The relentless sales from big brand furniture retailers are something to which we’ve all become accustomed. Boxing Day, the summer season, and, only shortly around the corner, Black Friday all begin to merge into one rolling tide of price cuts, resulting in customers always on the lookout for discounts and yet never really believing they are saving money from these ever-lasting offers.

Competing in this environment is tough, particularly during a year when sales of high-value goods, like furniture, have been so turbulent. We review the impact of this discounting trap, created by high-profile furniture brands, before exploring how to avoid discounting products through the use of smart alternatives that can boost sales without being detrimental to your bottom line.

The curse of the discounting trap

Black Friday is on the horizon, on the 27th of November. As always, significant price cuts are expected. However, despite the hype, there is a sense of discount-fatigue, particularly in the furniture sector. Too many cut-price sales by well-known brands have meant that these ‘special’ prices just don’t feel as special any more.

Trying to compete with this level of price-cuts is challenging, particularly for smaller retailers where margins aren’t so big, and it becomes simply unviable for their profitability.

An erratic year of furniture sales

Furniture manufacturers and retailers have been on a bit of a roller-coaster ride with their trade throughout 2020. The lockdown in March saw manufacturing forced to stop and retailers close their doors, leading to many employees being furloughed.

At the same time, the lockdown travel restrictions also created customers with more money to spend and wanting to improve their home, where they were now spending so much more time. Online orders soared, and when retailers opened their doors in mid-June, business began booming.2

The repercussions of this spike in sales is a shortage of foam and particleboard, reducing production capacity and driving up costs in the run-up to Christmas3. Furniture retailers have been left needing to pass on these increases or close their order books early at a crucial time.

However, the industry is under no illusion. This rush of sales could quickly turn as the country faces an economic downturn, and they deal with the added complication of Brexit also interrupting material supplies.4 A clear, effective strategy is needed to retain profitability, and, for many furniture manufacturers, traditional discounting is not the answer.

The long-term impacts of discounting

Traditional price cuts are used to drive footfall into stores and create a sales uplift across specific product lines. And it works – for the short term. However, these untargeted price discounts are an extremely costly way to boost sales, unnecessarily cutting sharply into your margins. Recovering your full-price position also becomes very difficult, which can have disastrous long-term effects on your bottom line.

Furthermore, with so many furniture retailers using discounts to attract their customers, the impact is becoming lost, and promotions of this kind lack any point of difference against competitors.

It is vital that furniture retailers understand how to avoid discounting products whilst retaining sales if they are to remain profitable. The good news is there is a smart alternative to traditional discounting that protects margins and offers the same, if not improved, motivation to buy.

How to avoid discounting products – alternative solutions

There is a range of innovative sales promotion solutions that can be used to engage your customers, drive a sales uplift and deliver improved profitability.

Designing a creative campaign, using tactical promotions, will create the same buzz around a product as upfront discounts. Proven in effectively removing the purchase barrier, they provide brands with a much more cost-effective method of promotion.

Examples of these promotional strategies include cashback campaigns, gifts with purchase or instant win offers:

  • Cashback rewards highlight customers’ savings and motivate purchases without the need for upfront discounting.
  • Gift with purchase promotions work on a similar basis, presenting better-perceived value for the customer with the addition of a specially selected, market-relevant gift.
  • Instant wins campaigns use high-value, sought-after rewards with the added excitement around a competition to drive sales.

Securing longer-term profitability, particularly during a climate of uncertainty, will also be immensely valuable to your brand’s future. Strategic sales solutions strengthen brand loyalty, shorten refresh cycles, widen your reach and lead to an increased share of the customer wallet.

Mechanics that achieve these goals include referral and rewards programs, which use strong incentives to drive recommendations and reviews, and trade-in promotions, which offer time-limited rewards to motivate product upgrades.

Creating smart sales promotions provide customers with a compelling reason for purchase without the need for costly upfront discounting. Working on the basis that only the most engaged customers make their claim, promotional costs are significantly reduced – often by up to 50%!

Furthermore, driven by market insights, these innovative and unique campaigns create a point of difference when compared to competitors’ relentless discounting.

In a highly competitive market, finding cost-effective solutions that allow you to avoid the traditional discount trap is critical. And with a discount-fatigue setting in and an increased sense of uncertainty about the actual savings being made, campaigns that offer something of value are shown to be highly responsive.

To find out more about how Opia creates market disruptive promotions that allow your brand to stand apart from your competitors, engage customers and drive a sales uplift, please get in touch with our strategy team.

 

1 https://www.idealhome.co.uk/news/black-friday-257538

2 https://www.theguardian.com/business/2020/oct/10/covid-boom-uk-furniture-firms-sitting-pretty

3 https://www.furniturenews.net/news/articles/2020/10/940782193-material-shortages-affecting-furniture-production-and-pricing-says

4 https://www.business-live.co.uk/manufacturing/manufacturer-reveals-how-lockdown-led-19019417