In a rethink of strategy, fashion retailers are planning to shorten their end-of-season sales events as customers lose interest in buying products merely for discounts. A longer duration also doesn’t necessarily translate into higher sales, they say.
After demonetization on 8 November, many branded apparel and lifestyle firms offered mid-season discounts that were to continue well into 2017 while also advancing their year-end sales to mid-December from end-December to boost flagging consumer sentiment.
But executives at K Raheja Corp.-owned Shoppers Stop Ltd, Dubai-based Landmark Group’s Max Fashion and Future Group’s Central are now planning to reduce the duration of their sales since consumers prefer to buy fresh stock.
Shoppers Stop reduced its last sale period by 12 days. It opened its sale at the end of December and wrapped it up by mid-February rather than end-February. It plans to follow a similar strategy during its summer sale too, i.e. reduce the duration by a week or 10 days.
“From this season onwards, our understanding is that we need to change track. Customers come and shop for new range and service, not price,” said Shoppers Stop’s managing director Govind Shrikhande.
Value-fashion retailer Max’s end-of-season sale, which used to last for 24 days two years ago, ended in 20 days in December and will be cut further to 15 days this summer.
“Over the next two years, we want to bring it down to two weeks because customers are not really enthused by sales…They are very enthused on full price because our average price is around Rs500 and even at 25% off, the customer ends up saving just Rs100 or so. Customers are saying we don’t need your Rs100, give us fresh next-season merchandise,” said Vasanth Kumar, executive director of Max.
Clearing inventory to make room for new stock is the main reason these retailers hold sales rather than to boost earnings. Revenue from end-of-season sales accounts for about 50% on average of a retailer’s total business during the quarter that a sale falls in; a major chunk of that comes in the first week of the sale.
Retail chain Central used to run its end-of-season sale for about six-seven weeks. Its last sale began during the last two days of December and ended on 31 January—lasting roughly four-and-a-half weeks. The philosophy going ahead will be starting and ending sales quickly to focus on new fashion instead, according to its marketing head Jitendranath Patri.
“The first two weeks of a sale are critical for a customer—that’s when he or she will come and shop. Then it’s only cherry pickers who keep coming and the offers become blind spots—how long will each brand keep saying 50% or 60%? There’s no sanctity for that number anymore,” said Patri.
“In the last four-five years, there was a lot of e-commerce discounting going on. Suddenly the apparel and lifestyle category was becoming the mainstay of e-commerce companies, which were selling merchandise at (discounts) throughout the year,” said Ankur Bisen, senior vice-president (retail and consumer products) at consulting firm Technopak. “That forced a lot of these big retailers to increase the length of sales or do more sales around the year and it was hurting their profitability. That realization is now (happening) and retailers are saying we have to go back to our retailing strategy.”
But whether a retailer is able to stick to its targeted sale period is another question entirely, said retail consultant Third Eyesight’s chief executive Devangshu Dutta. “It’s not always in the control of the company. You may plan to do a certain sale for a certain period of time but if you have a lot of inventory left over and if the rest of the market or your key competitors are also on sale, a brand may have no choice but to have a longer sale than planned,” he said.