Members only: the madness of modern discounting

Bargain-led consumers need motivation to purchase. Triggering somebody to buy often takes a logic like ‘girl math’, where a person works out the number of times a product will be used and the investment value of the goods towards making them happy, or a simple discount. As Black Friday proves, we are still addicted to discounts, the bigger the better.

Omichannel retailers and brands usually keep discounts the same for both online and offline sales. Online makes it much easier to compare prices, but when physical stores sales are cheaper to fulfil for the retailer, it is interesting that many stores don’t increase the discount in-store to get people out of the house, take away the delivery costs, and while they are there who knows what else they could discover. People do half the work for the retailer, taking the item there and then, getting it home themselves and negating any hassle or damage for the retailer from delivery. This must be a serious headache for online retailers particularly at peak times of the year like now.

Omnichannel retailers themselves agree that in store has the highest profit margins. From a supply side perspective, online is significantly more expensive than in store. Online came in at 30% more, with BOPIS (buy online pick up in store) at 23% and online ship from store at 12%. This is why so many DTC brands have struggled with the high discounting environment online. Online appears cheaper because retailers are willing to sell at low or negative margins.

Online is perfect for when you know what you want, but physical stores are all about discovery. If brands thought about exclusive in-store only deals or discounts, it could generate considerable footfall and a positive knock on effect to the rest of the store and the town or city centres where they are located.

Last year, a well-known department store group was offering online discounts - 3 for 2 - on Christmas decorations but nothing in-store. This penalises people who have made the effort to come into store and buy even though those sales make more money for the retailer. This same retailer was even asking its staff to click and collect online purchases rather than have them delivered to save the company money. Madness.

The split between physical stores and online sales in the UK is about 80/20 and looks set to stay at these levels moving forward. Physical stores have seen a strong bounce back since the pandemic and online sales have flatlined or fallen. Most retailers are heavily invested in omnichannel, but if you make more profit per item in-store doesn’t it make more sense to motivate more consumers into them and keep them coming?

In a world with no brand loyalty, it is amazing how many loyalty schemes there and how many retailers and brands have jumped onto ‘members only’ pricing. It is estimated that more than 90% of companies now have some form of loyalty program and have followed Tesco’s lead in offering significant discounts if you use your loyalty card.

According to Mintel, the majority of shoppers hold memberships with between two to five different loyalty schemes, with 14% holding six or more.

Even the local garden centre is offering cheaper members prices, which just creates another eye-roll if it requires downloading another app and signing up to a daily mailing list and remembering another password for the sake of what previously was a simply a ‘special’ before.

A whole industry has sprung up to service loyalty programmes and are invested in maintaining them. It’s clever, but also alienates consumers who aren’t frequent visitors. Many consumers are a bit fed up with these loyalty card only prices. They are basically forcing membership and making you feel stupid to pay more. Why penalise someone who only shops occasionally or doesn’t want their data collected? Also, it makes your prices seem untrustworthy, inflated and confusing.

Which?, said in September, that Sainsbury's and Tesco are using "dodgy tactics" by increasing the prices of everyday items so the discounts for people with loyalty cards look bigger than they really are. It’s like retail blackmail.

Could this be a fad as consumers start to rebel, sales drop off and new memberships slow? No one wants to be a member of every damn retailer they walk into.