Australians are avid online shoppers and known to love a bargain as new research shows a large portion of consumers are always on the hunt for a discount code or online sale. However, only 39 per cent of businesses say their discounts drive an increase in revenue.
The new PayPal mCommerce Index released today found 68 per cent of respondents are always on the lookout for a sale or discount code and 58 per cent have made sales-based impulse decisions.
But retailers Which-50 spoke to urged caution and carefully planning are required when participating in sales events. Sandradee Makejev, founder and director at St Frock, puts in bluntly:
“If you follow what the market does you will find your margin and profit suffers, resulting in a race to the bottom on price. I don’t want to be in that race.”
Makejev said that every sales cycle is an opportunity if you have the right placed strategy behind it, but brands also don’t need other promo day.
“The sustainability movement is supporting that with companies like Everlane taking down their websites on Black Friday to make a point of buying quality over quantity,” she explained.
Makejev said St Frock strategically has a percentage of inventory in their sale category to appeal to those who are deal seekers who only shop sales.
“It’s about the balance of staying competitive and being strategic on what and how we are discounting.
“We don’t need to discount the high per cent of product that is driving majority of our profit (our bread and butter) but for very seasonal styles or trend-pieces we use to entice customers that get them to click through but don’t necessarily buy, then these are the items we can move on margin.”
The PayPal study found 53 per cent of retailers say sales attracts new customers. The report shows the average shopper buys 2.7 impulse items and spent an average of $108 online without planning as they saw something on sale.
With the influx of marketing in our inbox, consumers are now expectant of ecommerce retailers to be handing out discounts.
The PayPal report showed 50 per cent of respondents have waited until an item was on sale before buying it online and 16 per cent will only shop online when there is a sale.
Young people are more likely to wait with 73 per cent of Gen Z and 65 per cent of Gen Y waiting for a new discount code or sale before clicking buy now.
PayPal said retailers during online sales, 34 per cent of customer baskets are bigger.
Julie Mathers, CEO and founder of Flora and Fauna, said she does experience a revenue increase and a wave of new customers when there is a sale event on, but says the business is selective about which ones to participate in.
“These sales create a buzz and excitement and are a great way to get people to your website and have an experience with you, so it’s absolutely a revenue boost. Whenever you have a sale that you’re funding as a retailer, and putting a lot of marketing behind, your margin is impacted.
“Volume however may outweigh the margin impact so you see a profit gain. These sales are more than a single event in my opinion, they are great at reinvigorating the shopping experience and create an event out of it.”
Regarding margins, the PayPal report said if it is done strategically, sales can attract new customers, increase basket sizes and build loyalty.
To keep customers around after the sale, Mathers said Flora and Fauna deliver a great experience and is constantly relevant.
However, Flora and Fauna does not participate in every sale that comes around. Mathers said they took part in Afteryay Day in early March but not Click Frenzy last week.
Her reasoning was that sales days were too close together for the company.
“We like to only do a couple of these large sales a year so customers aren’t expecting them.
“We have offers but that doesn’t mean you have to have huge sales each week, they can be product specific. The most important thing, I believe, for customers is to offer an experience and be relevant.
“If someone doesn’t want to buy something they’re not going to buy something no matter what the price is,” she explained.
Online sales momentum
The Australia Post Inside Australian Online Shopping report showed ecommerce sales jumped 24 per cent with $27.5 billion spent in 2019.
In 2018, 73 per cent of Australians bought something online. Ecommerce in 2018 made up 10 per cent of total retail sales growing 2 per cent from the previous year.
The busiest time for online shopping was in November and December with Click Frenzy, Black Friday, Cyber Monday and the weeks leading up to Christmas all bundled together into a five week block.
Research from Australia Post shows the five weeks from November 11 to December 15 accounted for 15 per cent of total online sales for the year. The peak was the Black Friday/Cyber Monday week between November 25 and December 1, 2018.
PayPal said despite the Black Friday and Cyber Monday being popular, 37 per cent of Australians expect brands to offer online discounts outside of traditional sales periods.
Peter Cowan, director mid-market and small business partners at PayPal Australia said, “Sales drive action, but despite strong consumer demand for regular discounts, only one-in-five online retailers reported that they always have at least one sale running.
“This gap between consumers’ desire for finding a bargain and retailers sales activity highlights an opportunity that retailers can leverage to drive greater sales volumes and attract new customers.”