When the seasons change, shoppers go a little crazy. Retailers lure them in with deep discounts and promotions on everything from clothes to electronics. These seasonal sales create a shopping frenzy that can significantly affect retailers’ profits – for better or worse.
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The Markdown Madness
To clear out old inventory for new seasonal goods, retailers slash prices drastically during seasonal sales periods like after-Christmas and back-to-school time. They buy merchandise at wholesale prices, but then markdown items by 50-70% off the regular retail price during these events. While this attracts bargain hunters, it also means selling items at a loss or tiny profit margin.
For example, a retailer may buy a pair of jeans at a $20 wholesale cost and originally sell them for $50. During a seasonal sale, they mark them down to $19.99, almost giving them away at cost just to get them off shelves. The same goes for products like wholesale sunglasses bought in bulk from a supplier like Olympic Eyewear, but then heavily discounted to lure shoppers.
Playing With Fire
This “markdown madness” is a risky game. If retailers do not plan carefully, they can easily lose money overall despite the customer traffic bump. They need to precisely calculate sale pricing versus supply volumes to turn a profit while clearing inventory. It is a delicate balance that can make or break their bottom line for that season.
The Power of Volume
Alternatively, seasonal sales can be a terrific way to boost overall profits through sheer volume. While per-item margins are slim during sales, retailers can easily make it up with a high quantity of transactions and premium impulse purchases.
For instance, retailers may discount basic apparel heavily to draw shoppers in. But then they strategically merchandise and market complementary accessories and splurge items at full price nearby. A shopper lured in by a $9 t-shirt sale may impulsively grab a $60 handbag or $125 pair of shoes they spotted while in the store.
Playing With Psychology
Retailers deploy some clever psychological tactics during seasonal sales too. The main draw is the “fear of missing out” – shoppers believe they are getting unbeatable deals for a limited time only. So they’ll buy more than they planned, even on regular-priced items.
Merchandizing also uses recognized pricing techniques like ending sale prices with 0.99 or 0.97 cents instead of whole dollar amounts. This seems like a trivial amount but subliminally signals value to our brains. Colors, layouts, and messaging work together to put shoppers in a bargain-crazed mindset.
The Thrill of the Hunt
Part of what drives shoppers into such a buying frenzy during seasonal sales is the thrill of the hunt. Scoring an amazing deal feels like a personal victory; tangible proof of one’s savvy shopping skills. Retailers capitalize on this by gamifying their sales, creating a sense of competition and accomplishment around nabbing the best bargains.
Tactics like limiting hours and heavily discounted items, having “doorbuster” deals only available for the first few hours, and offering stackable coupons all tap into people’s innate desire to win by getting the lowest price possible.
Conclusion
Ultimately, seasonal sales require meticulous data-driven planning and flawless execution by retailers to capitalize fully. They must carefully forecast demand, order the right inventory volumes, manage markdowns precisely, and optimize their store experiences.
Those who get it right can use seasonal sales to clear old stock, sell more full-priced merchandise, gain market share, and build customer loyalty. Those who get it wrong are left with unsold clearance items, no profits, and such a headache they will need to lie down. The impact is that dramatic.