Jabong, Myntra, other e-tailers force Big Retail to discount early and deep

Written by Anushree Bhattacharyya | New Delhi | Updated: Jul 21 2014, 18:34pm hrs
RetailersHowever, most stores launched their sales in early July; in the winter too, the sales had been advanced to late December.
Apprehensive that attractive deals from e-tailers will lure customers away from them, brick-and-mortar retailers have kicked off their end-of-season sales earlier this time around with the deepest discounts ever. The years two end-of-season sales are typically held in January-February and then later from mid-July to end-August. However, most stores launched their sales in early July; in the winter too, the sales had been advanced to late December.

To ensure they get a look-in, starting discounts this time have been as high as up to 50% and 50% flat over weekends compared with up to 30% offered earlier. And given that these sales are now a key driver of footfalls and revenues, discounts could rise further to levels of 70% towards the end of the sale period.

Indeed, they have little choice given e-tailing sites such as Jabong and Myntra offering discounts of a flat 50% and a variety of deals to boot. Recalling how it all began during Diwali last year, when consumer spends were falling, Darshana Shah, senior vice-president, marketing and visual merchandising, HyperCity Retail, says these biannual sales are now key for the business. With spends estimated to have fallen by 10-12% in the last festive season, we were compelled to drop prices and today these sales are a must, asserts Shah.

Indeed the two sales together account for a good 40% of the annual revenues of retailers which is why they cant afford not to participate. Sandip Tarkas, president, customer strategy, Future Group, confirms the steep discounts are luring consumers back to the stores. Theyre shopping once again and spends have gone up by about 15-20%, he says, adding the lifestyle piece has seen a 15-20% rise in billings so far this season. Harkirat Singh, managing director, Woodland, told FE the rise in consumer spending since the last week of June is perceptible. We started our sale the first week of July and since then have seen a 25% spike in billings, Singh said.

While its evident that the completion from their online peers has pressured them into slashing prices, brick-and-mortar retailers arent willing to throw in the towel just yet. In their chase for volumes, however, they are forced to sacrifice margins; industry experts say margins drop to 15-20% during sales compared with 25-30% at other times. This is despite the fact that a part of the discount is being picked up by the manufacturer.

Some retailers, however, claim margins arent getting dented. Srinivasa Rao, head, marketing, Lifestyle, part of the Dubai-based retail and hospitality conglomerate Landmark Group, is pleased with the performance of his store. Were growing in double-digits with increase in revenues and margins, observes Rao.

But its early days yet and with e-tailers, having started with a bang, could soon up the ante by launching products to drive impluse purchases; Myntra, for instance, launched both Desigual a Puma t-shirt featuring soccer club Arsenal to tempt buyers. Sales are the best time to drive impulse purchases as there is one set of consumers that looks for new products and another which buys both new and older products, explains Ganesh Subramanian, COO, Myntra, who claims his sales have jumped three-fold this season.

Peak purchase hours are typically office hours -- 10 am to 6 pm-- and from 10 pm to 12 at night. Most of our consumers are college students and young professional who use this opportunity to buy brands and accessories they would otherwise not be able to afford, Subramanian explains. Praveen Sinha, founder and managing director of Jabong.com claims his business volumes are up 250%.