How to avoid losses while discounting this festive season?

The festive season is when ecommerce discounts turn big and bold. All this is done in the hopes to receive massive orders that bring that glorious cha-ching! But, simple math shows that the more discounts you offer the less money you make. So, how can this festive season possibly boost your finances if discounts burn holes into your pockets?

Balancing revenue and discounts to avoid financial insecurity

Determine what to discount

MBOSS owner and online seller Chirag Gada claims that, “The additional discount during festive sales should be very low.. usually 2-5% as anyways there is good traffic during those days and sales will increase. Higher discounts can lead to losses or very low profits as post festive sales the returns are also very high. Only inventory which is to be liquidated should be discounted higher.”

Therefore, before you promote your products for the festive season it is wise to plan. Avoid promoting everything you sell. Select only products that:

• Have demand

• Can be sourced with ease

This means if it costs you too much to acquire a product, then it is best you don’t promote it through deep discounting. Also, products that sell like hot cakes are guaranteed to sell faster even at a small discount. You can also leverage discounts and benefits you receive from platforms. For example, Amazon currently has a series of offers for sellers. You can use these to lower your input cost and pass them on to the consumer.

Discount according to transfer price

Transfer Price = Costs + Margin

To figure out this price it takes a while. You need to understand how the market is responding to your products then accordingly change your selling price.

The seller behind the Cotton Chef, Farooque Memon says, “If your pricing is not right, the entire game is played wrong. You are just supplying the goods and not gaining profits. Hence if you have sustained a good pricing, it will be easy to give a lot of discounts.”

The multi-channel and inventory management firm, Browntape Technologies can record your products' performance through sales reports produced by its software. These help you identify the best and average performing SKUs and the best discount prices to sell them at during festive sales. Browntape’s price updating feature helps you change selling prices on online marketplaces at anytime.

Don’t discount all the time

“It is not necessary to give a lot of discounts every now and then. Else people have a very casual picture about your brand. If your product is always discounted, it loses its brand value.

Sellers can keep a slight giveaway of 8 to 10 percent. Discounting your product too much also doesn't catch a lot of attention. There are so many sellers who keep MRP as 999 and sell the products for 200 or 300 which is not an effective move (it’s a loss making one),” mentions Memon.  

You can even control the hour-by-hour timing of discounts with tools like lightning deals, so that your product does not need to be on discount the entire day. This has the added bonus of your product being visible to shoppers looking specifically for festive discounts.

Smart ways to discount this festive season

According to the category managers at Browntape, the best ways to offer discounts and stay financially secure are by:

• Offering combos – to increase ASP (average sales price). It also helps push the sale of slow-moving SKUs by clubbing them with fast movers. This will also enable liquidation of dead inventory and improve cash flow.

• Browntape helps sellers understand their slow and fast moving SKUs using the data analytics tools offered through its software. At the same time, the Browntape feature – ‘Bundle Creation’ helps sellers manage inventory across platforms where these combos are being sold.

• Creating coupons – for limited SKUs. Amazon.in offers different options for the creation of these. Coupons are beneficial in case you want to target only specific customers like loyal customers. Leaving discounts and offers open to everyone can lead to high returns later, which is an expense.

• Deep discount a select few – this way your entire brand catalogue gets visibility. Eg. Upto 70% off on only selected SKUs.

• Target specific pincodes – this way you again reach out with your discounts only to the audience that responds best to your products.

• Sell more at discounted rates – means you purchase/ produce your products in bulk to reduce cost of acquiring/ producing them. As a result, you have more room to offer deeper discounts.

• Reduce fixed costs – likes staff, warehousing, accounting and so on. You can opt for the Amazon FBA services to reduce your spends for efficient stocking and delivery. With the help of the Browntape software, you can manage your accounts efficiently, which means less staff expenses.