At thegreenlabels, we understand the power of discounts and sales. No other marketing activity works better than an ‘end of season’ price-cut, but what does this mean behind the scenes? We’re asking the question – what effect does discounting have on a brand, the consumer, producers and our planet?
Consumers
Oh ‘Sales Season’ has come! We’ve all felt excited about it at one point? A temporary discount creates an opportunity, the last chance and a need to act quickly. This feeling of immediacy can, at times, drive us to purchase an item with less attachment, love, or certainty. Looking at the price tag and thinking "it's such a good deal" can also cause us to be more spontaneous and buy items that aren’t always true to our personal style. For these reasons, we might end up only wearing an item two or three times and be more willing to discard it faster than something we saved for or deliberated over. As a consequence, our wardrobes start to overspill with unworn, unloved items and then the time comes when we need Marie Kondo to help.
As the consumer, we’re throwing away our hard-earned money. Research shows that on average we dispose of the equivalent of €72 worth of clothing every year and this amount has doubled in the past 20 years fuelled by discounts and the fast fashion industry.
Brands
Research shows that more than 64% of online consumers wait for Sales before buying anything. As a consumer, we can all predict the moment a beckoning email will land in our inbox, laden with ‘unmissable deals’ and a warning that it won’t last long. As Discount Sales started to help clear some lingering stock before launching into the new season – how does this predictability affect the original reasoning behind Sales? The discount is expected, becoming the rule rather than the exception, losing their elusiveness, ability to boost sales and so becoming unprofitable in the long run.
Sales lower brand value. In the short term, the ‘discounted price’ creates the feeling that this is the new, more accurate price and that paying more isn’t worth it. In the longer term, the predictability mentioned causes consumers to reconsider the value of the items offered and can result in a brand being devalued. This is why some luxury brands never go on Sale. They place emphasis on emotional drivers and brand perception to drive sales. How can they do this? Well, having a premium brand image coupled with a mark-up sometimes as high as x 20 (retail price = 20 x cost price versus ± x 2/3 in the sustainable fashion industry) helps these high-fashion brands make more money with each purchase.
Sales negatively impact margins. Margins are the value difference between the retail price and the actual cost of the item, if the retail price has to drop through discounts then the margin drops. When a business has to resort to Sales they need to sell a lot more during the Sales season to try to make up this loss.
Social & Environmental Impact
Lowered margin = cost cutting even if some brands argue that discounting doesn't affect how much they pay their suppliers, is that true though? Yes, in the short-term, at the point when an item is being discounted a price has previously been agreed or even already paid to the producers. Looking towards the long term if a brand has to regularly rely on discounts, the impact on margins can cause them to cut costs. This may mean they need to reduce the cost of future production, which can lead to a direct impact on raw material and fibre choices and overall quality of the product.
What does it mean for a small business like thegreenlabels?
As a retailer, we need to predict what will sell and what won't. It’s a tough job, especially when starting up and without experience from past seasons. It happens that we end up with overstock in some items, leaving our investment for the future season wrapped up and sitting on the shelf. As we want to keep bringing you the best sustainable items, to discount is our only option at the moment. So for our second season, we are borrowing a method from Everlane, where, as the consumer, we leave it up to you to “Pick your Discount”. The lower the discount the more you support us in our growth.
Here is how it works:
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35% discount | 30% discount | 25% discount | 20% discount | 15% discount | 10% discount |
| 0% of the price goes to us | 5% of the price goes to us |
10% of the price goes to us |
15% of the price goes to TGL |
20% of the price goes to TGL |
25% of the price goes to TGL |
30% of the price goes to TGL |
| We get back what we invested in the purchasing of the garment | Covers shipping costs |
Covers shipping & packaging costs |
Covers operational costs |
Covers website operational costs |
Helps us grow developing new website functionalities |
Helps us grow adding new clothing category |
Written by founder Claudia Angeli
