The ideal time to shop ask a woman and she would say, Just about any time of the day!. Twist the question, The perfect time to shop? and quick comes the answer, When its raining discounts!. And this mind set, is definitely not limited to the women of today or the current times. It goes back a long way, and it is a well established fact that no one likes to forgo the opportunity to save a buck wherever they can.
Undoubtedly, no matter what sales promotions are undertaken by retailers and brands, a sure shot winning method to increase sales is the discount strategy. Announce discounts and you would have consumers of all age groups flocking to your store. And then again, why not, who doesn't want to settle for the best deal and as mentioned before, save a buck. Says Misha Mehra, a teenage shopaholic, Though I shop a lot around the year, yet at the same time I go berserk during the discount season. This definitely does imply that I need to exercise a lot of restraint during the rest of the year, but then it is worth the wait. At most stores, you get the same things at a much better price.
Looking at the situation from the perspective of retailers, explains Mr Vinay Nadkarni, CEO, Globus, The main objective behind a sale is the clearance of stock since unsold merchandises tie-up cash, costing us more cash each and every additional day that they are not sold. Clearance of merchandise at the end of season is very important considering the fact that fresh merchandise for the new season needs to get space on the counter to attract the target customer.
The retailers have certain basic reasons for offering discounts. These include, an attempt to get rid of unsold goods, an effort to maximise turnover and faster cash generation. These are also planned to attract that segment of consumers who have not tried the product because of the high selling price or any other reason.
Says Mr Nigam Patel, Director, Provogue India Ltd, Sales largely help in converting potential customers into a regular customer. A lot of times, people pick up a product only because it is on sale and after using it they get hooked on to it. As a result, a consumer who purchases during the sale period actually ends up becoming a regular at the store. Retailers need to remember that this can happen only if the product offered by the retailer is of high quality.
Undoubtedly, the effort undertaken by retailers definitely works to the benefit of consumers. Yet is it just the discounts that make them tick or are promotional schemes equally exciting?
After speaking with a cross section of consumer of different age groups, the consensus was, Promotional schemes are interesting, yet nothing beats the high that cash discounts bring. At the end of it, the satisfaction that you derive with the extra notes in your wallet or purse cannot be compared.
The role played by both discounts and promotional schemes are slightly varied. Says Mr Nadkarni, Both promotional schemes and cash discount play independent roles and fulfill different objectives. In fact, from the perspective of a retailer, it is not possible to compare the two. Promotional schemes are aimed to reward our loyal customers while cash discounts are usually offered at the time of clearance of stock.
Says Mr Vishal Gupta, Senior Manager, sales and marketing, Indus Clothing Ltd, Both cash discounts and promotional schemes have their own importance - in fact narrowing down to the suitable choice depends upon the objective of the company or the retailer. At the same time, while devising the schemes one has to be careful that the freebie that is being offered in case of promotional schemes is of some use to the consumer . If this is not the case, then the scheme would fail to take off. At the same time, from the consumers point of view, direct cash discounts are preferred and this is clearly reflected in the increase in sale during the discount season.
As a result, it is essential for a retailer to understand that to attract consumers to promotional schemes, it is important to have a clear cut understanding of the consumers mindset and needs, before devising the scheme. On the other hand, in case of discounts, the retailer does not have to understand what freebie would attract the consumer, but instead needs to strategise the discount timing in such a manner that a large number of consumers can be attracted.
The stage setters
Large retailers like Shoppers Stop, Lifestyle, Globus, to name a few, are known for the end season sales and discounts that they offer. Undoubtedly, at these times the stores are over crowded as consumers look for the best deal that they can get. Says Mr Adarsh Jain, The best time to shop at any of these stores is when the products are on sale. You get the same thing that is available around the year at a much better rate, as a result you can actually buy more things in the same budget. So, we as a family usually buy only the essential requirements and splurge once the discounts are announced. And we now usually know around when would the schemes be offered so we plan our shopping accordingly.
