5 discount mistakes that cost online stores money

1 Discounting without the margin math

On a $100 product with a 40% margin, 20% off cuts your gross profit per unit from $40 to $20. You have to sell twice as much just to stand still. The formula behind it: discount ÷ (margin − discount).

A 1992 Harvard Business Review analysis of more than 2,400 large companies worked out how hard price hits profit: at their average cost structure, a price 1% lower at the same volume costs 11.1% of operating profit. That's a model calculation, not an observed result of real price cuts. Your store's number will differ, but the direction is the same.

2 Getting customers used to discounts

In three large field experiments at a US catalog retailer, deeper discounts brought more later purchases from new customers but fewer from established ones. One likely reason: customers who are used to discounts wait for the next one. Survey data points the same way: in Germany, 45% of Black Friday shoppers said they bought nothing big for a month or more beforehand.

Rely on a few well-prepared events a year and, in between, on offers that don't cut prices, like a free gift with orders over a set amount. The promotion calendar helps you pick the events that fit.

3 Discounts that stack by accident

Shopify combines discounts as far as each discount's own settings allow. One checkbox too many, and discounts stack in ways you didn't plan. Customers can redeem up to five product or order codes and one shipping code per order.

One calculation rule surprises many: two percentage order discounts are both calculated on the original subtotal. Two 10% discounts add up to 20% off, not 19%. So before every promotion, test the worst-case cart: biggest code, an automatic discount, free shipping and an item already on sale.

4 Public codes without limits

A code with no end date, no usage limit and open to everyone ends up on coupon sites and in browser extensions sooner or later. There are no reliable numbers on how much revenue that costs; the ones floating around come from vendors selling protection software. The limits on the code are cheap anyway.

Give every public code an end date, a total usage limit, one use per customer and a minimum order value. For newsletters and partners, use unique codes that each work once.

5 Price claims that break the rules

Price claims are regulated in many markets, and the EU is particularly strict. Practices that courts and lawmakers in the EU and Germany have already targeted:

• A compare-at price not based on the 30-day low: under EU rules and a 2024 ruling of the EU Court of Justice, a discount must be calculated from the lowest price of the previous 30 days. Since 2025, Germany's Federal Court of Justice has also required that this price be shown clearly and legibly.
• Inflated former prices: if you advertise a price cut although the old price applied only for an unreasonably short time, German law (Section 5(5) UWG) presumes it is misleading.
• "Up to 70% off" on almost nothing: a German court stopped such an ad in 2021, where only 2.5% of men's items had the top discount.
• Unclear end dates: a prominently advertised end date that differs in the fine print was held unfair by a Munich court in 2023.
• Hidden conditions: under German law (Section 6 DDG), discounts, extras and gifts must be clearly recognizable, with conditions that are easy to find and stated clearly.