Brand damage and luxury retail - is discounting harmful?

  • Written by Peter Needle
  • Published on 2 January 2018
  • Our Voice

Although discounting can be traced all the way back to the 1930s, it seems more and more retailers are feeling the pull to get involved. What's really surprising is that this also includes luxury brands.

Black Friday weekend saw luxury brands join the mark down mayhem for the first time. Michael Kors’ Jet Set Leather shoulder bag sold on Cyber Monday for $149, a discount of over 50%. The deals didn’t stop there, with one item found to have been discounted by 63%. Researcher Edited found that this wasn’t unusual – in fact, luxury labels offered the highest markdowns over Black Friday weekend 2017.

Does discounting cause brand damage?

On the whole, discounting is common in the retail industry, with many low-end and high street retailers using it as a pricing strategy (just think of all the bulk discounts you can get in the supermarket).

This is not so common amongst luxury brands, who tend to avoid discounting in order to protect their brand value. When buying luxurious items, it is the perceived value rather than the price that loyal customers are looking for. Speaking about the behaviour of luxury retailers in the 2017 Black Friday sales, New York-based luxury consultant Milton Pedraza, said “some of them reduced their prices without announcing it because it’s embarrassing and devalues their brand.”

Through discounting, brands become more available to a wider market and therefore lose their exclusivity. Now defunct premium fashion retailer My-Wardrobe felt the sting that discounting can have on high end brands when it faced a “wrath” for offering a 25% off voucher in magazine Grazia. The result was many unhappy designers who felt that their full price garments were being devalued. 

The key to luxury is quality not quantity

Burberry bagView larger
Burberry bag (The Guardian)

Quality and exclusivity count. When reputation is a company’s highest priority, their products must be of the highest quality. Would you buy a brand-new Porsche with a dent in it? No, we wouldn’t either.

Take a look at British brand Burberry who suffered brand damage in the late 1990s and early 2000s. The more available the brand became, the more often it became associated with bad taste and football – a far cry from the image it was hoping for. New CEO Marco Gobbetti intends to turn Burberry into a luxury brand to challenge the likes of Dior and Gucci. To do this, he plans to set prices at about 50% higher than their current price to match other brands.

It’s important to maximise quality in the manufacturing supply chain. Buyers of high-end goods are happy to pay for goods that reflect the price and offering discounts could imply a lower quality, ultimately damaging the brand. 

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