Steep discounts make end-of-season sales a big hit

Vaishnavi Bala Posted online: Wednesday, Jan 29, 2014 at 0000 hrs
Mumbai : Deeper discounts drew consumers to shopping malls and high streets this month after a lacklustre festive season had left retailers disappointed. End-of-season sales, which started off on a lukewarm note, saw things pick up by about mid-January with the takings so far up a good 20-25% over last year. While discounts in the 2013 season were up to 40-50%, this time around they’re a flat 50- 60%. Both Shoppers Stop and Pantaloons, for example, offered discounts of a flat 50% on weekends.

Indeed, with most big brands having two sales a year, and with the sales seasons getting longer each year, retailers are worried consumers won’t shop until there’s a sale. Says Manish Kapoor, COO, French Connection, “With biannual sale seasons in the Indian market, consumers tend to postpone their purchases till the sales takes place.” French Connection offered customers a discount of up to 60%.

Rajiv Nair, CEO, Celio Future Fashion, adds that a good sales season can also be worrying since margins fall. “A good discount season means consumers may stay away at other time and that’s cause for concern,” he says.

Not all retailers agree. Jitendranath Patri, head, marketing at Central, points out that the customer profile during the discount season and the full-price period differ. “The customers we get during the discount season generally shop at other value formats during full-price period,” he says.

Whether they’re making good margins or not, retailers are happy to be getting rid of stocks. Future Group’s Central, which was targeting sales of around Rs 320 crore in the one-and-half-month period till the first week of February, has already made 70% of the money. Says Patri, “We’ve seen an increase of between 30% and 35% this year”.

Big Bazaar’s bumper Republic Day sales was held over a shorter three days this time compared with six days in the last couple of years, but managed to rake in 25% more. While sales were brisk in smaller cities like Jaipur, Lucknow, Patna and Surat, the higher number of sales points also helped.

A Future Group spokesperson confirmed 2014 as the most successful “Sabse saste3 din” in the history of the group. “We did well because we had the largest number of points of sales ever of 550 points across Big Bazaar Direct franchisee and mobile trucks,” he said.

At the Pantaloon store in Mumbai’s High Street Phoenix mall, sales at the start of January were dull, fetching the outlet just Rs 2.25 crore, an 8% drop over the same period last year, with customer footfalls lower by 12%. But collections have caught up and the outlet has made R8.5 crore in the four weeks to January 26. That compares well with sales of Rs 11 crore in seven weeks last year.

French menswear retailer Celio confirms it has seen a 15% like-to-like rise at its end-of-season sale.

Marks & Spencer, also at High Street Phoenix, has done well, posting a 15% like-to-like increase so far. The store clocked sales of R18 lakh just on Republic Day but even weekdays are seeing collections of R8 lakh on an average. What’s clearly helped is that UK-based brand’s flat 60% discount on selected products.

Rajneesh Mahajan, COO, Inorbit Malls, says the response to sales at the mall has been good with a 20% rise in footfalls.

India Ratings & Research points out that if retailers chase aggressive revenue targets and acquire market share by resorting to longer discounting periods, margins could be adversely affected. The agency believes the industry has passed on the benefits of excise duty cuts on branded apparel to customers by way of discounts to prop up volumes.