Brands use discounts to treat note ban pain

Stores are offering 15-70% discounts to counter drop in footfalls

Sales at lifestyle goods retailers dropped by more than half in the first week after note ban. Bloomberg
Sales at lifestyle goods retailers dropped by more than half in the first week after note ban. Bloomberg

Mumbai: Anumber of branded apparel and lifestyle goods retailers are offering mid-season discounts in a bid to lift sagging sales following the withdrawal of large-denomination currency notes by the government.

The discount sales are likely to continue well into the new year as retailers are also considering starting end-of-season sales in mid-December instead of waiting till the last week. On the weekend of 4 December, brands such as Mango, Aldo, La Senza, Promod, Kenneth Cole, Steve Madden, Michael Kors and Pepe, to name a few, were offering discounts ranging from 15% to 70% following a drop in customer footfalls in the aftermath of demonetization of Rs1,000 and Rs500 banknotes.

To be sure, since the first week following the 8 November announcement, when sales dropped by more than half, business has picked up and is about 15-20% lower than a year ago. That’s small consolation given that retailers had been hoping for a strong December quarter, eyeing the Seventh Pay Commission payouts and a good monsoon. They are resorting to aggressive pricing and promotions to prevent a pile-up of inventories, analysts said.

“Retailers are under pressure because sales have fallen for the last two-three weeks and are yet to recover. So, they are testing the market with discounts and promotions to lure consumers,” said Harminder Sahni, managing director, Wazir Advisors, a retail consultancy.

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“We usually run promotional offers during Diwali and after that sell at full price till the end of season sales,” said Kavindra Mishra, managing director and chief executive of Pepe Jeans India Ltd. Following the demonetization announcement, on 9 November the brand announced a 30% discount on select merchandise and an additional 5% off for those paying with cards, said Mishra.

For Major Brands India Pvt. Ltd, partner for brands such as Mango, Aldo and Promod in India, mid-season sales usually end in November with offers up to 30% off on average. This time, however, the brands are still on sale and are offering much deeper discounts of up to 50% on average. “Brands may consider advancing their end-of-season sales from the last week of December to mid of December to make up for the loss in business,” said Tushar Ved, president, Major Brands.

Likewise for India’s largest sportswear retailer, Adidas. “We have seen a 10-15% hit in our business in November,” said Dave Thomas, managing director, Adidas India Pvt. Ltd, adding he expects end-of-season sales to start by mid-December.

Not all retailers are convinced about the discounting strategy. “We are seeing sales pick up and getting back to normal. This quarter there will be a small hit but we are doing better than our initial estimates and hope that retailers can hold on to their sales and start them by 10 January,” said Govind Shrikhande, managing director, Shoppers Stop Ltd.

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For the past two-three years, end-of-season sales have been starting early, in the week of 15-22 December, in view of the intense competition from online retailers. This year, as the discounts had been lower online, retailers were hoping to start such sales in the January quarter.

Meanwhile, retailers have also been looking at extending partnerships with wallet-service providers such as Paytm and FreeCharge to help consumers deal with the liquidity crunch. “We have tied up with every single wallet and are doing whatever we can do to make consumers go cashless,” said J. Suresh, managing director and CEO of Arvind Lifestyle Brands. “People are more careful of spending now even though they are buying on cards.”

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