Distress Sale

Posted in Marketing and Strategy Terms, Total Reads: 472

Definition: Distress Sale

When a company chooses to reduce or mark down the price of its product or service instead of discontinuing the service or the product right away, it is called Distress Selling or Distress Sale.

The pricing strategy is called Distress Pricing. Companies resort to Distress Pricing when the market conditions are tough and the sale of a particular product or service gets slowed down significantly. In order to cover the fixed costs associated with production and operation, a company chooses to sell its product or service at a lower price.

Distress Selling is a common phenomenon seen in the Fashion Industry. If a company is sitting on a large inventory of apparels and accessories which are now out-of-fashion, the company would try to sell the products at a lower price by giving large discounts on selling prices to its customers. Before HP Ltd. could close down its tablet PC business, it took resort to distress pricing where it reduced the price of the remaining tablet PCs by a huge margin.



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