart)
• High-value gift with purchase (eg. bonus full-size item)
• Spend more, save more (ie. better % discount if spend more)
Source: ChickAdvisor survey