“Amongst American retailers, discounting has become so common that it’s a challenge to walk past specialty stores like J.Crew and Gap, or traditional department stores like Macy’s or JCPenney, without seeing red sale signs.” ~ The Business of Fashion
Apparently, American retailers have jumped in too far with the constant discounting. And though it appears to be a win for the customer, it’s actually unhealthy for the retail industry itself, “shrinking profit margin and diminishing brand value, making the path back to growth more difficult,” says The Business of Fashion. It’s especially hard in the United States, where European stores like H&M and Zara are eating into its market share. In addition, the discounting model in Europe is much different from the United States. “It’s almost like a drug,” says Tiffany Hogan, a retail analyst for Kantar Retail. “We’re on this 40 percent off drug that we pulse every weekend or even more frequently. What happens when you take away your promotions? Your shopper just kind of melts away because you know that you’ve trained them to come back on that 40 percent off day.” Many retailers are opening outlet stores to get out of this vicious cycle and to create off-price stores without upsetting the old brand models.
But what does all of this mean for the future of the American retail market? Discounting in and of itself is not a bad thing, right? But the future model for Amercan retailers may have more to do with promoting loyalty programs and creating a unique shopping experience and promoting benefits for its customers – and away from the price slashing.