Every retailer we work with runs seasonal promotions. Boxing Day. Mother's Day. Click Frenzy. Christmas gifting from mid-November. EOFY. A few local ones (Vivid Sydney, Melbourne Fashion Week). The pattern is universal — and the mistake is too.
The mistake is discounting on price without checking what the discount does to margin.
The maths that catches people out
Here's the arithmetic every retail owner should have committed to muscle memory. If your gross margin is 40% and you offer a 30% discount, your remaining margin isn't 10%. It's approximately:
New margin = (Price × (1 − discount) − Cost) ÷ (Price × (1 − discount))
Worked on a $100 item that costs $60:
- Discounted price = $100 × (1 − 0.30) = $70
- Gross profit = $70 − $60 = $10
- New margin = $10 ÷ $70 = 14.3%
You have gone from 40% margin to 14.3% margin. To recover the same dollar profit, you need to sell 4× the units at the sale price. Sometimes that's fine — a Boxing Day sale will do exactly that. But if a Mother's Day promo shifts 30% more units at a 30% discount, you've made less gross profit than a normal week, on more logistics.
The three healthy questions
Before every seasonal move, we ask three questions with a retailer:
- What is the item's normal margin? Not the guess. The actual, GST-net, freight-in-included margin.
- What is the smallest discount that will move it? Not the biggest customary one. Sometimes 15% is enough. Sometimes the item doesn't need a discount at all — it needs to be moved to a hero position.
- What is our margin floor for this line? Below what percentage does this SKU stop being worth selling? For most physical retail we suggest never taking a line below 20% gross margin on a promo, and never below 10% even on end-of-life clearance.
Seasonal pricing calendar
Rough shape of the Australian retail year, and what makes each moment different:
| Event | Window | Typical mode |
|---|---|---|
| EOFY | Mid-June | Business buyers, higher-ticket, less price-sensitive |
| Winter clearance | Early July | Move dead stock; margin floors matter |
| Father's Day | First week Sep | Gifting; bundle rather than discount |
| Vivid, spring markets | Aug–Sep | Traffic play; premium presentation |
| Halloween (small) | Late Oct | Niche only; skip unless on-brand |
| Black Friday / Cyber Mon. | Late Nov | Deep discount culture; strict floors essential |
| Christmas gifting | Mid-Nov – 24 Dec | Bundles, not discounts, protect margin |
| Boxing Day | 26 Dec | Clearance; last chance at aged stock |
| Back-to-school | Mid-Jan | If applicable; volume, not margin |
| Mother's Day | Second Sun. May | Gifting; premium framing |
Bundles beat discounts, most of the time
A bundle protects margin because it protects the anchoring on each individual item. Two items normally $45 each sold as a "gift set for $80" reads as a $10 saving to the customer, but on your books it looks like this:
- Two full-price items = $90 revenue, unit COGS say $54, gross profit $36 (40%)
- Bundle at $80 = $80 revenue, same $54 COGS, gross profit $26 (32.5%)
You've given up 7.5 margin points instead of 14. And you've moved two units — which halves your logistics per dollar sold.
The COG floor
Inside the product we let retailers set a margin floor per SKU. Any promo that would take the SKU below its floor is rejected at the promo screen — not with a scary error, just a note: "This price would give a 14% gross margin. Your floor is 20%."
End-of-life clearance
Clearance is different. The goal is to convert stuck stock into cash, and any margin above zero is better than write-off. But even here we set a hard floor at cost — a "cost-price sale" is honest with the customer and honest with yourself. Selling below cost should only happen when the alternative is disposal.
Once a quarter, run the report of SKUs that have not sold in 90 days and price them at 15% margin. If they still don't move in the next 45 days, drop to cost. For ceramics studios, this is where seconds (pieces with minor glaze pinholes, small warping, or a slightly off foot) earn their keep — they clear at 40–60% of the first-quality price, still above cost, and buyers actually enjoy the story.
The one habit worth building
Before every promotion, write down what you expect to happen: unit lift, gross-profit change, and a floor you won't cross. Compare against actuals a week after the promo ends. Do this four times and you'll price seasons better than most retailers do in a decade.
