The black curse of discounting

by Gordon Hooper. Almost 30 years ago, one of South Africa’s greatest retailers at the time embarked on a strategy of weekend discounting campaigns, alternating through various merchandise categories to help prop up turnover. The board instructed the marketing director to implement the discount strategy, and the marketing director responded with reluctance, warning that the campaign was akin to “embarking upon a course of heroin from which we may not emerge”. Unfortunately for the retailer, these words rang true, contributing to its significant decline in business performance over the years that followed.

The thing is, discounting can be bad for business. Giving in to frequent and consistent discounting campaigns creates an expectation for shoppers and sets a precedent. They tend to wait to purchase the items only at the discounted price, holding out for a better deal, forcing more discounting campaigns, and further squeezing profit margins. Black Friday was originally an American, and specifically Philadelphian, tradition going back to the early 1960s. The term originated from the description of the heavy pedestrian and motor traffic associated with a mass shopping spree following Thanksgiving (which was always scheduled for the fourth Thursday of November).

As time marched on, retailers began competing for their share of this last Friday of November spike in consumer demand, quickly disappearing into the heroin-like rabbit hole of no return and no returns. Of course, in South Africa, most of us grew up without Black Friday. And we don’t celebrate Thanksgiving! Somehow, however, Black Friday spread from Philadelphia throughout the United States and then managed to spring its curse across the shores into many countries abroad, including our own South Africa. An estimated 60% of the globe’s 195 countries currently ‘celebrate’ Black Friday.

Black November

Not content with merely contaminating a large portion of the global geography, the past few years have seen Black Friday extend to Black Friday and Saturday. It didn’t take long for this to migrate to Black Long Weekend. And even Black Week. It was noticed with great interest that a major and well-known South African retailer last week published their intention to run, “Black November deals from 1 – 30 November, released in four sets of weekly deals on popular items”. So, we have now morphed to Black November. Having run amok geographically, the Black Curse of Discounting is extending its DNA across time, now spanning the whole of November. Will it end there? Will we see Black Summer next?

It’s anticipated that retailers will take on a more aggressive Black Friday approach this year to compensate for the impact of COVID-19 on the economy and consumers’ budgets. Brands jumping on this bandwagon include Incredible Connection, Foschini, Superbalist, and Pick n Pay. But what are the effects of the Black Curse of Discounting? It increases store traffic, thereby putting pressure on consumers and operational staff alike. It provides an opportunity for retailers to clear stock. In fact, I believe it induces consumers to buy products that are substandard, mismatched to their needs, or even that they did not want in the first place. Many of these purchases go on to be delivered as Christmas presents to loved ones, indeed thereby delivering discounted love. And, to boot, it reduces margins and, therefore profitability, for everyone.

Clearly, the Black Curse of Discounting leaves very few winners and, like heroin, ultimately is a lose-lose deal. Everybody loses in the long run. Why do we do it, and why is it growing with massive impetus globally? That is what plagues, and pandemics do. And that is what black holes do. There appears to be no logic behind it, but simply the way it is. In the meantime, let’s not short-change our loved ones by discounting our love implicit in the Christmas and year-end spirit. Maybe it’s time to go shopping driven by the purity of our needs,  rather than by the mad frenzy of the flock. And perhaps it’s time for retailers to stop throwing profits into the black hole called the Black Curse of Discounting. But we probably won’t.

Main image credit: Pexels.com.

Gordon Hooper is the co-founder and managing director of Bateleur Brand Planning, a South African market research and brand planning agency.

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