The sales pitch

MINT

The sales pitch

Given the current mood of the retail environment—online as well as in malls and marketplaces—it is difficult to say whether customers are stalking stores or retailers are stalking customers.

“End of Season” sales meant nothing in this country even five years ago. Which season “ends” mid-monsoon in India anyway, especially for labels selling salwar kameez and handloom saris?

Today, however, it’s very different. In malls and organized markets in big cities, there are few stores without a “Sale” announcement. Everyone struggles to keep up with the Joneses. From sunglasses, face creams, shoes and phone covers to accessories, home décor and beauty products—everything is soaked in discounts. The sure-fire hook works its charms down to the local markets, which resound with imitation sales on “suit-dupatta” sets and glass bangles. So even as “up to 50%” becomes ubiquitous bait, brands brandish even bigger offers. Big Bazaar billboards currently announce “Up to 60% off”, while Myntra, a subsidiary of the e-commerce firm Flipkart, cleverly worded its 2-3 July sale as the “End of Reason Sale (EORS)”.

 

Effusive, open-ended advertisements like “till stocks last” by Indian designer labels such as Tarun Tahiliani, as well as direct-to-consumer outreaches through text messages from brands like Marks & Spencer, Lifestyle and Benetton, among others, go on for weeks, sometimes more than a month, creating both tedium and frenzy.

Shoe retailer Charles & Keith has had a sale since mid-June—and it will last till the end of July. GAP seems to have been offering 50% off for the past two months. It is not just about reductions, there are a maze of offers—buy two, get one free; get a free bag/products worth XYZ on purchases above a certain amount, and a series of cashback promises on the use of certain credit cards and mobile wallets.

Sales don’t just last longer—led by global brands and online retailers, they start earlier, heralding “end of season” before the season actually ends. “Initially, when this trend of sales began, they used to be in August, and then it became end of July, now it is June,” says Neeru Kumar, designer and founder of the label Tulsi, who has worked as a textile conservationist for almost 30 years.

Due to the competition, indigenous brands that are in the business of creating four-five collections a year and don’t have the financial cushion to withstand frequent sales also spin on this merry-go-round. “We never had any sale till five-six years back as I believe in timeless classics, which should always be available but never discounted. I also think sales bring down the brand value, but we are compelled because of competition and customer expectations,” says Kumar. Her store now offers a month-long end-of-season sale from mid-June.

Fast fashion brands like Zara and H&M, which have challenged consumer interest in local brands in different countries, need to frequently get rid of stocks to bring in fresh ones. Inventory management is too expensive and cumbersome, and quick turnaround of merchandise is a part of their brand promise. While their discounts hook consumers, it has brought unhealthy competition to the doorsteps of Indian brands. As have fat discounts at online marketplaces.

Last Saturday, a Myntra press release issued in the evening said two million orders had been logged on the first day of EORS. A couple of hours later, the press release was reissued—the number had reached three million. The new release added that EORS was set to achieve its revenue target of 20 times more than the portal’s average daily sales.

Earlier this week, Mint reported that though the government has banned online marketplaces that receive foreign direct investment (FDI) from influencing product prices, e-commerce firms like Flipkart, Myntra, Amazon India and Snapdeal were offering discounts ranging from 20-90%. Myntra refused an interview to Mint Lounge while Flipkart did not respond.

Local brands find themselves handcuffed by these pressures. For apart from sales aimed at remaining in step with Web portals and global brands, their customers still expect additional discounts during festivals like Durga Puja and Diwali.

Sales make great sense for malls, where visitor numbers increase by 8-9% in these periods, according to a spokesperson for Delhi’s popular Select Citywalk mall. Yet, in many cases, the thinly veiled phrase “conditions apply” has significant meaning. These “best deals” for consumers come with many caveats. Customers are learning to engage with diverse fashion founts—H&M on the one hand and Ritu Kumar on the other, for instance—for the same reason: good bargains. They overlook the individualistic design signatures.

There is a downside to all this. It encourages people to collect more of what is ordinary (distinctive products are seldom included in sales) and what is not needed. Instead of shopping for style, consumers are breathlessly buying more. Good if you are just loading up on basics, but not if your goal is fashion.

Local brands forced to sustain sales cut corners in product enhancement. “Customers are hooked to buying only on discount, peddled largely by online retailers. This is creating unnatural buying behaviour,” says Amrish Kumar, chief executive officer of the Ritu Kumar label. With demand bargain driven, Amrish feels there is less incentive for brands to experiment. “Brands and retailers are concentrating on low-value products which end up being similar to each other,” he says. Ritu Kumar stores are offering product segregation during their ongoing sales—a rack with 20% off, one with 30% off, one even higher, even a rack where everything is for Rs.2,000 per piece.

Asked if his brand would consider opting out of seasonal sales, Amrish replies in the negative—it would mean losing out to the competition. But he does agree that the trend is choking innovation. “It will hamper the ability of brands to invest in innovation and, thereby, will weaken indigenous players—who may not have the cash flows of larger international players. In the long term, it is a dangerous trend for home-grown brands and fashion retail as a whole.”

Frequent sales with hundreds of red-tagged items are ubiquitous in Western markets too, particularly in the US. Earlier this year, J Crew got added to the list of American brands sued for “phantom markdowns”. The complainant accused it of “holding perpetual sales on arbitrarily priced items”. American legal website Law360 reports that brands like Calvin Klein, Tommy Hilfiger and Ann Taylor could also face lawsuits against markdowns, whereas Michael Kors paid $4 million (Rs.27 crore) to settle a “phantom markdown” claim.

Customers are now so used to sales that most brands notice the slide in numbers in the months when no discount is offered. Luxury handbag maker Coach told market analysts this year that it was considering withdrawing products from some multi-brand stores in the US and refusing to participate in storewide promotions on slashed prices.

The big question is whether brands have an exit strategy in place for long and frequent sales. Some of the answers may lie in the way a few American brands are segregating their businesses into outlets and full-priced stores. This helps customers decide what they want, and brands are free to open more sales outlets with discounted merchandise to attract bargain buyers. For example, Ralph Lauren, which was offering 60% off till earlier this week as a 4 July sale on its website, operated 165 factory outlets in the US and Canada in 2015—its full-price stores were only 58.

Staying away from sales as a deliberate brand-strengthening strategy can pay dividends. Some of India’s most known brands do exactly that. While Good Earth has a once-a-year sale that attracts extra long queues of regular customers, Fabindia never has a sale. Anokhi has a few separately earmarked outlets for discounted goods. None of these brands have lost their clientele.

“Discounting has gone from an occasional event to a new standard of retail. The dependence on discounting is sure proof of poor focus on designing, merchandising and buying. It damages the brand in the long term and just forces customers to wait for discounts,” says William Bissell, managing director of Fabindia.

That’s the point. Customers understand a brand just 50% if they only buy bargain merchandise. It is a discounted approach towards style.

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