Your Incessant Markdowns Are Giving Consumers "Sales Fatigue"

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Your Incessant Markdowns Are Giving Consumers "Sales Fatigue"

01/19/2017
A new report from First Insight uncovers what discounts consumers expect as well as how retailers can leave behind the dangerous strategy of using big sales to drive traffic to their stores. First Insight is a provider of technology solutions that empower retailers and manufacturers to introduce the right new products at the right price.

Retailers are in a race to the bottom as they continue to use markdowns to entice consumers, creating a demand for larger, more compelling discounts. This has spawned a unique challenge for businesses, as they are forced to consistently mark down the price of items, whether it be to meet the expectations of consumers or to make up for overstocks and returns.

How retailers have created "sales fatigue"
From Black Friday and Cyber Monday to Memorial Day and Fourth of July sales, retailers have conditioned consumers to seek out deals all throughout the year. This strategy has significantly changed shopping behavior, leading the average shopper to become increasingly price sensitive and selective with their purchases.

The survey found 45 percent of women must see a markdown of 41 percent or greater to even enter a store, and 39 percent of consumers are willing to travel to another store to see if they can buy an item at a lower price.

Additionally, in a previous study, First Insight found that the majority of women are no longer interested in paying full price for items. On average, across all women's wear categories tested, consumers were willing to pay only 76 percent of full price.

Who suffers the most and who reaps the benefits?
While brick-and-mortar retailers struggle to keep pace with the rise of online shopping — 60 percent of consumers see the biggest product markdowns online — some brick-and-mortar retailers still have a reputation for offering the best discounts.

The survey found that consumers expect to find worthwhile markdowns at retailers like Wal-Mart and Target, as 34 percent of consumers think they find the best value at big box stores, followed by department stores and off-price retailers, such as Macy's and T.J. Maxx, respectively, at 26 percent each.
Consumers are less likely to turn to luxury and boutique brands for value, with only six percent finding the greatest value at luxury retailers and just three percent turning to boutique retailers. No matter the retailer, however, big brand names take a hit, as 45 percent of consumers only buy brand name items when they're on sale.

"This new markdowns-focused shopping mindset is hurting the entire retail industry as deep discounts have completely shifted the way consumers view an item's worth," said Greg Petro, CEO of First Insight. "Retailers need to stop relying on markdowns to solve their problems, and instead, re-examine their pricing strategies and invest in technologies like predictive analytics to learn more about what their customers value most."

To review the full research and recommendations on how retailers can cure their business of the markdown virus, access the full report here.