In a bid to boost sales, retailers turn to ‘happy hour’ discounts


May 18, 2010

Sapna Agarwal & Gouri Shah

Mint, Mumbai, May 18, 2010

Across Mumbai, New Delhi and Gurgaon, children’s apparel and accessories store Okaidi has been inviting customers for happy hour sales over the past week. No, the French chain hasn’t suddenly started selling drinks; it’s offering a flat 20% discount on the purchase of its usual T-shirts, chemises and other items between 10am and noon, Monday through Thursday.

The marketing mantra may sound incongruous outside a bar, but retailers from a range of sectors have started borrowing it to push sales in traditionally lean hours—betting that everyone loves discounts.

“It’s definitely a trend,” says Devangshu Dutta, chief executive of New Delhi-based retail consulting company Third Eyesight, adding that sectors such as organized retail, telecom and entertainment are adopting the strategy.

Retail analysts say that besides boosting revenues, the strategy eases seasonal and peak-time customer load and improves manpower utilization., an e-commerce site that sells premium brands such as Moschino, Salvatore Ferragamo, Dolce and Gabbana, Hugo Boss and GAS at hefty discounts, last week introduced happy hours between 5pm and 8pm that let consumers win “free luxury gifts” every 15 minutes.

“We just wanted to offer our consumers some fun incentive to log on to, but once the figures came in, we were surprised to see that the announcement had generated tremendous traction,” says Pearl Uppal, co-founder and chief executive, Fashion and You India Pvt. Ltd, which runs the website.

Uppal adds that traffic has doubled since the website announced the happy hours.

A few months ago, Cinemax India Ltd, which has 94 multiplex screens nationwide, introduced earlier-than-usual screenings of the film 3 Idiots. With 28 shows daily in some places, the first would start as early as 6am, with as much as 50% slashed off the ticket.

“My rentals and manpower costs are fixed. The only additional costs are electricity. But we managed to get a new set of audiences to walk into our theatres during those times,” says Devang Sampat, senior vice-president at Cinemax India.

The shows, which also offered free tea and biscuits, drew college students and senior citizens after their morning walks.

“It worked beautifully,” recalls Sampat, adding that the strategy has worked for other films too, pushing up audience numbers by at least 100%.

Okaidi, for instance, has registered a 200% hike in sales, says Neelu Mundra, sales manager at the Okaidi store in Mumbai’s Atria Mall. “Mornings are usually dull with hardly any walk-ins or sales,” she says, but adds that the promotion has seen sales grow three fold.

Candies, a multi-cuisine restaurant in Mumbai, offers 25% off on food between 8pm and closing time.

“Close to 15% of the day’s products are usually left unsold at the end of the day, but with discounts like this we see all our inventory sold with just 1-2% left unsold,” says manager Ashish Anton.

Dutta of Third Eyesight points out that retailer Big Bazaar offers deep discounts every Wednesday, which has traditionally been a weak day for it, while mobile service provider Bharti Airtel Ltd offers free or discounted rates during some hours to spread its load more evenly.

“It (promotions) typically also serves to attract new entry-level customers who otherwise might not have come—so if you take away the cost of customer acquisition, then these promotions become even more profitable,” says Neelesh Hundekari, principal at global consulting firm AT Kearney.

As a bonus, consumers who go for such promotions also tend to buy at full prices, helping them trade up at no extra cost, he added.

But happy hours pose some dangers as well. Managers at Okaidi are wary of letting the promotion wean away customers willing to buy at full price during peak hours between 5pm and 9pm, which are typically half of total sales.

“The objective is to increase the sale, assuming that the peak hour sales remain the same,” says Kamal Kotak, director, Major Brands India Pvt. Ltd, which manages Okaidi.

“The expectations from this offer is to see an increase in (overall) sales of 25-30%,” he said, adding that if successful, Major Brands could adopt the strategy for other brands they manage, such as Mango, Promod and Aldo.

This may be a challenge but it is not impossible, says Hundekari of AT Kearney. “People are used to different discounts at different times of the year; getting used to different times of the day is not very hard.”