Setback for e-commerce: Online discounts fall; footfalls in malls soar

By: | Published: July 7, 2016 6:19 AM

Discounts on portals are estimated to be smaller by 20% to 30%

Discounts on portals are estimated to be smaller by 20% to 30%Discounts on portals are estimated to be smaller by 20% to 30%

It’s not raining discounts on shopping portals this ‘sale’ season but business isn’t likely to be booming in stores either. The first weekend—over July 3 and 4—didn’t go too badly. The Orion mall in Bengaluru—owned by the Brigade Group—did brisk business that was about 15% more than in the 2015 July sale.

The Inorbit Mall in Mumbai—promoted by K Raheja Corporation—saw better footfalls of around 14% more than last year. The Infiniti malls in Mumbai claimed to have seen 20% increase in footfalls during the preview sales just before the weekend. However, no one’s talking of how much of this has translated into sales.

What has changed this time is that the merchandise and discount levels are more or less the same across channels. Rajneesh Mahajan, vice president at Inorbit, however, points out shoppers can’t be expected to flock to stores simply because discounts are smaller online.

“It’s not that simple. A fair of shopping is done on impulse,” Mahajan added. Govind Shrikhande, managing director, Shoppers Stop, believes sales will grow meaningfully only once there is a pick-up in discretionary spending.

Experts said shopping online had become more a function of convenience and less a function of discounts now and consumers could be expected to change their habits overnight simply because government policies had been reworked.

Earlier this year, a report published by the BCG said 59% of consumers shop online for factors other than discounts.

This is the first discount season after the government cracked down on deep discounts, disallowing e-commerce entities from directly or indirectly influencing the sale price of goods and services. The objective was to ensure a level-playing field with offline retailers who believed this would help boost their business. Most of them have left the duration of the sale unchanged at six weeks even though margins remain under pressure. “Customers are now used to a culture of sale previews as well as a 6 week sale and it cannot be suddenly made shorter,” Mukesh Kumar, vice president at Infiniti, observed.

Arvind Singhal, managing director at Technopak pointed out online marketplaces have reduced their marketing spends in recent months to manage their bottomlines. “There are fewer full page, in-your-face advertisements this time,” Singhal added.

One sector analyst who did not wish to be named estimated discounts on portals are smaller by approximately 20% to 30%.

Although leading e-retailers continue to host sales, experts say the quantum of discounts has fallen. A cursory browsing of some of the major portals revealed fewer items were discounted more than 50%. In the apparel segment, discounts were largely between 30% and 40%. Experts said online marketplaces have largely discounted private labels as brands have more or less matched the dsicounts with those in stores.

With the industry not anticipating a blockbuster ‘sale’ season, same-store-sales for leading brands are tipped to grow by about 10%-15% in the September quarter; that’s the run rate companies have delivered in the past one year, said one analyst from a leading brokerage firm.

But that’s better than the sluggish summer.

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