Brand Building Through Discounts – A Fatal Business Strategy!

By Author: William King
Total Articles: 44
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No brand, no customer, no business! This is something modern entrepreneurs know well. Gone are the days when stepping into the wholesale industry was quite lucrative, hassle free and rewarding. Now only astute wholesale suppliers reap the benefits of this business who know how to close profitable deals and adapt to the changes in the industry from time to time.
An entrepreneur majority now enters saturated niches like wholesale clothing, handbags, electronics or shoes, where snatching even a small portion of the market from the existing competitors is quite tough. In order to beat the competition, suppliers work hard to build their brands, since it is the only way out for them to survive in the market. The problem starts when, due to lack of knowledge, they devise and implement wrong brand building strategies.
I have seen many suppliers packing up their business in the starting few days of the launch of their venture and leaving the industry with a heavy heart. Many among them are those who implement a fatal brand building strategy i.e. brand building through discounts.
Huge Discounts – A brand Building ...
... Strategy!
Entrepreneurs know well customers are always price conscious and if they have to earn recognition among them, they must offer huge discounts & bargains. This is true to some extent but its wrong implementation can be fatal. For instance, if you are a clothing wholesale supplier and you sell one shirt for £20, the retail price for which is £40, it is a regular discount you are offering on bulk buying. If you sell the same shirt at £10 instead of £20 just to win more customers and earn recognition, this would be ‘brand building strategy through discounts’.
How can this strategy be fatal?
Extraordinary discounts are always fatal, since they narrow down profit margins. This strategy in the short term often seems to be advantageous but in the long run it always proves to be fatal. This phenomenon is discussed in detail below.
Very Low Profits! – The suppliers who opt for this strategy earn very little profits, since they sell just slightly above the break even point. The break even point is the point where the company sells at no profit or no loss basis and selling price of the item becomes equal to its cost price. Suppliers who have offered huge discounts can’t increase their prices easily and if they do, it leaves a bad impression. The profits they reap are very low and if any contingency arises, it becomes hard to sustain the loss which eventually results in business failure.
Unhealthy Price wars! – Extraordinary discounts initiate unnecessary price wars, in which it always ends up with one party leaving the battlefield by kissing goodbye to the industry. When wholesale suppliers offer extraordinary discounts, their competitors also slash their price as a reaction. Suppliers again reduce their price and the competitors follow. This continues until one of the companies starts selling at the break even point killing the purpose of running a business. If you too plan to engage in these wars, then there are 50% chances that the business which could fail would be yours.
Note: The best strategy to build brand is by enhancing the value of the product through its quality and demonstrating it to the prospects by using social media and other such platforms.

William King is the director of Wholesale Clothing, UK Wholesale Suppliers and Clothing Wholesale. He has 18 years of experience in the marketing and trading industries and has been helping retailers and startups with their product sourcing, promotion, marketing and supply chain requirements.