The Internet, on Sale

Online shoppers prefer discounts. Forty percent of online shoppers say saving money on the Internet is a priority, according to a survey conducted early this year by e-centives.

So does this mean that the Internet has become a discount paradise? Will products offered at “two for the price of one” or “half price” be the only ones to survive? Should infant brands unable to offer that kind of roller-coaster publicity just forget it?

Well, by digging through a few statistics, it’s possible to conclude that discounts do indeed define the form of purchasing closest to the online consumer’s heart. Here’s the story the numbers tell: 67 percent of Internet users look for a percentage of savings, 25 percent are after free shipping, and 8 percent want a gift included with the purchase.

Expecting More (or Less?)

The interesting question is, Why is this something-for-nothing trend taking place? Why do 40 percent of consumers believe that discounting is the only parameter worth determining how they spend money on the Internet? The answer is simple. The dot-com business community has created the expectation. For six years we’ve been educating the consumer to expect discounts. What began as a promotional feature, one that underlined for the consumer the clear benefit of shopping online, has now become a prerequisite for online transactions.

First Amazon.com offered a 30 percent discount on all its books. Then barnesandnoble.com followed with a 40 percent discount. Next their competitors followed with 50 percent discounts. This sequence mirrors the experience of mail-order companies that have been compelled to offer special discounts for shopping by mail.

What began as a tactical ploy, a tool for attracting brand-new customers to a brand-new shopping environment, has become an irresistible addiction that forces the whole online shopping industry to continue offering discounts to survive. The alternative is to retract the discounts and watch traffic decrease dramatically.

A Real-World Lesson

Is there a point of return? Or is it too late?

We might be able to learn from the brick-and-mortar brands and retailers. You see, they face this problem every day. They address it by using high-quality brands as attraction points. This pulls customer traffic into the store, but it doesn’t mean that the featured articles are being sold at a discount. Once the customers are in, they can see the store’s signature products being sold at competitive prices. The result? Consumers feel that the store is a good value because its flagship products are cheap.

Let’s look from the brand manufacturer’s point of view. At that end of the supply chain, you’re in danger of being a real victim of discount wars, especially if your product is selected as the discount lure. The manufacturer’s defensive response? To combine discounted and branded products in ways that thwart comparison. For instance, this familiar ploy: Buy Colgate toothpaste and get 20 percent extra toothpaste free.

So, what can we learn from the brick-and-mortar retailer and manufacturer? Don’t put too much faith in the “fact” that 40 percent of consumers are looking for a discount deal, that’s what.

I’m sure that some retailers’ statistics reveal a similarly high figure, but if they respond to it by discounting 100 percent of items, they’d never survive. Just as in retailing, successful e-tailing is about creating a few very good points of attraction and becoming famous for them. It might be that your Star Trek goods are discounted 30 percent to attract traffic and the rest of your products carry prices comparable to those of the rest of the market.

The Internet is like most other businesses: It has to attract and retain customers. Discounting might be a good way of attracting them, but in the long run it’s certainly not the best way of retaining them.