Rakesh Kumar, a Delhi-based software engineer, is a happy man. Last week, he paid a visit to home town Agra and decided to pick up some apparel for his wife. Interestingly, he ended up shopping for self as well. So he ended up overshooting the budget. Why then is he sanguine about this unscheduled extravagance?
Because he did all that and stayed well within the budget. Thanks to some heavy discounting on most apparel brands, he managed to get more bang for his hard-earned buck.
Now comes the crystal ball question: Taking into account economic pundits’ projections that the economy will revive after the second quarter of FY09-10, will Kumar — and others like him — be amenable to full-price shopping after market sentiments pick up?
In an attempt to find the answer to this question, IndiaRetailing conducted a poll. And the results, to put it mildly, can be worrying for many retailers. A mammoth 61.1 per cent of the total respondents say that they will not buy the same product at their original prices, while a mere 11.1 per cent turned undecided on the question, and a more substantive 27.8 per cent insisted on being insensitive to the discount therapy.
“Do you remember the ‘exact’ price of the toothpaste you purchased last?” asks Sumit K Lal, director, Ecco Shoes India, in response to the question. “Your answer would almost certainly be a ‘no’. However, when it comes to luxury brands, the answer would be otherwise.”
Brands that have concentrated on offering better value, than going down the discount route, will succeed even in these tough times.
“Excessive discounting eventually leads to consumer dissonance at some stage or the other. Discounts as a clearance, odd size discount etc. may be well understood by the customer, but when you discount to counter a slowdown in the market, it is bound to send the wrong signals. The consumer will definitely take it that he has been overpaying all this while and that the company was making major profits. This dissonance could result in the consumer losing faith in the retailer and shifting loyalties. Now consider raising the prices when the economy revives — the ensuing dissonance will hit even the most loyal consumer base,” he adds.
Taking the discussion further, Govind Bharwani, director and president, Major Brands India says, “Consumers will find it
difficult to buy the same products againif they get heavy discounts and products at throw-away prices. To gain the consumers’ confidence will take a few seasons.”
Bharwani believes that it would be wiser to react on basis of customer demand and adjust the buy accordingly. “Heavy markdowns can be undertaken in a panic scenario — when a retailer is over-stocked or doesn’t have a fast moving collection. But if repeated, this can cause damage to the brand image and profitability. Nobody can achieve profitability by being on continuous markdowns / sales as the industry has similar sources to buy from and the pricing is more or less the same for all,” he notes.
According to Shivaraj Subramaniam, marketing head, Van Heusen, too much discounting is harmful, irrespective of the state of the economy, or other circumstances. “Brands that have chosen to `discount’ because of the recession have assumed that consumers are uni-dimensional, and will buy at lower prices. However, consumers are far more conscious, and give much more importance to the value they perceive from a purchase. Brands that have concentrated on offering better value, than going down the discount route, will succeed even in these tough times,” he points out.
Agreeing with Subramaniam, Puneet Verma, vice president – sales of Sports Station India says, “Giving excess discounts is not good for the brand image itself. During a slowdown, brands need to look at offering products that are perceived as value-for-money by consumers. Having said that, it is not necessary that brands should drop MRPs, they can instead add more value to the product,” he suggests.
Commenting further, Kanika Mathur, president and co-founder, Solutions Digitas says, “Some categories will tend to give discounts; however, these will not be radical. In most cases, the sheer desire to own a product will drive purchase at the price points that are available at during that period, regardless of what the price tags are.”
Jay Gupta, managing director, The Loot says, “I believe anything too much is harmful. And during the slowdown, when the disposable income of individuals have decreased, the buying capacity is affected. During these times it is very important to retain customers and build a set of new customer base.”
Meanwhile there are all time discounted brands which also have extended their discounts beyond the regular ones. “Obiously discounts are the main key to attracts the customers, because when they heard about discounts they create an image in mind about the pocket friendly pricing; they plan to go and purchase some of them; they buy it also. Generally we are giving 50 per cent discount on Cantabil and Lafanso, but during this slowdown we have added 10 per cent extra discount. In case we return to original prices, then too it will be 50 per cent discount. So the psychology of consumers won’t change,” says Vijay Bansal, MD, Cantabil International Clothings.
