The business of sale and discounts

The business of sale and discounts

Hiram Lodge, the American business tycoon in the fictitious world of Archie comics, hires Ms Brissy—a psychotherapist with a track record of curing compulsive shoppers—for his rich, spoilt daughter Veronica. Veronica pleads before her father that shopping is her lifeblood while Ms Brissy placates her: “Nobody is asking you to give up shopping, my dear! Moderation is the keyword."

As part of the therapy, Veronica Lodge has to get rid of product catalogues as soon as they arrive, carry a calculator on her shopping trips and avoid her favourite stores. She follows the instructions and takes Ms Brissy to all the out-of-town “discount" and “special consignment" stores.

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The finale has Ms Brissy standing amid loads of shopping bags belonging to her and talking to Mr Lodge on the phone: Veronica is “definitely making progress" she tells him, but she herself is ready to quit since she “just can’t afford" her new job.

The humour and irony of the situation notwithstanding, the truth is that discounts stoke greed and Ms Brissy is easy prey. Fortunately for retailers and brand owners, the Ms Brissy kind of consumer exists across all markets, and increasingly so in India. To tap such consumers, the sheer number and scale of discount sales has grown in the country. July and August are now established as the sale months in the Indian retail calendar, as are January and February. Retail chains, single or multi-brand stores, menswear, women’s or children’s wear in luxury, premium and mass categories are all offering discounts.

The phenomenon of discount sales is relatively new to India. Until a few years ago, a sale was looked down upon and associated with poor quality products. That’s changing, insists Shivaraj Subramaniam, a marketing expert who manages the men’s apparel brands at Madura Garments. Discount sales are a sign of the evolution of a market, he says. Saloni Nangia, vice-president at retail consultancy Technopak Advisors Pvt. Ltd, adds that India is following developed retail markets.

Fashion-forward markets such as Italy and the UK offer discount sales four times a year. “India doesn’t but we will get there," Nangia says.

There are many reasons for the change. For a start, Indian consumers are becoming more fashion-conscious—they know about the latest trends and silhouettes. Two, the retail landscape has altered. International brands have arrived with a discount sale culture that seems to be built into their business models.

That’s not all. Modern retail is also creating the ambience and opportunity for sales. The lifespan of merchandise is getting shorter as the consumer gets bored quickly and starts looking for fresh stock. In developed markets, the life of merchandise has dwindled to three months from six earlier.

Clearance sales make ample business sense, too. The consumer benefit is obvious: Popular brands are accessible at a discounted price. The brands, believe it or not, make good money. A premium men’s apparel brand that averaged sales of Rs5 crore a month made as much in the first three days of a sale held last year.

Sale signage entices new customers who may end up buying. Even loyal customers spend more during a sale. So while the unit value of the products sold may be low, the volumes make up for it. According to Shivaraj Subramaniam, brands don’t lose money during a sale though they may make a smaller profit. The margins of everyone in the value chain are protected because the mark-ups on apparel brands are pretty high.

Today general sales are as much a part of the consumer calendar as the wedding season. Shivaraj Subramaniam says that a sale now has respectability and the customer buying at a sale is not looked down upon. It is a part of the retail experience and a win-win for both the consumer and the brand, he says.

Not all agree. Nagarajan Subramaniam, an independent marketing consultant based in Mumbai, says that it is a bruising game that dents the image of the brand.

His theory is that discount sales are crowded by shoppers who are both conditioned and impulsive. So revenue may not be the issue. But it is wrong to attribute the growing number of discount sales to consumers demanding quick turnaround in merchandise.

There are brands that change merchandise every three months without offering any discounts. He feels discount sales reflect companies’ lackadaisical attitude towards their merchandise at the planning stage, spurred by complacence that the inventory could be cleared later through sales.

In the long run, the customer is not loyal to the brand but to the discount, Nagarajan Subramaniam says. Veronica Lodge’s psychotherapist Ms Brissy would doubtless buy the argument.

Shuchi Bansal is marketing and media editor with Mint. Comment at