Saturday, December 15, 2007
The Guardian seems to be finally picking up on a trend that has been expanding this Christmas.
Vouchers are really coming into their own as a form of luring customers to a store. It remains to be seen whether they are effective at really making the stores money, but I think there's definitely been a higher profile accorded to the stores which have put time and effort into pushing these discounts.
The problem with vouchers and discounts is that they product some problems further down the line. A shop's "hero" products are generally ones that are heavily in demand. These will sell out and make the retailer a tidy profit whether they discount them or not. With discount vouchers these products will disappear quickly and at a discount, whereas the products which are usually discounted towards the end of a season will still be there.
However some of the discount codes are structured in better ways - enforcing a minimum spend is one effective way of doing this. Although the retailer probably loses out in terms of margin, the minimum spend makes sure the revenue stays at a decent level.
Another argument for the voucher codes is that it attracts new customers, some of whom will hopefully become regular shoppers. This will always be true but some would question if a discounted sale is really the best way to begin a relationship with a consumer.
One problem we are experiencing on the internet is that some affiliates are exploiting these codes mercilessly. Retailers already pay their affiliates a commission from sales. If the customer also uses a voucher code the sales that are driven may actually become unprofitable. Even more problems arise if the merchant's tracking system doesn't allow you to know if the affiliate's sales used voucher codes.
Overall voucher codes are a good thing for the internet as it makes people spend more time online before shopping and puts an incentive into them doing a bit of research before going out into the streets. The question is whether the discounts do anything actually useful or valuable for the retailer. I don't think it does.
Picture stolen from ewar_woowar's photostream