With Vogue Online Shopping Night just around the corner, retailers are bracing for a surge in sales. However, new research from marketing platform Klaviyo warns that relying heavily on steep discounts to drive short-term gains may ultimately have a negative impact in the long run.
Brian Kealey, Klaviyo's VP and MD APJ, says the appeal of a big discount day is obvious but often misleading. "Shopping moments like Vogue Online Shopping Night tempt retailers to offer discounts for a quick sales peak, but deep discounting is a short-term fix that threatens long-term growth."
The post-sale hangover
According to Kealey, heavy discount days tend to attract existing customers rather than new ones. "Instead of bringing in new audiences, heavy sales days mostly drive existing loyal customers to buy core inventory at a bargain. This jeopardises future demand and leaves brands nursing a post-sale hangover."
Kealey points to Klaviyo's own research, produced with James Hurman, which found brands that run deep discounts see revenue drop by an average of 27% in the two to four weeks following a major discount period. "Even worse, data shows deep discounters actually grow 50% slower than full-price retailers across every price point. Slashing margins simply doesn't scale a business."
A measured way off the discount treadmill
Kealey isn't arguing retailers should abandon discounting altogether, he says stopping abruptly isn't the answer either. Instead, he recommends gradually tapering off big event discounts in favour of more targeted, value-add incentives. "Turning off the tap overnight isn't the answer either. Brands need a measured approach... gradually tapering off deep event discounts in favour of targeted, value-add incentives that protect both brand reputation and profit margins would be the solution."
His overall message to retailers eyeing next week's sales event is to think beyond the immediate spike. "Ultimately, relying on mass sales events to chase quick revenue is a trap. Sustainable growth belongs to the retailers that step off the discount treadmill and focus on preserving full-price value."
Note: figures cited are from Klaviyo's own proprietary research and have not been independently verified.