Discount means Failure

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aet
Posts: 214
Joined: Tue Feb 06, 2018 7:56 pm
Location: Kunming ( China )

Sun Oct 18, 2020 12:50 am

Please note that this topic is related to single item / unit discounts not to wholesale / quantity discount concepts.

A while ago I was watching a program , an interview with some owner of clothes ( fashion ) company.
He said one sentence which I resonate with : " Giving a discount is admitting a failure " .

So how I see this applied in tea business?

Tea

vendor's failure : stocked up more than was sold so certain teas can be discounted after some time as the quality decreases ( like green tea 2nd year , black tea 2 or 3rd year..depends on processing . Dark oxidized are loosing flavor than some sun dried which actually gets better after 2nd year for example )

processing failure : 2nd batch arrived might not be as good as the 1st. one so honest vendor might put this on discount despite having a same costs as with the 1st. one. Happened to us few times and we had to "eat the bullet" .

I don't see any reason for giving any discount for tea which gets better with age like puerh, unless tea went with some storage issues ( got wet / mold or something ) .

Pottery

vendor's failure : sometimes you can miss some flaws when checking in studio / masters workshop and see those later when making detailed pictures for presentation. It is fair to write original price of good item and place some discount for those flaws.

production failure :
Sometimes also can take to your shop intentionally some pottery if you feel that still can be sold for fair price with some discount ( or just like the concept / design of the item very much ) since the flaws do not affect brewing or using process. In both cases is fair if vendor point that out in description.

transfer failure : happens when pottery shipped from place of production , some part might get chipped off. If it's not affecting brewing or using, it's ok to put in discount with detailed images of the issue.

There could be cases when vendor needs or wants to sell the item for costs price just to get it out of the house and keep some customer happy but honestly I don't believe that this happens often. As a vendor it's not your intention give buyer knowledge about your costs.
We have done that few times in some exceptional cases or only for close friends. Sometimes we put in box some free cheap stuff in bigger amount than regular few grams sample we do , just to fill the box and making some sense of expensive shipping fee, but again, can't do that with every customer.


To sum all that up. If there is a product with discount without any reason mentioned above :

1) vendor runs marketing strategy - marking higher prices so after the discount still gets the originally wanted profit, but makes customer believe getting some extra deal.
2) vendor made some mistake - nobody is perfect and we all make mistakes, just some vendors do not present it as failure but rather put it as some special Xmas offer or something


Just if you thing about it. If there is an item with 60% discount , means then before you had paid 60% more and only on Black Friday or whatever day you can get a fair price. Probably most of you know that some vendors just raise the prices before those Special Days , yet I see lot's of people with reactions " I will wait for my Discount Day ! " ;-)

I also understand that there are the cases , especially this year , when business is very slow and vendor needs to tap on some marketing tools like this one ( discount ) , but it's up to the buyer having a common sense what discount is reasonable and for what items.

Please also note , this is my personal opinion coming from our retail experience. If you feel like to share more or disagree with some points, please do it in friendly discussion matter.

Thank You!
Ethan Kurland
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Location: Boston
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Sun Oct 18, 2020 9:47 am

Thanks for being generous with your time to write an interesting post.

For several years from mid-November through mid-February I sold overcoats & jackets that cost $800 - $10,000. The inventory was huge, highest quality & top brands were available. My bosses turned over $20 million a year. In the giant hotel showrooms or in cities' convention halls, a customer could select from 3 - 5,000 coats sized for the smallest to largest people; no one sold at lower prices than we did; &, most venues were considerably more expensive, many were much, much more expensive.

I don't know why, but one week at Hynes Auditorium in Boston, so many wealthy people came in to look at our coats with all-too-familiar annoying attitudes: 1. There must be a catch; someone cannot sell the same coat for half of what I paid at my .....;or.. or, 2. This is a luxury item & one can always negotiate a discount (at least 10% is usually in customers' minds);.....

That week customers acted as if we were liars & thieves. A relatively nicer doctor was good enough to speak openly. "This coat you are selling for $8,000 is $15,000 at Saks at the Prudential Center. We just looked at it there. It is hard to comprehend."

I suggested that he return to Saks & ask them to sell the coat to him for $8,000. The doctor returned to me later & offered me $7,200 for the coat explaining that Saks had offered him a 10% discount, proving what his parents had taught him, that luxury items can always be discounted. (Yes, $8,000 instead of $13,500 was not making him happy.)
Hynes was drafty & cold in the winter; so, I was wearing a Thai silk scarf. I said that I cannot discount but would send him a similar scarf once I got home in lieu of a discount. The doctor got me agree to send him 2 scarves then grudgingly paid $8,000.