In most cases, the discount and sale strategy is clearly defined and planned by brands and retailers after taking into consideration a number of essential factors. Explains Mr Nadkarni, In the fashion business as per the merchandising calendar, there are two seasons in the year spring, that is summer, and autumn, that is winter. These respectively begin in March and September and close in August and February. The merchandise mix changes every season. As a result, it is imperative that after the end of season, all the stocks have to be marked down so that customers buy the same. Clearance of all the remaining merchandise at the end of each season is very important considering the fact that fresh merchandise needs to get space on the counter to attract the target customer. At the same time, it is important for a retailer to understand what to mark down, when to mark it down and how much to mark it down.
Outlets like Giant and Big Bazaar, on the other hand, thrive because of the discounts offered when consumers pick multiple units of the same product or buy in bulk. In fact, these retailers offer discounts and deals all year round. And undoubtedly, this acts as an incentive for consumers to make an extra effort to shop here instead of the neighbourhood stores.
It makes so much more sense to go and shop at Giant or Big Bazaar rather than the neighbourhood retail outlets. We get a much larger variety and can choose the products that best suit us and at the same time we get better value for money, says Amita Seth, a housewife.
Understanding the concept
The question is, what goes behind these discounts and how do retailers plan the discount strategy. Explains Mr Nadkarni, The levels of discounts are to be decided after looking at a number of factors that essentially include ageing of stock, stock oddments and taking into consideration the losers and the slow movers.
Discounts essentially aren't about merely marking down the price of a product. these have to be constituted after a proper analysis of the offerings and the consumers mindset. The main factors that effect discounts, in terms of percentage and actual amounts, include, the actual cost of the product, the leftover quantity's in that particular product or style, and the category that it falls into, in terms of is it a regular style that would be repeated or a fashion style that would not be repeated.
At the same time, when the consumers realise that retailers have a healthy profit margin, does that not make the entire pricing questionable?
Says Arunima Kang, a well traveled shopper, We do realise that retailers keep a profit margin when selling products and the margin is definitely huge as even when the products are on discount, they must be making some money. Then again, that the way the world is, why would a retailer sell a product if he is not benefitting from it.
That undoubtedly is a fact, and most consumers accept it and ignore it.
Says Mr Gupta, Hefty profit margins are a myth and even consumers have understood the gimmickry of some retailers who offer products perpetually on discount where the original MRPs are doubtful. Moreover consumers also realise that the choice of products with discounts would be very limited and styles would be old especially in the case of big brands.
Consumers though familiar with this fact, still prefer shopping when items are on discounts. Says Abhay Kumar, The variety offered during discounts might be a little less than the times when the retailer offers no discounts, but then you need to pay a price for the money that you are saving. Also, when you are getting something at a cheaper price you are usually not very choosy. As far as styles going out of fashion in the next season is concerned, it take a little time for trends to actually catch on here and there is hardly ever any drastic change. So, it definitely makes more sense to shop during sales.
Another fact is that consumers today are fashion conscious. As a result, they are willing to pay a price to keep in tune with the changing trends. This further implies that till the time that an item can be categorised as the latest in fashion, they do not mind paying a higher price. Retailers understand this psyche and leverage on the benefits that it offers. So, only those items are usually offered on discount do not carry the tag of, latest in fashion.
Says Mr Nadkarni, The consumers today pay for novelty value of fashion, at the outset he or she pays premium for the freshness of fashion. Also consumers are aware that as time passes fashion becomes common place and they will not pay the same high price later.
Further Mr Patel elaborates, A consumer usually pays for the perceived value of the product. It is actually quite simple, even if a consumer has enough number of footwear or shirts, he would not mind picking up a branded one if he is getting it at a good price. This is the basic thought that goes behind planning a sale.
Not the perfect approach
In certain cases, brand promoters and retailers feel that a discount strategy can actually hurt the image of the brand.
Elaborates Mr Dilip Kapur, President, Hidesign, We at Hidesign do not believe in sales. At the stage where Hidesign is now in the Indian market it only ends up hurting the brand. Sales essentially have to be planned according to the image and the positioning of the brand.
To do or not to do
At the end of it, it is more or less the decision of the brand or the retailer to take a call whether to offer discounts or not. In certain cases, it is a strategic decision to not offer any discounts. As a result, the sale of these brands and products more or less, remains the same through the year.
From the point of view of a consumers, the more the discount, the more fun it is to shop and the more they would buy!
So retailers, take your pick!