Wednesday, February 15, 2023

Thou Shalt Not Discount

You have trained as a martial artist for years and you appear at a convention center for your first competition. To your left is your mentor, you call him sensei. To your right are your teammates, cheering you on. On the perimeter, excited fans cheer from the bleachers. In the ring is a judge, steeped in tradition and rules of your art. Your opponent enters the ring. You both bow. You step up, your arms loose, fists not too tight. And you kick them squarely in the crotch and watch as they go down in a heap. The crowd gasps. Sensei bows his head. The judge is apoplectic.

Discounting in retail is a kick to the crotch. It is the lowest form of practice. Discounting is a systemic problem that undermines everyone around you and makes everyone else's job that much harder. Discounting bucks tradition, tradecraft, and if you believe sensei, all common sense. From a collective standpoint, discounting is salting the earth. Discounting is bad. Perhaps evil. They may even ban you from the convention center next time you arrive. However, discounting is also a good strategy.

We are not formal karetekas. We do not have formal training, a sensei, a body of tradition and mores. We are retailers. Retail is about supply and demand. It's that simple. There are plenty of times, and even a couple business models that allows for discounting. It is hated because it is powerful. If you know how to use it.

If you're new to retail, discounting will bury you. You have no idea what margin you need to obtain, so you will work yourself to death when it's too low. Therefore, because it is death to the novice, and it's a kick to the crotch to everyone around you, new retailers have been taught to never do this. You need to get over this. As a 55 year old formal martial artist, let me tell you a kick to the crotch is how I'm starting all my fights, and hopefully ending them. I didn't ask to be in this fight, so I will choose the rules and how it ends. If it didn't work, they wouldn't hate you for it.

When do you discount? When you have to, for as long as you need to, and not a moment longer. There is money on the table you are giving away for momentum. As an overall business model, you may have lower overall costs that let you use this as a strategy. You may be peeing in the pool, but the pool is big and there's enough chlorine between you and me, that I'm feeling pretty safe over here. 

Sometimes products are just low margin. What makes a product low margin? When you can only sell it at a low margin; supply and demand. Some products are dead and just need to go. Cut quick, cut deep, cut once. Some markets are just trash and your community might only respond to discounted product. I personally think you should move on to another business or another community, but maybe that's some elitism on my part. You might be doing great in your trash market, with regular kicks to the crotch. You do you.

What we need to avoid is an overall rule that you never discount. That's nonsense. Retailers discount all the time. It's a street fight, even if it's on main street. The problem with discounting is if you do fail, you'll likely never understand why. You'll fail slowly, while your sales might even be stratospheric. Discounting is best left as a strategy for high velocity products and dead products. If you discount overall as a business model, I will bow my head in shame when I look in your direction, but you're still alive and your opponents are swearing at you from the mat. There are worse things.

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