Discounts in Online Stores: How to Get More Sales Without Losing Profit

Every store owner wants to increase sales. The simplest way to do that is to offer a better price than competitors. In other words, give discounts. But if you don’t plan them carefully, discounts can lead to losses. And no one wants to sell at a loss.

This article explains how to use discounts correctly, when they are beneficial, when they are not, what types exist, and why you should use them at all.

Discounts are a marketing tool used by both online and offline businesses. They serve different purposes, such as:

• Clearing seasonal stock. For example, offering winter coats at 30% off at the end of the season to make space for new inventory.
• Attracting customers with better pricing. Like giving 15% off the first order.
• Encouraging undecided buyers. If someone adds an item to their cart but doesn’t buy it, a follow-up message with a 10% discount can bring them back.
• Selling leftovers or slow-moving products. For example, offering XS-size t-shirts at 50% off.

Even though discounts reduce profit per item, they can increase overall revenue and customer loyalty when used correctly.

There are many types of discounts. You can apply them to a specific product, a whole category, during certain hours, or for specific customer actions. Here are six common types for online stores:

1. First Purchase Discount — offered to new customers to encourage their first order. People prefer buying from stores that give a better price. This type of discount can turn first-time buyers into repeat customers.

2. Seasonal Discount — used to clear out inventory at the end of a season. Even for dropshipping businesses that don’t store stock, these discounts are an effective marketing tool.

3. Holiday Discount — offered around holidays when demand increases. For example, discounting popular toys before Christmas can result in a sales boost.

4. Personal Discount — Tailored offers, loyalty points, or gift incentives to encourage repeat purchases or reward loyal customers.

5. Short-term Discount — Limited-time offers like weekend-only sales or "20% off all TVs this Saturday and Sunday" or "25% off all t-shirts between 8 PM and 9 PM."

6. Situational Discount — Sent when a customer abandons their cart. For example: "You left a phone in your cart! Complete the purchase within 24 hours and get 10% off your entire order.

There are many ways to discount products, but understanding when to use each one is more important than just knowing they exist.

Imagine a business sells t-shirts for $10 each. If they offer a $2 discount, the new price is $8. That seems like less income per item, but if the store sells twice as many because of the discount, here’s what happens:

• Without discount: 10 units × $10 = $100

• With discount: 20 units × $8 = $160

Even though each item is cheaper, the business earns more overall because of increased sales volume. So, a discount isn’t always a loss — it's a way to encourage more purchases and grow your revenue.

2. When discounts help clear inventory

For example, a store sells advent calendars. After the holidays, demand drops. They offer a 50% discount. If the original price was $40, now it's $20. While the store earns less per item, they still make some money instead of holding on to unsellable stock.

3. When discounts attract new customers

Imagine a new online store that nobody knows about yet. To attract attention and get people to try their products, they offer 30% off the first order. As a result, more visitors come in, check the products, and — if they’re satisfied — return as repeat buyers.

4. When discounts help retain customers

To stand out from competitors, many online stores launch loyalty programs. For example, giving customers points for every purchase that can be used for future discounts. Buyers feel like they’re getting better deals and keep coming back for more.

Now you understand not only the types of discounts but also when they are most beneficial. But sometimes discounts can backfire. Let’s look at when lowering prices is not a good idea.

Discounts are a classic sales tool, but there are situations when you should avoid them:

• Constant discounts devalue your product. Shoppers will think the discounted price is the “real” price and stop buying at full price.

• If you're selling luxury brands. Customers expect luxury items to be expensive. If you offer a discount, they might think the product is fake or defective, and go to a competitor.

• If discounts attract the wrong audience. For example, a premium store launches with a big discount to get attention. It attracts bargain hunters who leave as soon as prices return to normal.

• If discounts are done just because others are doing it. Like during Black Friday or holiday sales. If your profit margins are tight, you might end up selling a lot but earning little or nothing.

• If you copy other businesses. Remember: every business has a different cost structure, markup, and pricing strategy. A 30% discount might be fine for one company and a disaster for another.

• If customers ask for a discount. You don’t have to agree to every request. Offer similar products at a lower price instead.

• If the sales team can’t sell effectively. Sometimes sellers use discounts to close the deal faster instead of explaining product value. The store loses money even though the product is sold.

• If discounts are your only argument. This creates a “discount store” image. Customers wait for deals and ignore regular pricing — hurting your long-term profit.

Discounts can be powerful — if you use them wisely. Here’s a step-by-step guide to help you choose what to discount without losing money:

If you use a CRM like 4Partners, you can view detailed sales reports in your dashboard. If you're using a different system, contact support to learn how to download similar data.

Transfer the product names, number of sales, and average price into an Excel sheet. Then move on to the next step.

Add a column called “Markup %” and enter the data. To calculate the markup in dollars, use this formula:

Average sale price ÷ markup percentage = markup amount in USD

This will give you a clearer picture of your profit margins.

To understand which products are best for discounts, divide them into 9 categories based on sales volume and markup:

Best categories for discounts: AC, BC, BA AC, BC, BA

These items have high margins or low sales. A discount can boost visibility and encourage customers to buy. In the case of BA, you're warming up interest in popular seasonal products.

AA: These sell well and have high margins. No need to discount — consider raising the price.

AB: Also strong sellers. Use discounts only if you want to push new items or boost attention.

BB: Similar to AB. Discounting is optional.

CA: High margin, low sales. Try improving your marketing before lowering prices.

CB: Medium sales, low margin. Avoid discounting — you risk selling at zero profit.

CC: Low sales, low margin. Best to remove these from your catalog.

Pro Tip:

If your store has hundreds, thousands, or even millions of products — apply discounts by category, not individual items. Just follow the same process: gather category-level sales data, calculate average margins, and run the ABC analysis.

1. What do discounts do for an online store?
They help drive sales, attract new customers, move old inventory, build customer loyalty, offer a competitive edge, and increase average order size.

2. Can I avoid giving discounts at all?
Yes, but you’ll need other ways to engage customers — like giveaways, loyalty rewards, or special offers.

3. What’s the right discount to offer?
It depends on your goal.

• 10–30% is enough to draw attention.

• 50% or more is good for clearing out stock.

But always make sure your business stays profitable.

If you have a question about this article, message us in the chat — we’re happy to help.

→ Discounts are a marketing tool. Use them to clear seasonal or slow stock, attract customers, or convert hesitant buyers.

→ There are many types: first-time, seasonal, holiday, personal, short-term, and situational.

→ Don't discount just to follow trends — run the numbers to make sure you’re still making a profit.

→ Good times to discount: to earn more overall, retain customers, sell unsold goods, or attract new buyers.

→ Bad times to discount: when selling premium items, if it draws the wrong crowd, or if it weakens your brand or profits.

→ Use data and ABC analysis to choose the right products or categories for discounts. That way, you maximize impact without hurting your business.