Is too much discount selling the retail sector short?


January 17, 2014

Priyanka Pani, The Hindu Businessline

Mumbai, January 17, 2014

Retailers and mall owners are throwing open malls at eight in the morning and doling out offers and discounts to boost slackening sales. Experts have attributed this trend to high inflation, slowing economy, competition among retailers and emergence of online players. They believe too much discount is detrimental to the sector.

Infinity and Growels mall in suburban Mumbai decided to remain open for shoppers from 8 a.m. till midnight for a day on January 17. Korum mall in Thane and Oberoi in Goregaon were running flat 50 per cent discount across 90 well-known brands until midnight on January 11.

Additionally, there were prizes every hour from cars to diamond jewellery and international holidays. DLF mall in Delhi has similar schemes for 27 days starting January 10. Retailers are spending more during the sale period for customer acquisition. But are these campaigns translating into sales?

According to Devangshu Dutta of retail consultant Third Eyesight, the demand has certainly been subdued due to macroeconomic sluggishness and damp consumer sentiment. “I don’t think the current discount sales are attracting heavy footfalls. In fact, discounts were being offered within the season, too, which would have taken some of the possible ‘sale’ footfalls into the core season as well,” he added.

Mukesh Kumar, Vice-President, Infinity Mall, said that while the economy was playing spoilsport, there has been an increase in the number of sale seasons and prolonged sale period as fewer people were coming to the malls. Kumar said while the topline for most retailers has jumped 30 per cent year on year, the margins have been impacted.

Margins have been hit by 30-40 per cent, an official at a premium brand said.

“Everyone seems to be part of the race to the bottom and most brands and retailers are losing out in the discount game by sacrificing both short-term margin as well as long-term brand equity,” said Dutta of Third Eyesight.

The emergence of e-commerce players, which are playing the cards of convenience and reasonable pricing, are also posing threat to the brick-and-mortar sales mostly in small towns where there are not too many brands and malls.

(Sourced from The Hindu – Businessline.)