What to know: Target and Walmart plan to discount early and often this holiday season.
The decision is because of “inflation” and “cost-consciousness”.
In the last quarter, Target admitted that its discounting strategy to clear inventory wasn’t having the desired impact on sales. Customers weren’t rushing to buy just because merchandise was cheaper.
Does the holiday season make discounting different: Analysts predict that sales will grow this year, but not at the rate of years past.
Inflation is still an issue for customers with inflation at 8.3% in August.
Reports predict that customers will cut back on how many people they buy presents for.
This gives mixed signals about what to expect.
Discounts are problematic in any environment.
Discounting does several things:
- Cuts into profits
- Undermines brand equity
- Can push away certain segments of the market
The big key: Discounting 1% brings down your profits between 10-40%.