Retailers warned about the perils of discounting in run-up to Black Friday

As retailers slash their prices this week in the run-up to Black Friday and Cyber Monday, experts are warning about the negative impact discounting can pose on brands.

Shoppers are predicted to spend £1.5 billion online this Friday alone while this week’s overall in-store and online receipts are expected to hit £10.4 billion.

But discounting does not always have a positive impact on retailers. Research by online payment provider Klarna found that 53 per cent of the retailers  say that sales are having an adverse effect on their profits, with 11 per cent claiming that discounting cost them over £25,000 in 2017. What’s more, 63 per cent of customers don’t return to a retailer after purchasing an item discounted during Black Friday or Cyber Monday.

Pini Yakuel, CEO of Optimove, comments: “Once the discount period ends, the customers attracted by slashed prices will stop coming. We have found that shoppers who make their first purchase from a brand over the discounting season are 19 per cent less likely to return to make a second purchase, rather than someone who buys at any other time in the year. If a business wanted to tap into Black Friday and Cyber Monday trend, discounting must be used in a strategic way to start and maintain an ongoing relationship with the customer.”

He adds: “Black Friday is rightfully seen as a critical moment to generate revenue and kick-start the holiday trading season, however retailers should retain a long-term mind-set when devising their discounting strategy, and use a data driven approach to foster long term relationships with their new customers.”