Year-End Sales Tactics to Push Sell-Through
As we edge closer to December, fashion brands and retailers are anticipating another major retail event – the year-end sales. Aside from Black Friday and Single’s Day, the year-end sales are a long-standing promotional tactic used by retailers to clear remaining inventory of the season or a final push to hit sales targets for the quarter.
Sales can start as early as November and continue on to January. However, based on the turbulent year the fashion industry has gone through, more discounting does not sound like a good idea. Some brands have opted not to partake in these mega price slashing events to protect brand perception. For instance, Burberry will reduce discounting despite low sales this year, in favour of shallow markdowns for specific product ranges during a limited period.
In many ways, discounting is a double-edged sword. While it can boost sales, get rid of aged inventory and promote customer growth, bear in mind it can also be detrimental to the bottom line. Ultimately, too much discounting means cutting into margins with risks of diminishing brand value.
Therefore, brands and retailers must navigate the year-end sales tactically and kick the habit of ineffective discounting.
Targeting Key Areas of Your Inventory
With many brands and retailers in survival mode, the temptation to off slow demand with deep discounts is all too real. However, blanket discounting can lead to unnecessary margin cuts on still sought-after products. Instead, we suggest looking at targeting problematic areas of your inventory.
Focusing on the 151-180 days column, we see dresses as one of the slow-moving categories at ASOS UK. The data states 133 dresses launched during Spring had never been discounted despite being nearly six months old.
A deeper dive into the products within this bracket showed several dresses with intricate detailing, made of rich materials, while the rest are floral-themed midi dresses that were introduced for the season.
Based on this crucial information alone, brands can start to strategise the best discount mechanic to sell these dresses. For the more intricate party dresses, the best option is to either remarket these dresses for the approaching holiday season or introduce a shallow discount for the dresses with a high number of backed inventory to clear remaining stocks.
Spring-themed products can be marked down at a deeper discount as an off-season item. Alternatively, relevant products have the option to be rolled over to next Spring and sold at full price.
The next step is to determine the right discount depth and offer mechanics for the aged products. The key here is to find the most optimal discount rate to convert sales without over discounting. Keeping a reasonable margin on these products will ultimately lead to better profitability.
Going back to the example on ASOS dresses, the discount breakdown against sell-out rate for the category shows the 20-29% off and 40-69% off discount ranges have the highest sell-out rates. The 30-39% off discount range failed to convert to sell-out beyond 60% indicating that the products discounted in this range are less popular. Sell-out rates also increase after 70% off, however, only a minimal number of products sit within the range.
Focusing on party and evening dresses only, the discount against sell-out are narrowed down by style. The chart illustrates Swing & Trapeze dresses can convert to high sell-out at shallower discounts while Bandeau dresses can only break the 70% sell-out rate benchmark when discounted above 50%.
This allows brands and retailers to plan their markdown tactics based on sell-out rate with specificity to each style. In this scenario, we can validate the styles of party dresses we saw before such as A-line and Tunic against its respective sell-out rate and determine the most optimal discount depth.
If the goal of the markdown is to clear a high number of stocks, brands and retailers can also exercise various different mechanics to increase basket sizes. Among the popular end of year sale tactics, we saw last year include limited-time discount codes for specific categories or Holiday-themed products, free delivery and bundles such as buy two, get one half price or 70% discount for three items and above. Below are some examples of the offers featured on the ASOS homepage.
How to Best Plan a Discount Period?
Holiday sales typically take place after Black Friday weekend with increasing discounts leading up to the week before Christmas. In countries where Black Friday is less relevant, 12 December (12.12) onwards is when the sale period kicks off. While there are no hard and fast rules on when to begin discounting, especially in the current landscape with lockdowns, most brands and retailers will typically launch discounts in similar periods to remain competitive.
Due to the delay of Prime Day from July to October this year, many retailers were seen launching discounts during that time as well. The chart below shows the dates of when ASOS and Zalando launched a high number of products on discount.
While both retailers launched discounts in October, the analysis indicates Zalando launched 557 products on 11 October. ASOS followed up nearly two weeks later on 24 October but with 200 more SKUs.
This was on top of ongoing discounts of another 46,000 SKUs that were already on markdown. An analysis of that day showed the bulk of the products were mostly discounted between 20-39% off and 50-69% off.
Implementing Smart Year-End Sales Tactics
A lesson all of us have learned this year is that constant deep discounting is a short term strategy that often yields less than stellar results. As seen with shorter shopping events like Single’s Day or Prime Day, consumers are more likely to spend when the sale occurs less often. Many brands like Burberry are taking a stand to discount fewer products in shorter promotional cycles amid the turbulent trading period this year.
Most importantly, to push product sell-through, brands and retailers need to offer discounts on products that are relevant. Today’s shoppers are the most informed and diligent consumers, most will research a product well before purchasing it. As previously reported, consumers are more likely to purchase a product even with a small discount if it is of value, which is why the right year-end sales tactics need to be deployed.
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