Klarna slams ceaseless sales spirals

By Ryan Weeks on Thursday 5 April 2018

Editor's PickDigital Banking

The payments giant is calling on retailers to #ditchdiscounting.

Recently-licenced European bank Klarna has unveiled damning new research on the practice of discounting in retail.

The research, which encompasses 500 British retailers, found that discounting has become a near-constant phenomenon, with 57 per cent of consumers expecting regular sales. The eCommerce channel has been highlighted as especially vulnerable, with 56 per cent of retailers saying that the majority of their discounted transactions come via online sales.

Over half of retailers say that the “always on” nature of sales is having a negative impact on profits. A sizable 11 per cent claim that discounting cost them more than £25k in 2017.

The fallout from the sales frenzy is not confined to smaller firms. In fact, those with 100-239 employees are worst-affected, with 66 per cent saying that constant discounts are hurting profits.

Klarna also conducted surveys on the buyer-side, finding that 18 per cent of consumers only shop when a sale is on. For millennials (aged 25-34), this proportion jumps to 23 per cent, and to 22 per cent for gen Z members (16-24 year olds). Just 11 per cent of over 55 year-olds wait for sales to shop.

But Klarna sees cause for optimism in the emerging trend of consumers placing greater emphasis on a positive shopping experience than on discounts. 28 per cent of its consumer respondents say sales are too stressful and avoid them altogether. Meanwhile, 45 per cent indicate that they would be more likely to shop if sent a personalised offer. 25 per cent of consumers say they’re less likely to shop regularly with a retailer that is forever pushing discounts, and 38 per cent say that constant sales make a brand look “cheap and unfashionable”.

Naturally, Klarna took the chance to plug its own services. The bank flagged the fact that 36 per cent of consumers say they would be more likely to buy full price items if able to pay later – after having received their goods and decided what to keep.

“Providing an exceptional customer journey at any time of year is vital. It’s clear that merchants and consumers are increasingly disillusioned with discounting and should look instead to ‘surprise and delight’ shoppers in the everyday user experience. They can do this with features such as a mobile-optimised checkout, one-click purchases, deferred payment options and personalisation,” said Luke Griffiths, managing director of Klarna UK.

Klarna was granted a banking licence in the Summer of 2017. Founded in Stockholm in 20005 with the goal of making it easier for people to shop online, the business is focused on payment and point-of-sale financing solutions. It sold a 10 per cent stake to private equity group Permira in July of last year for approximately $250m, according to reports.


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