Report reveals cost of discounting

Exemplifying the discount culture that dominates modern retail, 57 per cent of Australians have said they will buy from a new brand if they’re offered a discount, according to research by advertising platform Criteo.

The ‘Why We Buy’ survey found that consumers will change purchasing behaviour based on discounts, and will return to a retail brand if is offering a stronger discount than its competition.

“It’s no surprise that Australians love a bargain, but what we might not realise is the cost it is having on our retail industry with local businesses facing immense pressure to continually offer sales and discounts to customers, impacting overall profit margins,” Criteo Australia and New Zealand commercial director Colin Barnard said.

“Discounts have traditionally enticed new customers to make impulse buys, often with brands that they may not have considered buying before.

“In today’s retail landscape, the number of sales available has completely diluted the market, challenging retailers to stay even more competitive.”

According to the research, a further 50 per cent of customers will purchase a new brand that is recommended by a friend, while 48 per cent are enticed by a tree trial or sample.

These results align with information released by the Reserve Bank of Australia, which said the retail industry was suffering from the weakest business conditions of any industry in Australia due to declining profit margins, impacted by the consumer desire for lower and lower prices.

“This price competition… affect the profit margins of retailers as they seek to maintain a ‘lowest price position’ in the market [which could] influence other business decisions and have wider economic consequences,” RBA senior representative Matthew Carter wrote.

According to the RBA, retailers are offsetting this decline through the implementation of cash-saving methods, such saving on rent and labour – potentially through the closure of physical store locations.

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