Without a sound business model, discounts are a fleeting solution to maintaining customers and profit, according to Brian Rosen of Chicago-based consultant ROCO Partners.Î¾ Rosen says until recently, discounting was used primarily to reduce inventory.
"Discounting wasn't done for cash-flow needs.Î¾ It wasn't done for survival.Î¾ It was only done to reduce inventory and make room for seasonal buys or other short-term kind of re-occurring changes.Î¾ Now what's happening is discounting is done as a way to raise cash flow, and really nothing more.Î¾ So it's no periodic, it's not two weeks a year of sales.Î¾ This is a week a month, this is every Saturday—that kind of re-occurring sales that are beginning to hurt retailers' brand."
And Rosen says discounting must be used sparingly to keep customers from automatically associating their brands or services with continual discounts.Î¾ He recommends a better business model that offers exceptional client services and satisfaction level, and take price off the table.
"Make it about customer experience.Î¾ Make it about service.Î¾ Make it about selection.Î¾ Make it about knowledgeable sales people.Î¾ Those are things that can't be easily duplicated.Î¾ Those are things that separate you apart from other retailers.Î¾ And those are things that take price off the table.Î¾ That's a battle retailers can win both big and small, and frankly, when you're going up against the big-box retailers, those are advantages the smaller box has.Î¾ Because you can't win on price.Î¾ There's two retailers in America — there's Walmart, and everyone else.Î¾ You can't compete against Walmart, so you have to play on a field that they're not good at, and that would be selection, service and knowledge."Î¾
Rosen says occasional promotions and increasing quality of the product and overall shopping experience will be more beneficial for retailers in the long run.