Digital Legacies: Discounting

The American news channel CNBC reported an article saying “Amazon touts record post-Thanksgiving sales amid lacklustre Black Friday, Cyber Monday for retailers,” announcing the seemingly obvious, but still lacking the complete story as to how digital impacts the economy. As everything now goes online, the exclusivity of special buying seasons is now virtually gone, as much as special discounts have gone forever. The average prices applied this year are higher than the last one. Several researchers have been investigated over the last years how serious shopping holidays have become in regard to real discounts. It turns out, as no surprise, that discounts, meaning real ones, are almost gone. According to Sensormatic, the 10 most important shopping days in the United States, and probably in a similar fashion across most of the rest of the world, are as following:

Friday, November 26 – Black Friday
Saturday, December 18 – Super Saturday
Thursday, December 23 – Thursday before Christmas
Saturday, December 11 – Second Saturday in December
Sunday, December 26 – Day after Christmas, aka “Boxing Day”
Wednesday, December 22 – Wednesday before Christmas
Saturday, November 27 – Saturday after Thanksgiving
Saturday, December 4 – First Saturday in December
Tuesday, December 21 – Tuesday before Christmas
Sunday, December 19 – Sunday before Christmas

When any new form of business saturates, it loses competitive advantage, and has to start fighting tough wars to win over established industries, who have fought back and have trained to understand the competition. Amazon, for instance, has gone into physical retail. In this case common brick and mortar retail has been learning how to understand e-commerce, how to incorporate that in the overall strategy, how to understand more efficient supply chains, and how to get closer or equal to prices applied to consumers online. In the third quarter of 2021, the share of e-commerce in the entire US retail sales stood at 13 per cent, down from 13.8 per cent in the same quarter in the previous year. Each country has its own characteristics, and United States is used here as an example because of the amount of data generated there. However, it serves as an example of trying to predict or anticipate the future in other places. The frenzyness that e-commerce is facing, hence applying all-day Black Friday strategies, is maybe a sign of desperation, that it is now finally undergoing tough times, and real competition.

The war between online and offline has a cast, especially hard to be swallowed by offline retailers. Even though people value physical goods more than the online ones, the infrastructure will take a toll on the overall perspective of profitability. According to a paper titled Digital Goods Are Valued Less Than Physical Goods, published in 2017 in the Journal of Consumer Research by Orgun Atasoy and Carey K Morewedge, “In five experiments, people ascribed less value to digital than to physical versions of the same good. Research participants paid more for, were willing to pay more for, and were more likely to purchase physical goods than equivalent digital goods, including souvenir photographs, books (fiction and non-fiction), and films. Participants valued physical goods more than digital goods whether their value was elicited in an incentive compatible pay-what-you-want paradigm, with willingness to pay, or purchase intention.”

The effects of permanent discounting is to be seen in the long run, but little by little we start to understand the dynamics of commerce, where both online and offline are changing, with a real war being battled every day. Larger groups, who now operate online operations after having only High Street stores, are trying to optimise their businesses by integrating both, so that they can deliver faster and better. The permanence of discounting will eventually also have consequences for brand value, one way or another. And this will always be in the calculation as to how far you can discount, and eventually go back to normal pricing. Ultimately, people’s perception on continued discounting will be that the real value of those products are not as they are in their RRP (Recommended Retail Price). Apart from the fact that we always want to get the best use, observing from a print building perspective, it will be interesting to understand this new phase of online and offline dilemma. New dynamics will be generated, new business models might come up, including the merge of many companies in the sector.

Read more from the series Digital Legacies where our columnist Julius Wiedemann investigates the many aspects of digital life.