Customer Footfall Analysis
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In the previous article, we have already seen what Black Friday sales or deeply discounted sales are. We also know the economic rationale behind such sales.
Some of the benefits which are derived from these sales have also been discussed in the previous article. However, it would not be appropriate to say that deeply discounted sales do not have any drawbacks.
There are some significant drawbacks associated with such pricing. In fact, the impact of these drawbacks can last for a long period of time.
Hence, it is important to know the economic and financial shortcomings of using deep discounting as a strategy in the retail sector.
There are many retail experts who believe that Black Friday sales are a sure-fire way to increase your sales in the short run. However, it damages the financials and reputations of the business in the long run.
Hence, at least some part of the revenue which is generated on Black Friday is actually generated from revenue which is lost on a day-to-day basis. This means that retailers are effectively cannibalizing their day-to-day sales in order to generate huge sales on Black Friday.
However, with the rise of online retailing, customers can get the same price from the comfort of their homes. There is still some discomfort involved in availing these prices. However, it does not totally disrupt the holiday schedule. Hence, even people who work busy jobs are willing to spend an hour or two if it saves them a significant amount of money.
When brands start selling deeply discounted products, they no longer remain exclusive. As a result, customers which buy these products at full price tend to feel cheated.
Hence, the whole concept of customer relationship-based marketing ceases to apply if a store starts deeply discounting their products at regular intervals of time.
Aggressive price cuts by retailers are matched with even more aggressive price cuts by their competitors. The end result is a permanent state of price war which does not benefit anyone in the industry over the long term.
Since almost all retailers organize their sales at the same time of the year, they are forced to spend a large amount of money to ensure that their customers are aware of the prices that they offering. As a result, retailers are forced to spend large sums of money as communication spends. Since the cost of advertising has skyrocketed in the recent past, this communication spend rapidly add to increasing costs and end up making the event financially unviable.
The above points clearly demonstrate that deep discounting is not a strategy which can be followed by every retailer. There is a very clear impact on long term sales, profitability as well as the overall brand value of retailers if they decide to use this strategy. It is important for the retailers to be mindful of this impact and create their strategy in such a way that they can avoid the negative outcomes associated with deep discounting.
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