What is a loss leader?

Point of Sale (POS) Glossary

A loss leader is an item sold for less than regular market cost to attract customers to a store, hoping it will stimulate other, more profitable sales. Sometimes accessories, warranties, and ancillary items associated with purchasing the product or bundles are required. Loss leaders are often a strategy used on Black Friday and other major sales days to entice people into a business.

In a retail store, a point of sale system can be programmed to handle the challenges of a highly discounted item, such as limiting the number per customer, total sold at the discounted price, or enforcing any other stipulations of the sale. A POS acts as a gatekeeper managing all of the rules of the loss leader promotion.

The loss leader strategy can be more tricky in digital retail since customers may be more likely to purchase the highly discounted item and nothing else since they are not inside a physical store. Additionally, loss leader strategies on popular websites may result in unsatisfied customers as products can sell out in seconds.