Discounts on E-commerce website are harmful in the end | MBA in Bangalore

Posted by Prof Manoranjan H P On 08/07/2022 12:10:01

As more people shop online, the value of the Indian e-commerce market has surpassed USD 28 billion in 2019–20. Actually, from 12 percent in 2020 to 18 percent in 2020, buyer penetration has significantly increased. The e-commerce industry has experienced a tremendous increase in popularity, largely due to discounts.

Discounts are a tried-and-true marketing tactic for luring clients. Everyone uses this method to outperform their rivals, including small e-commerce apps and huge e-commerce giants like Amazon, Flipkart, Myntra, etc. A recent poll by Lab42 found that 7 out of 10 respondents buy online for better deals and 2 out of 3 respondents shop online because it is less expensive, which is a lucrative incentive to draw clients and increase market share. MBA in Bangalore

But does this "race to the bottom" ultimately succeed? Discounts can occasionally entirely destroy a product, and the seller eventually bears the loss when there are very few margins left to support business rivalry. Top Ranked MBA college in Bangalore

Benefits of discounts on e-commerce platforms

  1. Long-term discounts for loyal clients keep them coming back- Discounts are also a better approach to keeping loyal, long-term clients. It promotes consumer loyalty and gets people to keep making purchases from your website. For instance, one of the numerous strategies to keep clients over the long term is to provide Amazon Prime members with a variety of privileges, such as free shipping, Prime Music, and Prime Video.
  2. Intensify AOV (Average Order Value)- AOV determines how much money you make (on average) from each checkout. Combining several products into one package aids the seller in generating sales for the product segment that is losing money. Customers are enticed to acquire the product at drastically lowered prices. This is one of the reasons why e-commerce behemoths find success with discounted tactics.
  3. Makes new customers more likely to make purchases- Discounts aid in both the retention of current clients as well as the growth of clientele by luring in new ones. New clients are drawn by discounts to purchase on e-commerce platforms where they may take advantage of free home delivery as well as significant savings. Shoppers claim that free shipping is the reason why 73% of the audience buy products online.
  4. Increased market share and sales turnover- The end goal of providing such an astronomical discount and employing numerous promotional techniques is to boost sales turnover and market share. Discounts aid in luring clients and building a solid clientele that later becomes a platform's most devoted clientele.

Demerits of discounts on e-commerce platforms 

  1. Difficult renewal and repair- Even though the product has a guarantee, it gets challenging to replace and upgrade the product. Customers are dissatisfied with the length of time between reporting a complaint and having it repaired or renewed.
  2. Products don't adhere to the quality requirements- Large discounts on products frequently mean that they do not meet quality standards. Typically, things offered at steep discounts lack warranties. Customers are therefore impacted and see their trust in the brand and business decline as a result.
  3. Decreases consumer faith- Because of the astronomically huge discounts, consumers may eventually start to lose faith in the company and its goods. Continuously offering discounts, particularly at accelerating rates, may eventually start to draw attention. Customers may start to have doubts about the product's quality.
  4. The profit margin is harmed by unrealistic discounts- E-tailers are offering their products at unanticipatedly steep discounts, and e-commerce companies are employing unrealistic price strategies as they compete to establish their brands. For instance, incredibly substantial discounts were provided during Flipkart's Big Billion Days and Amazon's Great Indian Sales. It might later have an impact on the company's brand reputation.

Conclusion

A smart starting method to grow the client base and the audience is to provide discounts. But simple discounts have a tendency to devalue the e-commerce market. One should focus on product innovation and diversification once a sizable market base has been built. Long-term discounts could damage the reputation of existing online retailers. Instead of relying solely on discounts, one must continually improve the calibre of the services provided and employ other marketing techniques.

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