Everyone loves a good discount

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Buy one and get one free. ‘20% off on one, 30% on two and 40% on buying three shirts,’ screams another hoarding in a large store. This is not an end of season sale or even a festive discount. Rather, the advent of modern retail has ensured that discounts are a year round affair now.

While stock crashes may erode wealth of many and create panic, MRP (maximum retail price) crashes are always welcome. “Globally, discount retailing is big and is the fastest growing sector. Given the value consciousness of the Indian consumer, it is likely that discount will become a big part of the retail sector,” predicts R Subramanian, managing director, Subhiksha Trading Services. Adds Rajesh Seth, vice-president, marketing, Brand Factory, “In many ways, discount is a starting point. It helps in creating a buzz and excitement, and ensures higher footfalls in a store.”

Discount retailing, a post-war phenomenon, is an established market practice in countries like the US. However, the concept is new to India because till recently, MRP was the be all and end all as far as pricing went. In the West, discount stores were conceived to serve consumer needs of baby boomer families. Designed to operate with low-price mark-ups and basic service levels, these formats achieved higher sales volumes and faster merchandise turnover. This pricing strategy enabled the likes of Wal-Mart, Kmart and Target to have a wide presence in the US within a short span of time. Deals, freebies and bargains have redefined shopping experiences in these countries and now the same tactic is being deployed across retail formats in India.

There are various avatars of discount retailing emerging in the country. While first movers like Subhiksha have pioneered EDLP or every day low pricing, Chandrababu Naidu-promoted Heritage Foods has adopted ‘high low pricing’ at its Fresh@stores. Consumers walking into Fresh@ stores can expect selective deals and discounts on the products on display. Heritage has also adopted a bill buster scheme wherein consumers are rewarded for purchases above a certain value. “While we may not offer a discount on our normal merchandise, we offer substantial value by way of a free gift, which is extremely useful,” explains Santhosh Unni, operations and marketing head at Heritage Foods (India) Ltd.