Offering Extraordinary Huge Discounts A Negative Business Strategy!
Offering wholesale products at rates lower than their retail price is what wholesale business is all about
. Since competition is heating up in modern wholesale industries where many new entrepreneurs are launching similar business ventures, its becoming hard for existing businesses to retain customers and maintain their position in the industry.
With increased inflation worldwide, modern customers have become quite price conscious. In order to attract them, many wholesale suppliers offer extraordinary discounts. These discounts are normally more than the regular discounts on the purchase of
Wholesale Products and are offered due to following two reasons:
1.To introduce new customers in business
2.To reward existing customers
Being a wholesale supplier with years of experience in bulk dealing, I have come to know that huge discounts or bargains kill the business potential and lead it to failure. Those, who go for this strategy, reap temporary rewards but in the long run, they deteriorate their business viability. The following pointers discuss how extraordinary discounts are harmful for your wholesale business.
Lose Brand Indentify!
Generally customers perceive discounted products as inferior quality items providing low value to them. For this very reason, branded companies in order to create and maintain their brand image, never slash down their price below a certain limit. Despite their high price, people are always crazy to buy these products because they perceive it as high quality and value added items. When business starts selling at unimaginably low prices, it loses their brands worth and reputation in market.
Initiate Price Wars!
When wholesale suppliers offer discounts, their competitors who have been keeping eye on them also slash their prices because they never want their customers to shift to other businesses. When wholesale suppliers see their prices have become competitive in the market, they further cut them down to take an edge over their rivals and the same process is repeated. This creates unhealthy price wars in the market which lead some business to sell at break even point. Since further slash in price is not possible, many wholesale suppliers end up kissing good bye to the wholesale industry.
Elevate Customers Expectations!
If wholesale suppliers stick to the strategy of offering extraordinary discounts for a long period of time, it enhances customers expectations to continue offering wholesale products at lower rates forever. Customers start devaluing the products and presume that their lower prices are justified with the value they offer to them. If wholesale suppliers are not able to continue selling at such low rates in future, it becomes hard for them to sell at full margins.
Unsteady Sales & revenue!
Even if wholesale suppliers hold temporary but frequent sales offering products at bigger discounts, this leads customers to stop placing orders when they are not running sales and wait for the future sales. This, if on one hand, leads to unsteady sales and revenue then on the other hand suggests that businesses should continue such sales forever. With discontinued sales and revenue, it becomes hard to get the business loan approved because profits continuity is a major factor seen by the lender for loan approval.
Short Business Life!
Since you are in wholesale industry, you must be aware of the fact that customers are normally not loyal to a business but to low prices. If any other wholesale supplier offers discounts greater than yours, they are more likely to shift to them. This means that in order to retain them, wholesale suppliers need to accept lower returns permanently. Offering heavy discounts permanently narrows down the profit margins and thus shortens the business life.
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