Bombay, Bangalore, Delhi, Ahmedabad, Baroda…..high street, shopping centers, malls..et all…There is a discount everywhere for every thing!
And surprisingly Retailers say that Sales are higher by discounts. Whilst this would be obvious, “who can resist a sale?” it also raises a couple of questions ~
Did they have such large margins earlier?
Are they doing this just to ensure cash flow?
Can they afford to continue doing this, given the fact some of the retailers have had sale from Divali onwards?
What is the difference in product on Sale & without it?
Will this price become the benchmark once the discontinue the Sale?
How long is this really going to last?
Does Sale give value to the consumer & volume to the retailer?
Some of these questions do have answers, that are revealing about the strategy adopted.
Discounting is normally related to inventory management as well as the revenue sharing agreement that the retailers strike with the original equipment manufacturers to keep products rolling on a faster rate. The technical term “Velocity”.
Here you have apparels, consumer durables, electronics etc. BUT most of the discounts normally come from “PRIVATE LABELS”.
For example Big Bazaar with at least 25%+ of its sale coming from private
labels can afford to keep giving deep discounts, for a much longer time.
Private label allows a retailer to make at least 60% of
the cost of the product sold, whilst the rest can be passed off to manufacturers & transporters.
And yes this can be good for both retailers & consumers; however the standardization is the issue here. In an effort to keep squeezing, the first lot in Apparels is US size, whilst the 2nd lot is UK size. The material gets thinner or the buttons, there is a variety of things that can happen, which 80% of the consumers are not concerned about.
However, INDIA which is practically 6-8 different countries in one, the most critical element of discounting which involves planning of geographical & festival sales is still
very much in the evolving stage.
AND this is when the consumer planning to shop shall come into its own!