For UK fashion brands and retailers, excess inventory is an ongoing challenge.
Shifting trends, high return rates, and seasonal demands often leave businesses with surplus stock. While discounting can seem like a quick fix, excessive markdowns can create more problems than they solve.
Over-reliance on discounts can erode brand value, reduce long-term profitability, and shift customer behaviour in ways that are difficult to reverse. In this article, we’ll explore the key dangers of excessive discounting, why brands should tread carefully, and alternative strategies for clearing stock without damaging the bottom line.
What we will cover in this post:
- Customers' shifting shopping habits & brand erosion
- Managing your marketing ad spend to avoid diminishing returns during sale season
- Managing the loogistical strain of increased returns during sales periods
- How to avoid margin erosion & price wars when discounting stock
- Alternative clearance options
Shifting customer behaviour & brand erosion
One of the most significant risks of excessive discounting is its dual impact on brand perception and customer behaviour.
When customers consistently see your products on sale, they begin to associate your brand with discounts rather than quality or exclusivity. Over time, this devalues your products and makes it difficult to sell at full price.
Businesses most at risk
Luxury and premium brands that over-discount risk losing their aspirational appeal. If high-end fashion items are constantly available at a lower price, customers may start questioning their true worth—and why they should ever pay full price.
This shift in perception also leads to changes in customer behaviour. Shoppers who become accustomed to frequent sales may delay purchases, waiting for the next markdown. This creates a cycle of price-sensitive shopping habits, where customers are less likely to buy at full price and more likely to switch brands for a better deal.
The impact
A brand’s value is built on perception. Once customers view your brand as “discount-first,” it’s incredibly challenging to rebuild loyalty and command premium pricing.
Marketing Challenges & Diminishing Returns
For marketers, excessive discounting creates a perfect storm of inefficiency.
As popular sizes or styles sell out, your ad campaigns continue to drive traffic to product pages with limited inventory. Shoppers who click on ads only to find their desired size or colour unavailable are likely to bounce immediately, leading to wasted ad spend, higher bounce rates, and an inflated Customer Acquisition Cost (CAC).
Businesses most at risk
In this instance, any business with an e-commerce function is at risk. Imagine you’re running a digital marketing campaign to clear a SKU of men’s shoes. The most popular sizes (8-11) sell out quickly, but your ads keep pushing traffic to the product page. When potential customers arrive and see their size is unavailable, they leave the site. This results in wasted impressions, a negative buyer experience, and a higher CAC—all while your ROAS drops.
Beyond the immediate inefficiencies, heavily discounted products inherently have lower margins, which further reduces the ROI of your campaigns. Instead of focusing on driving traffic to high-margin, full-price items, your team is tied up creating and optimising campaigns for clearance products. This time could be better spent on initiatives that strengthen the brand, nurture customer loyalty, or promote new collections with healthier margins.
The impact
Excessive discounting not only erodes profitability but also diverts valuable marketing resources away from initiatives that drive long-term growth.
Logistical Strain & Increased Returns
Discounted sales tend to generate the same rates of customer returns, and potentially higher when considering impulse purchases driven by deep savings or customers deviating from their normal sizing due to limited stock availability. The logistical and operational costs of processing a return are the same whether the item was purchased at full price or at a discount, adding pressure on warehousing, customer service, and logistics.
Businesses most at risk
According to ZigZag, the average cost of a return in the UK is estimated to be between £10-20 per item, factoring in shipping, processing, and restocking. So, brands already operating on thin margins, these increased returns can quickly turn a sale into a loss.
The impact
If discounting is being used to clear end-of-season inventory, returned items may become obsolete before they can be resold. For example, a winter coat sold in a March sale might be returned towards the end of April, by which time demand has dropped significantly. This could result in the item being written off entirely, adding to inventory losses.
Margin Erosion & Discounting Price Wars
In a crowded retail market, discounting can quickly escalate into a race to the bottom. Competitors often use price-matching algorithms to track and respond to price reductions, creating a cycle where brands continuously undercut each other. This not only erodes margins but also undermines the perceived value of your products.
Businesses most at risk
For brands that supply to third-party retailers, the risks are even greater. If retailers see you heavily discounting through your own channels, they may feel pressured to lower their prices to stay competitive. This can strain wholesale relationships, as retailers may become hesitant to place large future orders if they fear margins will be squeezed or that they’ll struggle to sell at full price.
The impact
What starts as a short-term clearance tactic can lead to long-term price instability, making it harder to maintain profitability and brand positioning.
Protecting profitability & brand value when clearing fashion stock
While some level of discounting is necessary, it’s crucial to balance markdowns with other clearance strategies that maintain brand integrity and profitability. Here are some alternatives:
- Strategic Limited-Time Sales
Instead of constant discounting, brands can run carefully planned, limited-time sales. This creates urgency without conditioning customers to expect perpetual markdowns. - Outlet & Off-Price Channels
Selling past-season or overstock items through dedicated outlet stores (physical or online) helps clear inventory while maintaining full-price positioning in primary sales channels. - Managed Resale & Secondary Market Solutions
Working with managed resale providers like Resku allows brands to recover value from excess and returns inventory outside of their core channels. This approach avoids public price-slashing and preserves brand equity. - Loyalty & Value-Added Promotions
Instead of direct discounts, offer incentives like gift-with-purchase, loyalty points, or exclusive bundles. These strategies maintain price integrity while encouraging repeat purchases.
Ultimately, a hybrid approach enables retailers to balance brand risk, operational workload and profit margins.
Excessive discounting may seem like an easy solution for clearing stock, but the long-term risks far outweigh the short-term gains. From eroding brand perception and shifting customer behaviour to squeezing profit margins and straining marketing resources, over-reliance on markdowns can weaken a brand’s financial health and competitive edge.
Instead of falling into the discounting trap, fashion brands and retailers should adopt a more strategic approach to inventory clearance. By leveraging a mix of limited-time sales, outlet channels, and resale providers, brands can efficiently manage excess stock while preserving brand value and profitability.
Build a sustainable excess-inventory solution for your fashion brand
At Resku, we specialise in helping fashion brands resell their excess and returns inventory through secondary marketplaces, away from their core channels. Capitalising on the growing demand for sustainable and value-driven shopping, Resku provides a fully managed online outlet designed to discreetly and efficiently sell unsold and returns inventory. Whether you’re looking to recover revenue, reduce waste, or maintain brand integrity, we’re here to help.
- March 31, 2025