What’s the point of half-yearly sales when nothing is ever full price?

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Walk into any major shopping centre at the moment, if you can bear the school holiday crowds, and you're almost certain to be greeted with a sea of red heralding the twice-yearly sales.

Retailers say they are trying to break the discounting cycle but there is still work to do to convince shoppers.Credit:Christopher Pearce

Traditionally, these clearance periods were used to clear stodgy stock to make room for next season's wares. Because, you know, by July we should already be thinking about what we'll be wearing to Christmas lunch.

But over the years, the sales periods have become retail's version of The Boy Who Cried Wolf. You see, after years of perpetual discounting, where if you pay full price for anything these days you're a bit of a mug, the (struggling) retailers may cry "sale" – but we've stopped listening.

Where did this cycle begin? I want to propose it was with the major department stores, sometime in the late noughties, spooked by the perfect storm of global financial crisis, the "invasion" by overseas retailers, and the growth of online shopping. Rather than focus on improving their range and, critically, their customer service, they opted for the self-defeating strategy of perpetual discounting.

Man with a (full-priced) plan … Myer’s chief executive, John King.Credit: Supplied

Almost weekly, shoppers could find off-cycle discounts on everything from bed linen to business shirts that there was no longer any incentive to shop at full price. And it doesn't take an economics degree to work out that the larger percentage of stock sold at a markdown, the smaller the profit margins. And the smaller the margins, the less money for things such as staffing. And so people stopped coming.

From the consumer's point of view, the discounts are fantastic but if retailers continue to discount it’s a path to destruction.

It was finally Myer chief executive John King who declared the era of deep discounting was over. But judging by the "Super Saturday" ads we still see most weekends in the newspapers, including this one, the war is far from over. Because in the end, taking the high ground rarely gets anyone anywhere in retail. If you can't beat them, you must join them, at 40 per cent off.

But there are small signs the tide is turning. Russell Zimmerman, acting head of the Retailers Association of Australia, says the depth of off-cycle discounts has eased off from 50 per cent or more to somewhere more modest, in the range of 20 to 30 per cent.

"Customers are coming in and doing a lot of checking, they know their pricing. For retailers to get customers through their doors they have to offer discounts," Zimmerman says.

He believes, somewhat optimistically I think, that younger consumers are less price sensitive, and may be the key to breaking the cycle.

"Younger millennial customers … tend to buy straight away but a lot of people wait for the sales … We are slowly but surely changing that mindset," Zimmerman says.

His view is not helped by data from the US that found nearly half of all female shoppers need an enticement of 40 per cent off or more to contemplate entering a store.

"From the consumer's point of view, the discounts are fantastic but if retailers continue to discount it’s a path to destruction. We have seen plenty of retailers, such as Toys R Us, that are no longer in business because they have discounted to counteract the online [pressures]," Zimmerman says.

Electronics retailers will be rubbing their hands after the government’s tax cuts passed parliament last week.Credit:James Davies

Retailers are hoping that the government's $158 billion tax cuts will feed directly into cash registers, much like Kevin Rudd's "plasma TV stimulus" package of 2009.

According to Australian Taxation Office data cited last week, most Australians submit their tax returns in late July and August, meaning the money, about $1100 at the maximum rebate level, should land in people's bank accounts between August and September.

But there's still a trust defecit, with fashion subscription service Stitchfix's founder, Katrina Lake, telling the Business of Fashion recently: "The lack of transparency around things being 40 per cent off everyday and people not having a really good sense of what something is worth because of it … has created a lot of distrust in retail."

If retailers are keen to finally wean shoppers off an entitlement culture when it comes to discounting, now may be as good a time as any, when people are feeling slightly more flush, and there's the added lure of new stock. And perhaps instead of seducing consumers with 25 per cent off if they shop early, why not try using top-shelf customer service? Wouldn't that be a novel idea?

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