At the end of the season, I sent the doctor a note. Something like: You did not call my boss to complain that I did not send the scarves; so I assume that you learned one does not need a discount on an item to be happy about purchasing it; and/or, you thought that there must be a catch & were happy that the catch was only a lie about a scarf. If you are unhappy, here's my phone #. I live in the area. I'll bring you the scarves in person.

How are decisions made? It is frightening to ponder.
mbanu
Posts: 164
Joined: Fri May 03, 2019 3:45 pm

Mon Oct 19, 2020 6:30 pm

I think this is related to the format of the purchase. Discounts are studied in a supermarket type environment, where there is a good chance that the shopper will be left alone until they check out.

Many teashops follow the older labor-intensive way of selling, where there is a salesman following you around.

I think that in a salesman type environment, free samples are more likely to encourage sales, while in a supermarket type environment, coupons and discounts are more likely to encourage sales.

The challenge for online sellers, I think, is to determine which model is most accurate for tea-buyers, since tea is such a taste-driven product.
Ethan Kurland
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Mon Oct 19, 2020 8:03 pm

mbanu wrote:
Mon Oct 19, 2020 6:30 pm
The challenge for online sellers, I think, is to determine which model is most accurate for tea-buyers, since tea is such a taste-driven product.
Yes, but.....
So complicated! Tea-buyers of Teaforum are probably different from buyers from Facebook. And people get confused. I have had 2 people try to order a tea that they were sure they had sampled from me. I needed to tell them that I don't sell that particular tea. I've also seen that I have had a couple of customers decide to buy a particular tea sampled via our association, except that they buy "it" from another vendor.

Never mind reminders that the name of a cultiver or mountain that tea was grown on, is hardly enough to know how it is from another source.

But mostly I have come to dislike online samples for the most part, because it often takes a few sessions for one to find the preparation & parameters that work for him. A sample is rarely prepared a few times. 8 grams of free tea (which sometimes still amounts to a fair amount of cost) is likely to convince someone that he does not like that tea, though it could be a favorite. Even if that person had 20 grams, perhaps after 2 sessions, he might stop trying a tea after 2 sessions & put it away to give to someone sometime (perhaps after it has gone stale).
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aet
Posts: 214
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Location: Kunming ( China )

Mon Oct 19, 2020 11:46 pm

agree with all comments above alright. Marketing strategy is the part of the retail of course and as the research article ( link to huffpost ) says " people feel more happy " with discounts or freebies.

Some farmers send us quite a lot of free samples and we feel bad about it..in sense that we feel like obligated to buy something from them after , as they are trying hard to make for money for living.
We give some free samples with the order, but for educational / suggestion purposes for the next order.
But some people take those as a free gift rather than something what should focus on and try to understand the quality difference from what they originally purchased.
We also had a client who was buying only samples ( and I was giving free samples with those as well ) who later told me that he was searching those teas somewhere else and purchased full product elsewhere. He actually even told me...., would you believe that ? ;-D ( not sure if it was just ignorance or he was trying to suggest something )
So I agree that not all marketing tools work on everybody.

But the way I personally see it is that if I put 30,40 or even just 10% discounts on some "Friday ,Sunday" , I will make happy those Discount Hunters who show up only on that particular "Monday" once a year , but I will upset the rest of the loyal clientele who buy from us through all over the year...and those are the most important for us.
If I buy some stuff for 100$ and in few months later , in some Cyber day , the same vendor sells it only for 70$ ( without item decreasing on it's value for any reason I mentioned before ) , I would be upset for sure and would find hard to get back to this vendor for the next purchase....unless the magic Friday comes again.
I'm already receiving emails from the people I've never heard of before ( I mean not our previous customers ) asking about discounts on Friday,Monday and just forwarding them to this thread to read.
I do not mean to be disrespectful or ignorant to the proper customer service ( last year I had a template with the answer for those emails ) , but I've found this thread to be more meaningful as other people also contribute with their thoughts about this matter.

Thank You!
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StoneLadle
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Location: Malaysia

Tue Oct 20, 2020 6:29 am

Don't overthink it man.

Sales and discounts are normal for any business of any sort, especially in this stupid climate...

Mainland sales and discounts are dodgy as all hell...

So you just need to do the basics well and establish a good reputation... Reputation is everything...

