Physical and online retailers to cut down discount season

While ecommerce players are considering full-price model to turn profitable after gaining a foothold in the market with deep discount strategies, physical retailers have decided to shorten the discount season. Retailers such as Shoppers Stop and Madura Fashion and Lifestyle, in association with the Retailers Association of India (RAI) are talking to other leading players to shorten the discount season. The aim is to reduced it from eight weeks a year to six to six-and-a-half weeks, over two editions.

So far, weak consumer demand and online discounts offered by ecommerce platforms have forced physical retailers to extend their discount season.

Shorter discount period to rake in profits

Flipkart’s ‘Big Billion Sale’, Google’s shopping fest, Amazon’s discount season along with other similar sale events by ecommerce players such as Snapdeal, Myntra, Jabong etc have had a negative impact on sales at brand and retail stores. This, coupled with low consumer sentiment, physical retailers are battling online discount wars. No wonder, they are yet to witness growth in their sales. While there was a 15 to 25 percent like-for-like growth in pre-Diwali shopping season last year, the seasons after that are witnessing lower than expected footfall at stores and malls.

Now, retailers have decided to manage inventories well and shorten the discount period. However, experts feel customers habituated to shopping only when the discount season is on may further move away from physical stores. As per a CRISIL study, players looking at making a mark in this space will have to learn from the past and judiciously assess customer preferences and calibrate expansion plans.

E-platforms now moving to full price model

After being heavily criticised for offering branded merchandise at steep discounts, online platforms are now mulling turning to full price model. Several apparel labels not only raised concerns over discount strategies adopted by ecommerce platforms but also issued a rulebook for them to follow, which has mandated e-commerce companies to follow a full-price model.

Now that consumers are habituated to shopping online, not just because of the discounts but also because of convenience, quality and variety, experts feel, the latest move may not have a negative impact on buying behavior. For instance, a recent report by ecommerce knowledge platform eTailing India points out that, while 32 percent of Indian customers shopped online for the convenience, 30 percent respondents said they went online only for the discounts.

However, the success of India's ecommerce companies largely depends on the quantum of discount they offer to attract consumers. A rise in inflation and continuous impact of economic slowdown has tremendously affected consumer spending and they are visiting retail shops on lesser occasions. A recent Assocham study says that they are increasingly giving preference to buying online owing to the discounts offered on brands.