Both the increasing amount and nature of price discounting are issues that are gaining prominence. This increasing prominence – and its implications regarding profitability – have been featured in many of this site’s pricing posts.
Investor’s Business Daily (IBD) published an article on February 24, 2014, titled “Retail Discounting Can Be Hard To End, Risking Profit.” The article discusses various aspects and causes of the increasing retail discounting and promotional activities.
A notable excerpt:
Minimal personal income gains continue to strain consumers, he says, placing pressure on retailers to reduce prices as they vie for shares of a consumer discretionary spending pie that isn’t growing.
“CEOs are asking themselves, ‘How do I grow in a slow-growth world?'” added Joel Bines, managing director of consulting firm AlixPartners. “The answer is to take share from competitors, and the fastest way is to out-promote them. It’s a ‘beggar-thy-neighbor’ strategy and it’s escalating.”
The article also features various statistics concerning retail discounting, decreasing margins and profitability.
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