Why are Sales and Discounts efficient?
In 2021, when Amazon launched its annual event, the company generated $11.2 billion in just 48 hours. That’s about $233 million per hour — more revenue in two days than many small businesses make in an entire year. More than 250 million items were purchased worldwide, with independent sellers alone moving over 100 million products.
How? The interesting part is that Amazon did not invent a revolutionary new product for those two days. It simply offered temporary discounts. Amazon’z annual event that made so much profit is called Prime Day.
Prime Day is Amazon’s annual members-only sales event, available exclusively to subscribers of Amazon Prime. What began in 2015 as a celebration of Amazon’s 20th anniversary has evolved into one of the largest shopping events in the world — rivaling Black Friday and Cyber Monday. For two days, Amazon offers thousands of limited-time deals across electronics, household goods, clothing, and more.
When you think about sales and discounts, keep in mind that they are not merely price reductions, since when
used strategically, they become powerful tools for shaping consumer behavior, managing inventory, and
increasing overall revenue.
One of the most effective uses of discounting is as an attraction tool. In economics and retail strategy, this is closely related to the concept of loss leader pricing — selling a product at a very low margin, or even at a loss, in order to draw customers into the store. The discounted product acts as a magnet. Many shoppers initially come only for the promotional item. However, once inside, whether physically or online, they are exposed to a wide range of full-priced goods.
This often leads to cross-selling and impulse purchases, increasing the total basket value. Even if the discounted item generates little profit, the additional items purchased alongside it compensate for the lower margin. In this sense, the discount is not a sacrifice but an investment in customer acquisition and revenue expansion. The short-term reduction in profit per item can generate higher overall profitability per customer.
Another powerful strategy is the use of deadlines. A discount without a time limit feels optional while discount that expires in two days feels urgent. When consumers know they have limited time, they experience scarcity and fear of missing out. Psychologically, buying at a discount allows people to feel “smart” — as if they are winning a small financial victory. Adding a deadline only intensifies this effect. This leads to faster decision-making, reduced comparison shopping, and higher conversion rates. Time pressure compresses demand into a shorter period.
Discounts are also an efficient solution for unsold or outdated inventory. Products that remain on shelves for months tie up capital and occupy valuable space. By discounting older items, businesses increase the probability of sale, free up storage, and convert stagnant inventory back into cash. Even if the profit margin is lower, liquidity improves. A well-known example of this strategy is Zara, the global fast-fashion retailer. The company operates on a rapid production cycle, introducing new designs every two to three weeks. So it is obvious that fashion trends shift quickly, and inventory can lose value within a single season. To prevent stock from accumulating, Zara runs structured end-of-season sales twice a year, where discounts can reach 30–50%.
Finally, discounts become especially powerful when connected to events or emotional moments. During major holidays, seasonal changes, or popular cultural events, consumers are already psychologically prepared to spend. They associate buying with celebration, renewal, or self-reward.
Behavioral economics helps explain this through the concept of mental accounting, introduced by Richard Thaler. People mentally divide their money into different categories — for example, “rent,” “savings,” or “holiday spending.” During emotionally significant periods such as New Year’s, Black Friday, or back-to-school season, consumers often activate a separate psychological spending account. Purchases feel pre-approved within that mental category. When a discount is added on top of this emotional readiness, the transaction feels not only enjoyable but also rational and financially smart.
So now, when you already know about the entire mechanism behind Sales and Discounts used by great companies such as Amazon and Zara, will you still fall for them? Interestingly, yes, you do, but with a slight nuance. Being more aware of this dynamic can, at some point, change how you view all this. During special events or emotionally peak moments, whether feeling urgent or overly happy, you might look at the numbers outside of you feeling and make a rational decision. And at the same time, seeing a suspicious discount that would otherwise hurt the shop’s / business’s profit can lead you to discover other good price offerings. Of course, in a positive context.