What is Loss Leader in Retail? Explained

A loss leader is a pricing strategy employed in the retail industry where a product is sold at a loss or with very little profit margin. The purpose of a loss leader is to attract customers into a store or to a specific product line, with the expectation that while purchasing the discounted item, customers will also buy other, more profitable products. It's a tactic to stimulate sales, create customer loyalty, and increase overall revenue, even though the initial promoted product may not generate a significant profit on its own.