New research suggests that holiday shoppers are fussy about their discounts.
“Customers are already getting steep discounts from Amazon AMZN, -0.77% so unless a sale is over 25% off, it’s not head turner,” she said. Morgan said most brick-and-mortar stores realize that can’t compete on headline-grabbing price cuts alone. Companies that want to compete with Amazon and other online retailers that are heavily discounting products are introducing more loyalty rewards cards, subscription models, coupons and even perfumed stores to sweeten the deal.
Others say that 25%-off sticker may have more to do with numerology and psychology, and other unknown workings of the human brain. “That figure may just sound nicer to some people: 25% is psychologically important. It’s one-quarter of 100,” says Christopher Elliott, author of “Scammed,” a book about how to avoid shady deals. “I think we’re conditioned to respond to a 25% discount as buyers. To consumers, it’s a magic number.”
How and when discounts appear also have the power to excite shoppers. Michiel Heijmans, chief operating officer of Yoast.com, which specializes in SEO, wrote on this blog. The limited duration of discounts — Cyber Monday and Black Friday, for instance — obviously creates a sense of urgency, as does the wording and actual dollar amount of the item. A 15% discount on a $12,000 watch may not be as attractive as the same price cut on a $120 watch.
Retailers, conscious that consumers work in mysterious ways, have become more creative at selling discounts. They know, for example, that they likely have more chance persuading people to buy stuff by offering 10% off a pair of socks if the offer buy two pairs instead of one. To the consumer, that sounds like they’re getting 20% off. For the retailer, it’s a win-win: They’re actually only saving $2 off two pairs of socks and still paying $18 that may not otherwise have spent.
Consumers have, of course, become increasingly sophisticated and don’t necessarily believe that a $9.99 tie is cheaper or more attractive than a $10 tie but, while research is mixed on this subject, some suggests it still works like a charm. Some stores focus more on the placement of items: An expensive TV may make a slightly overpriced less expensive TV look attractive. It’s called the “comparison price effective” and, experts say, common in many large stores.
David Weinrot, chief operating officer at Swagbucks, said 25% as an absolute minimum for a price cut to be attractive seems relatively low to him. “I was surprised it wasn’t higher, frankly. It’s good news that retailers don’t have to discount as much as they do.” But he said department stores often have to shift inventory before the weather (and fashions) change. “It’s not unusual to discount ‘soft line’ goods like apparel and home furnishings by up to 60%,” he adds.
He cites some 2018 holiday season knock-down prices, which go far beyond the minimum 25% required by many shoppers: J-Crew is offering up to 60%, Old Navy GPS, +0.32% is advertising 60% off many items, while Macy’s M, -1.05% is offering 30% off. “Soft retailers for apparel really push hard,” he said. “It’s not anywhere near as uncommon as it may have been in the past. They are setting the ‘watermark’ for discounts in the minds of consumers.”
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