Why Do Companies Offer Huge Discounts?

Many people wonder why companies offer massive discounts—sometimes 70% or even more. Do you think companies lose money in these sales? Or are there smart strategies behind these price reductions?

Let’s explore the real reasons behind these offers, the difference between fake and real discounts, and how businesses actually benefit from them.

First: Fake Discounts

Some businesses artificially increase the price of a product before applying a discount, making it appear like a great deal when, in reality, the price remains the same.

For example, if a product originally costs 10 EGP, a company might increase its price to 15 EGP and then apply a 30% discount, bringing it back to 10 EGP. This deceptive tactic damages a company’s credibility and erodes customer trust.

Second: Real Discounts

Reputable companies offer genuine discounts for well-planned reasons, such as:

1. Increasing Market Share

Companies use discounts to attract new customers and expand their presence in the market.
In price-sensitive markets, like Egypt, discounts are an effective tool to gain attention and boost sales.

2. Clearing Old Inventory

• Some products lose value over time, especially electronics, which become outdated when new models are released.

• Perishable goods, such as food items close to expiration, are sold at discounted prices to minimize losses.

3. Improving Cash Flow

Companies rely on a fast turnover of goods to maintain profitability.
If large amounts of stock remain unsold at the end of the month, businesses offer discounts to move inventory and free up capital for new products.

4. Promoting New Products

Discounts encourage customers to try new products while offering related items at full price for profit.
For instance, a company might sell printers at a lower price but keep ink cartridges expensive.

5. Bulk Purchase Advantage

Large retailers like Carrefour buy massive quantities from suppliers at lower prices, enabling them to offer discounts that smaller shops cannot afford.

How Do Companies Benefit from Discounts?

Smart businesses know how to offer discounts without suffering losses. For example:

• They apply discounts to products with high profit margins.

• They allocate marketing budgets to cover the cost of promotions.

• They ensure discounts align with strategic goals, such as expanding their customer base.

Tips for Consumers:

• Don’t rush into buying discounted items—verify if the deal is real.

• Compare prices, read reviews, and check if the discount is genuine.

• Great deals are usually offered at specific times, not all year round.

Tips for Business Owners:

• Avoid relying on discounts as a constant strategy.

• Offer well-planned promotions with clear objectives.

• Genuine discounts build customer trust and ensure long-term success.

Conclusion

Discounts aren’t always what they seem, but companies with smart planning know how to use them to achieve their goals—whether it's increasing profits, clearing inventory, or expanding their customer base.