The intention of clearance sales : A comparison between consumers and retailers in a volatile business environment

Sammanfattning: Low prices in textile fabrics are a phenomenon that can be traced back for centuries. In 2011 a new record was set when 37.7 percent of all items in the fashion commerce were sold at a discounted price. Retailers today on the Swedish market have taught the consumers a new consumption behavior due to the constant flow of new products. It has become difficult to increase a price of a product due to globalization and the hard competition it brings. Economies of scale have made it possible for retail chains to offer products with low prices. Because of the fluctuated demand among consumers today clearance sales have become a natural part of a company’s business strategy.The purpose of the thesis is to define if companies use clearance sales as a strategy in today’s volatile business world and to compare retailers’ approaches with consumers’ attitudes towards clearance sales. This study questions whether clearance sales are necessary today. The purpose is also to clarify if clearance sales can be limited by several factors and how companies will manage clearance sales in the future.The methodology used in this thesis is an inductive approach together with a qualitative and a quantitative research strategy. A case study including interviews with seven different retailers and a survey with 100 participating consumers have been accomplished.The authors of this thesis could not discover a strategy how clearance sales are managed among the participating retailers. They claimed that clearance sales are necessary and that it is a result of faulty forecasting and a decreased willingness to buy among consumers due to the volatile business world. A speeded up system with more collections each year stresses and forces retailers to purchase more products that cannot be sold at regular prices, which in the end lead to even more clearance sales. Clearance sales affect the companies differently depending on their retail construction.The authors have noticed a shift in the society where consumers’ willingness to buy has decreased due to a rise in environmental thinking. Meanwhile, companies are still using clearance sales as a tool with the purpose to attract consumer to low prices. However the authors claim that clearance sales have lost its function. Companies are realizing that they need to understand their consumers and their market so that their forecasts are more correct and thereby they will have less unsold products that will end up at clearance sales.