Sales can be tiered also... VIP sales for frequent customers, followed by general sales... Who cares why you're having a sale so long as you're selling the same stuff as always?
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wave_code
Posts: 197
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Location: Germany

Wed Oct 21, 2020 3:28 am

I'm with @StoneLadle here. I wouldn't overthink this. I also don't know if there is a translation/language thing here too - to say failure in this way in English sort of implies some sort of grievous error or something unforgivable rather than just a mistake, and maybe that is what you intend, but there are plenty of reasons someone might offer discounts/sales that aren't necessarily the result of some sort of large mistake or incompetence.

especially for small businesses sometime an unexpected cost or bill arises that needs to be dealt with right away, or the chance to bring in a new and desirable/rare product may requires a sudden cash surplus - having a sale or offering a temporary discount is a much easier way of bridging that financially than getting a small/micro loan. also not all tea is puerh and improves with age and needs to be sold off quickly at different points- maybe it just didn't sell quite as well as was thought or the supplier ordered too much or had it prices just a tiny bit too high- I don't know if I would call this a failure per say, various conditions may have caused them to make what the best decision they could at the time, and if they have to compensate later so be it. I'm just as unlikely to order from someone who is constantly sold-out of what I want as I am from someone who seems to have discounts all the time, and for those who don't have a super established or legacy type name/customer base its a tightrope walk.

nobody wants to be outright exploited or feel scammed, but also if people don't have enough of a mark-up margin they won't be around very long, or they have structured their business very poorly. having worked in bicycle and music/record retail both of those areas have some of the worst profit margins from wholesale to retail, and as a result it is incredibly difficult for shops to stay in business unless they are doing a LOT of sales or make their money another way, so many specialists aren't around for very long and its a real shame. I'd rather have paid one or two dollars more for things over the years and continued to have specialist shops around for when I needed things than had them all vanish.

while most samples/freebies I have been given are total trash, being a regular there are one maybe two suppliers I have gotten not discounts from but actual good samples from because they brought in a new product and want to introduce it to their customers, especially those they know will be interested or appreciate it. and more often than not those times I've actually been given a good sample from a vendor I trust I do wind up ordering it in quantity next time because they know their customers. its a very different situation than the 'free' dirt mini tuos you get from ebay vendors that go straight in the trash.

if you are thinking and talking in terms of those who only order teas of aliexpress when there is a $1 discount for 24 hours or something like that, well thats a whole different market and type of buyer and probably not anyone you need to concern yourself with anyway. those people will do what they do regardless and maybe be very happy with their $4/kilo sketchy hongcha never knowing what else it out there, and thats fine. I think most people know they get what they pay for, it is just a question of who can/is willing to pay and who isn't and there will always be both, so there will always be vendors who cater to one or the other type of buyer or psychology.
Slurp
Posts: 35
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Wed Oct 21, 2020 9:47 am

The notion of "discount means failure", while once generally true, hasn't really been the case for a long time in the retail industry. Take, as example, JC Penney, a once-well-known retailer in the US. They offered such frequent discounts that their customers stopped shopping there except during sales. JCP tried changing strategy to a more normal pricing approach, and customers stopped going altogether, they quickly went back to the discounting strategy....and their path to bankruptcy was assured.

On the other hand, the richest retailer in the world, Amazon, just had its annual Prime Day super sale. Quite possibly worldwide they discounted more than the full value of all the wares at JC Penney. And yet, one can hardly argue that Amazon was discounting from a position of weakness. Rather it was from position of strength. The idea is to appeal to people who might not otherwise have shopped at Amazon to see how pleasant an experience shopping online is with them instead of at their competitors' physical stores, to sell Prime to people who otherwise don't subscribe, and to generate an incredible amount of buzz (free advertising) that they otherwise would have had to pay a fortune for.

Now to your specific point:
aet wrote:
Mon Oct 19, 2020 11:46 pm
But the way I personally see it is that if I put 30,40 or even just 10% discounts on some "Friday ,Sunday" , I will make happy those Discount Hunters who show up only on that particular "Monday" once a year , but I will upset the rest of the loyal clientele who buy from us through all over the year...and those are the most important for us.
Only you know your market, and only you know your ability to service a larger market. If you can't expand your market, discounting is unlikely to be a winning strategy and a focus on the existing loyal clientele is probably right. Otherwise, it comes down to an analysis of what you stand to lose vs what you stand to gain.

To give a personal example. I prefer Japanese teas, and have a two stores that I will order from. If another retailer wants to win my business, what do they do? Advertise? That might work with folks who don't otherwise have a strongly established preference, but for someone like me not likely to succeed - the issue isn't not knowing about other vendors, it's not believing that they're likely to be better. And even with modern web analytics, advertising is still expensive to reach the right target market. Or you can offer a sale that's significant enough to convince people like me to give you a try. Will it work? Maybe. Will you get some discount hunters, as you fear, who buy once then never come back because someone else is offering a bigger discount next time? Undoubtedly, but that's simply part of the equation. Only way to know is to try it and see how many new buyers you get, and more importantly how many of those come back when there's no discount on offer.
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