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Retailers Pushing Their Luck Through More Discounts

Monday, February 03, 2014
By Mayura Shanbaug

End of season sales number are turning out to be better than festive season sales

Mumbai's media professional Gayatri Rajwade is a happy woman this year as most of the end of season sales at the city retailers have not only been extended, but  the discount and freebies are also increasing with every passing day.

“I love branded stuff but I cannot afford it on a regular basis. Season sales are the best time to get good bargains and own stylish branded  clothes and accessories which are beyond my reach during the festive season like Diwali,” says Rajwade. 

She is amongst thousands of buyers who do not buy during the festive season, but wait for the same stuff to go on sale during an end of season sale. May be that is the reason that retailers this year have not only extended their sale  periods, but are also outdoing each other in terms of  discounts. Most retail outlets and malls in the city are now offering discounts from anywhere between 50%-70%.

According to a retailer, “Sales during season or after season are done with the following objectives: To clear unsold stocks as the slow-down is likely to create excess inventory. To promote sales by offering special deep discounts and lure customers to buy more and pre-pone their purchases or to attract them away from competition. Line or product failures are better cleared during the season at higher discounts rather than  off-season where the off take will be anyhow very poor.”

According to BS Nagesh, Founder, TRRAIN, the Indian retail industry is going through a consolidation stage wherein existing players are/have corrected their models and learnt from their mistakes and are growing from their cash flows rather than borrowings or further equity infusion.“As far as season sales are concerned the market news is that it has been slower than what retailers expected,” he says.

Though the country's retail sector is set to grow at an annual rate of 16 to 19 %, reaching Rs. 56.8 trillion ($901 billion) in 2016, as per a research report, most of the mid segment retailers barring, some top ones, seem to struggle with dipped sales, lower margins and high cost of funds. This year India has witnessed the worst festive season sales in almost a decade.

As per reports, sales have dipped by 15-20% and the cost of funds have increased by 15-20%. For the businesses, the effective loss adds up to around 35-40% during this festive season.

According to industry experts, the desperate retailers have already extended their sale duration by a week to 10 days. “This has become a yearly phenomenon. Retailers have been advancing their sale duration by 10-15 days every year. It shows their desperation due to poor sales,” he says. 

Chief Executive, Malls, Runwal group, Anupam T, says “ car traffic has gone up 15% across the group's mall in the city. Its R City mall is holding a flat 50% sale in all 100 brands.”   

However, Jay Gupta, Managing Director, The LOOT, believes that the response has not been good in the initial days of the sale. “Brands on discounted sales through the year have not seen a good response during the current sale period,” he says.

Gupta reveals that the sale would go on till valentine day as retailers are hoping to cash on to the lover's day euphoria. “The end of season sales number is just about better than festive season sales, but are a disappointment if compared to the last year's figures,” explains Gupta.

According to B S Nagesh, the supply side has also been toned down as most mall players have become more cautious after the euphoria of 2008 - 09. However, he is optimistic and says “I see more success in the next 5 years than what we have seen in the past. My belief is the golden period of Indian retail is 2015 – 2020.”

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