Demonetisation Affect: Brands still giving out end of season discounts

For the first time in six years, the customary end-of-season sale at Zara, Mango and Marks & Spencer has meandered way past its traditional deadlines – without emptying the shelves. Low consumer confidence owing to currency swap announcement has prevented brands from liquidating last season's stocks as, analysts say, even discounts of up to 70 per cent couldn’t lure customers. Promotions, cashbacks and discounts by brands such as Marks & Spencer, Tommy Hilfiger, Pepe Jeans and Superdry had to stretch the discount season that typically lasts about six weeks by at least a month, said industry executives and retailers.

According to Suresh Sungaravelu, Executive Director-Retail, Prestige Estates, this time, stocks have piled up because of demonetisation and brands that still have inventory left are on sale. Usually, the trend is that the inventory of the coming season is decided according to the performance in the previous years. Typically, the new stock gets introduced by Valentine’s week, but this time the sales season seems to get extended till Holi.

Analysing macro-economic growth

According to some companies, the government's decision to suddenly restrict the use of Rs 500 and Rs 1,000 bills greatly impacted the purchasing power of consumers, which temporarily hit sales of products. To counter plunging consumer confidence, fashion brands offered buyers discounts anywhere between 40 per cent and 70 per cent until February end, and some of the offers are still valid. Spain's Zara, for instance, generally goes into fully new merchandise weeks before March, but this year various items from men's shirts to women's winter wear were still on sale until last week. Furry women's jackets, for instance, with an original price tag of Rs7,990 were available at a 50 per cent discount for Rs 3,990.

Zara's UK rival, Marks & Spencer, too is still offering 40 per cent less on the purchase of a second shirt. At Nine West, women's bags were being sold at a 50 per cent discount, while Hush Puppies' shoes had a similar price cut. At Mango and Accessorize, discounts were as high as 70 per cent. Discounts were also prominently displayed by various other brands, including the lingerie label La Senza and apparel brand Voi Jeans.

According to Van Heusen store executive in Bengaluru, the retailer ended the sale season only on February 28, until when the brand offered 40 per cent discounts on the purchase of two shirts or trousers and 50 per cent on shoes. Some of the items of their old stock that didn't sell are now available on the company site.

Is it going to impact summer sales?

Except some brands, most are yet to move into the full new season collection in every store. Various brands have moved merchandise from high visibility stores to more secondary markets. For most of the brands, 100 per cent new season collection in every store hasn't happened. Otherwise, Valentine's Day is typically the cutoff to fully move into the new Spring/Summer collection. The spillover could impact business in the spring/summer season.

Other brands such as H&M and People have already started giving promotions on their new season stock, replicating round-the-year offers by online fashion shops such as Myntra and Jabong. While H&M has started 50 per cent discounts on the second denim trousers, shorts and dungarees, People is offering 'buy-three-get-two-free' offer across all categories.