Getting Discounting Right in 2016

Posted by Alex Buckley, Sales Director, NetSuite EMEA

Deal-hungry consumers have vaulted Black Friday to the most important sales period for UK retailers, who take in £1.05bn during that time. But selling a large proportion of goods at discounted prices is having a negative effect on UK retailers’ overall profitability, according to a new study from Planet Retail.

Based on 2015 results, UK retailers stand to lose more than £38bn in potential revenue across the year on marked down sales, according to “UK Discount Pricing Strategies” research conducted by Planet Retail in conjunction with NetSuite. While more than a quarter of all annual UK retail sales will be generated by cut-price sales, discounting will deny some £20.3 billion in retail contributions to UK economic output in one year alone.

The trend of discounting is here to stay – price wars and decreasing margins, coupled with consumer expectations, necessitate it. But the current model is unsustainable – and retailers agree that they need better visibility into their total operations in order to create profitable discounting and promotional strategies.

Legacy technology impeding visibility

Many retailers are battling with current technology landscapes that are fragmented and disparate – and don’t allow for the single view of inventory, sales and customer data that could be leveraged for strategic pricing. They’ve been sold on the value of gluing this all together with best-of-breed software, to create the omnichannel view they’re seeking. But they’re now coming to the realisation that it simply doesn’t work – that if the back-end is fragmented, there’s no way to rely on the data used for customer-facing activities.

This tangled web of legacy retail management software is holding retailers back from offering more sustainable and profitable discounting and promotional strategies - such as personalised or location-based discounts, offers and promotions.

For more strategic discounting, customer, order and inventory data needs to be harmonised on one platform, that is then integrated with customer-facing POS and ecommerce systems. With inventory data that doesn’t sit in silos, coupled with reliable customer and sales data, retailers can use markdowns for maximum benefit, while also reducing margin erosion. Real-time data and complete visibility into operations allows retailers to align supply chain, assortment, and merchandising processes with changing consumer pricing and promotional expectations.

Armed with reliable data, retailers can figure out what pricing techniques will produce the best combination of revenue. For example, according to Planet Retail research, with real-time inventory data, retailers can compare strategies of doing low-level markdowns early in the season against deeper reductions later in the season to maximise sales revenue and unsold merchandise. They can also create offers based on where the customers shop, and match that with their most loyal and valuable shoppers.

As Planet Retail put it, “good promotions drive sales and improve price perception. Bad promotions lead to lower sales and destroy price perception, as well as margins.”

We will be sharing the complete results of our exclusive research with Planet Retail into “Getting Discounting Right in 2016” in our bootcamp at this year’s Retail Business Technology Expo (RTBE). Be sure to register for your chance to get exclusive insight and benchmarks into how leaders in the industry – including Charlotte Tillbury, Fat Face, Pret A Manager and WH Smith – are leveraging the cloud for optimum pricing and promotional strategies.

This year, we are on stand 591 at RBTE. Our retail experts will be on hand to talk you through how we’re helping retailers get a 360-degree view of their business.



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