January has been the month of never ending sales, here's why

Tuesday, 24 January 2023

Smith & Caughey's January sales promotion started on Boxing Day.

Everywhere you look, signs in shop windows advertise discounts. Boxing Day sales have been and gone, as have discounting typical for public holidays, so why are the sales still around?

Typically, retailers enter a period of heavy discounting just ahead of Black Friday in November and in the lead up to Christmas. Followed by Boxing Day as a way to get rid of older stock.

Then comes the public holiday or weekend-long promotions.

However, January seems to be one big continuous sales promotion.

* Boxing Day bargains abound but shoppers find it less frenetic this year

* How to bag the best deals on Boxing Day

Smith & Caughey’s managing director Edward Caughey said discounting had become more important than ever as retailers grappled with inflation and rising operational costs.

Edward Caughey says Smith & Caughey's is moving away from discounting.

Discounting to “boost cash flow” was a natural response to that, but he warned it was ultimately a “race to the bottom” that would result in “margin erosion” for retailers who would have to reduce service levels and capability to compensate.

The family-run department store broke tradition this year, starting its sales on Boxing Day running through to the end of January. Typically, it would have two separate promotions in the month.

Caughey said Smith & Caughey’s priced its items in line with their recommended retail prices and offered genuine discounts during its sales promotions. However, some retailers practised ‘marking up to mark down’ to inflate the regular retail price of an item well beyond what it should be selling for, then have regular promotions where the item is discounted aggressively.

A wide range of retailers are having prolonged periods of sales and discounting.

AUT marketing lecturer Amy Errmann said this was a common sales tactic used by retailers, called anchoring.

A retailer would post a regular price to “anchor” the shopper to psychologically believe that was the price to pay for a product, along with a discounted price to make them believe they are getting a deal.

”[Sales] are important from the point of view that every retailer needs to clear residual seasonal stock, to make way for new season collections. But they are not anywhere near the core of our strategy,” Caughey said.

Discounting by retailers helps to push sales volumes and get rid of old product to bring in new.

“We are progressively reducing the amount of discounting we are doing. Our goal is to house only the most coveted, exclusive brands and hero lines, the demand for which means that sale events become less necessary.”

Errmann said that in January there was typically a surplus of product leftovers from the gift rush during the holiday season – and it was in the best interest of retailers to get rid of the stock quickly to make room for the year’s new designs and products.

Not selling as much as they usually would to get rid of stock could also be why sales promotions were continuing on a lot longer than they normally would.

There was also more competition in the market, Errmann said.

“One trend that is happening in Aotearoa – and also around the globe – is that retailers are competing to attract more frequency of sales with the same consumer to attract loyalty.

“If we think of consumer spending as a pie, it is not necessarily getting larger – so retailers are having to compete for a larger piece of the pie to post growth. We may be seeing more sales around us as we observe retailers competing for that larger piece of pie,” she said.

“We are seeing inflation increase, while the salaries of mainstream consumers and the middle class consumer may not necessarily be increasin. Retailers are having to compete for wages that seem more scarce to workers.”

One retail sales assistant Stuff spoke to said it was the end of the season, meaning retailers were working hard to get rid of last season’s stock ahead of new product restocks.

Some sales promotions on selected goods had no end date and were on sale until they sold out.

An Auckland sales assistant at H&M Newmarket said Covid-19 related shipping delays had meant that some previous season stock had arrived late but needed to go to make space for incoming new stock and this was why there were so many sales on.

Errmann said discounting was likely to continue as the year progressed. She warned while this probably meant good profits for business, it came at a cost to the environment.

“Consumers can expect discounting, or at least perceived discounting, to be a new normal. One of the reasons is that retail has adopted a model similar to fast fashion. This means that product lines get updated much more frequently – monthly rather than by season – and therefore trends change much more rapidly.

“Discounting helps retailers push volume by getting rid of the old designs and bringing in the new. Just keep in mind this might be friendly for profits, but not for resource use that impacts the environment.”