Lazada generated $250 million in GMV for its annual 12.12 Online Revolution campaign, effectively doubling the results of 11.11 Single’s Day a month earlier ($123 million GMV). The company’s latest success is seen as affirmation for the ecommerce potential in the region or “a major highlight of consumption growth”, especially for the 3,000 brands selling on the platform.
End year sales mean greater discounts and a common route taken by most brands to increase sales and conversions. However, data analytics platform BrandIQ found some brands from the ‘Baby & Kid’ category on Lazada Indonesia actually took a different approach for the region’s biggest online shopping event.
Six popular baby food brands in this category actually lowered their discounts on the site five days before 12.12, meaning the product was actually more expensive during 12.12 than previous periods.
Some lowered theirs as close as a day before the sales event such as Dancow, a milk brand for children from Nestle, that decreased the discount percentage percent discount on its products by almost 14%.
And they weren’t the only brand that adopted this pricing strategy, the brand Cerelac also decreased discounts even more from 8.52% off to only 5.2% off on average.
Other brands such as Nutren and Nutrilon maintained a relatively stable discount strategy during the sales period.
This behavior begs the question, why are certain brands countering the entire concept of a sales campaign by offering more expensive products?
The most likely reason is that these brands see the event as an opportunity to increase margins by leveraging the high traffic flowing into the marketplace with the hype and marketing efforts surrounding the shopping event.
Given that baby food is a relatively price inelastic product, meaning that demand is unaffected by price as babies need to eat, these brands have more leeway with not participating much in the discounts party but still reap the benefit from the online sales.
What does this mean for brands?
Brands entering the online space are often plagued by the pressure to enter price wars to win market share. This means lowering prices is almost a must for brands, especially during the sales period.
It was reported a few years ago that merchants on Tmall in China said that if they don’t price products lower than in stores on rival sites, Alibaba pushes them down their ranks, effectively limiting their access to hundreds of millions of potential customers. Alibaba didn’t comment.
However, as shown by the data above,
Brands can actually avoid price wars and hits to margins by understanding the nature of their product.
These two different strategies highlight an important lesson for companies during promotional periods, while most ecommerce players utilize heavy discounts to maximize sales, revenue can also be made by doing the opposite and lowering discounts.