More Sales, Less Profit? Check Your Holiday Discounts
Updated: Sep 13
A discount can make a sales day look exciting. More orders come in, the shop feels busy, and your revenue climbs. But the work required to serve those orders grows too. Before choosing an offer, check what each discounted sale leaves to cover the rest of your business.
Give the promotion a specific purpose: clear selected seasonal stock, encourage a larger purchase, or attract first-time customers. The purpose helps you decide whether the result was worth the cost.
Start with what remains from one sale
Write down the regular selling price and the costs that change when you sell another unit: product cost, packaging, payment processing, and any other relevant variable costs. Subtract those costs from the selling price to find the contribution per unit.
Here is a simplified example. A product sells for $50 and has $30 in variable costs. It contributes $20 toward fixed costs and profit. A 20% discount reduces the selling price to $40. If variable costs stay at $30, contribution falls to $10.
You would need twice as many units to produce the same total contribution. Selling 10 at full price contributes $200; selling 20 at the discounted price also contributes $200. The example assumes unchanged costs per unit and no additional fixed promotion costs.
In your own calculation, update percentage-based payment fees, packaging, and fulfillment costs at the new price. If handling twice the orders requires an extra shift or paid advertising, include those additional costs too.
Test whether the extra volume is plausible
Use your own past promotions as a comparison when possible. What happened to purchase count, average purchase value, contribution, and workload? Did the offer bring additional customers or mainly discount purchases that would have happened anyway?
A higher sales target does not cause customers to buy. Check whether your audience, available stock, and fulfillment capacity support the additional volume you need. For a new offer, a limited test can give you information before a wider commitment.
Consider a more focused offer
You could discount selected seasonal items, build a gift bundle, or add a small gift above a purchase threshold. Each option still has a cost. Calculate the bundle’s full contents, the gift cost, or any delivery subsidy before deciding it protects your contribution.
Keep eligibility and timing easy for customers to understand. Decide how the offer interacts with existing discounts and check the checkout experience before promoting it.
Measure the result that matches the goal
For stock clearance, track units cleared and contribution recovered. For larger baskets, track average purchase value and contribution per order. If acquiring customers is the goal, set a limit on what you are willing to spend; future repeat purchases should remain an assumption until they happen.
Compare against a relevant full-price period, allowing for differences in opening hours and demand. Record refunds and returns when evaluating the final result.
Your takeaway: the promotion check
Before launch, complete these five lines: Regular contribution per unit __. Offer contribution per unit __. Units needed to match the regular contribution __. Additional promotion costs __. Result and review date __.
For the same product and unchanged fixed costs, divide regular contribution per unit by discounted contribution per unit to find the required unit-sales multiplier. If discounted contribution is zero or negative, extra volume cannot recover the lost contribution under those assumptions.
Give the offer a sales plan
The Boutique Sales Forecast & Stretch Builder helps you examine the purchases and average transaction value behind a sales goal. Work through the promotion calculation above first, then use the workbook to explore the volume your offer would require.
Check your discount before you commit
Enter your regular price, cost per item and discount percentage in the Markdown & Margin Calculator. See the dollar discount, sale price and profit or loss, then adjust the discount until the result works for your business. Break-even covers the cost you enter; rent, payroll and percentage selling fees are not calculated.
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