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US online retailers' erred discounts to tune of $9.24mn
May '17
In 2016 US retailers missed $9.24 million in revenue by miscalculating the optimal percentile in which to discount items, according to a discount analysis of luxury, premium and mass market men’s, women’s and children’s US apparel, accessory and footwear brands, carried out by EDITED, the world’s biggest source of real-time data for brands and retailers.

The analysis included 114 online retailers in 2016.

EDITED’s platform analysed when the same products across retailers sold slower when discounted at a different percentile to identify the lost revenue amount. The women’s luxury goods category incurred the biggest loss, accounting for almost half ($4.3 million) of the total revenue missed last year. Women’s luxury goods were discounted at 40-50 per cent initially compared to 30-40 per cent, leaving products on shelves for 19 days longer. Menswear luxury goods lost over $687,000 in revenue when discounted at 40-50 per cent versus 30-40 per cent, with products not selling for 11 extra days.

“Discounting tends to happen once retailers have worked out consumer demand isn’t high enough, but our analysis proves that an aggressive price reduction is not always the best approach,” said Katie Smith, senior retail analyst at EDITED.

“The extent of how much a retailer discounts its products depends on a multitude of factors - including timing, product type, category and popularity. Having this level of granularity can quite literally mean that a retailer adds - or loses out - on hundreds of thousands of dollars per year in revenue.”

EDITED’s retail discount analysis also showed that premium goods discounts are a mixed bag - when women’s premium goods were discounted at 20-30 per cent off, retailers lost $1.69 million, with products not selling for an extra 16 days. However, men’s premium products did not experience a significant revenue loss, indicating a more aligned discounting strategy with consumer demand.

Mass market showed the best discount to sales approach - for womenswear, products sold 11 days faster when first discounted at 30-40 per cent rather than 40-50 per cent. Retailers lost over $1.59 million in needless reductions with this approach. Meanwhile, mass market menswear retailers would have pocketed over $517,000 in sales had they chosen to discount at 20-30 per cent rather than 30-40 per cent, the analysis found.

Out of all the categories, luxury items take the longest to sell even when discounted, with menswear luxury items sitting in inventory for over three months on average followed by womenswear, 106 days and children’s, 70 days.

On the other hand, discounted mass market childrenswear took only 43 days on average to sell, compared to 80 days for premium products. Mass market womenswear took 63 days compared to 76 days for premium items. Finally, mass market and premium menswear took 67 days and 80 days to sell respectively.

EDITED’s platform includes a discounting tool that helps retailers better understand and compare discounts with competitors’ first, current and deepest markdowns in real-time. Using these insights, retailers can develop a discount strategy to optimise its margins. EDITED analysed retailers selling men’s, women’s and children’s luxury, premium and mass market brands online from January 1 to December 31, 2016. (SV)

Fibre2Fashion News Desk – India

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