Comment

With the advent of organised retailing in India, the world of discounts, rebates and bargains has transformed in the last decade. They are no more re-adjustments of inflated prices.

Today, discounts are genuine markdown of regular merchandise. Informed consumers have become bargain-hunters and keep a close eye on bargain announcements.

But January 2012 was different, even unique, in the context of discounts. I am even tempted to label it Black January (think Black Friday, the busiest shopping day following Thanksgiving Day in the US, when most major retailers open extremely early, around 4 am or earlier, and offer promotional sales). The month may not have been the busiest, but it was certainly the most discounted.

Perhaps for the first time, discounts were comprehensively used by the retail industry to lift its sagging numbers. Some were coordinated marketing efforts but many were desperate efforts, signifying underlying challenges the industry is currently facing.

Three distinct trends were noticed in the retail industry’s fight back, using discounts as a primary tool.

First, end-of-season sales were advanced. Retailers, particularly hypermarkets, brought forward end-of-season sales to lift footfalls. While this was a pleasant surprise for shopaholics, it also reflected the sense of urgency and tough times for retailers.
Second, bargains were woven around the theme of Republic Day (January 26). One unique campaign that stood out was “Get double the value offer”, if one buys goods worth Rs1,950. This is smart and surprising. Prices are rarely cut around festivals such as Diwali. The logic is to ride on the festive wave for shoppers to loosen their purse strings.

Moreover, national holidays are rarely used as occasions to offers bargains and discounts. Unlike the long October day celebrations in China or the 4th July celebration in the US, mood on national holidays in India is more serene than celebratory. Therefore, such occasions are restricted to decorate stores with nationalist colours.

The 2012 Republic Day will go down in history as one that offered most bargains. While the initiative by retailers to induce a celebrations-and-shopping binge around Republic day is welcome, the outcome is more unintended than planned. The real motive was to capitalise on the long weekend and bring shoppers to stores with the hope to inject new life to depressed numbers.

Third, use of price cuts to improve the performance of certain categories. Here, the story of tablets (iPads, Galaxy Tab) is worth mentioning. This category is yet to take off in India. Samsung has played the torchbearer to build awareness of the category, but is yet to taste success. While, there are structural issues for tablet’s inability to take off, tablet players used the month of January to offer heavy price discounts. The motive really was to discover the price at which Indian consumers will attach value to tablets. These were genuine price cuts to the MRP (maximum retail price) by all players.

If retail sales figures of January are any indication, then these retail sales initiatives did manage to not only bring in the consumers to the stores but also made them open their purses. It is not surprising, therefore, that tablet sales grew the highest (in % terms) across all categories. Many other categories witnessed a double-digit jump in sales as well.

The key question, however, is about the sustainability of this performance. Economic slowdown is just one part of the story.
All the three trends denote a shift in the positioning of discounts from merely being a stock clearance exercise to a stimulus tool used to induce consumers to shop. One can argue that it signifies the maturity of modern retailing. Will the shoppers, however, continue to shop in same numbers once the stimulus is removed? Have the retailers inflicted a self wound by creating a new term of reference by spoiling consumers?

Black January is a sign of fundamental changes happening in the way at least urban India shops. Now it is almost clichéd to say that the Indian consumer is a value-seeker.But retailers / product brands struggle to keep pace with the dynamic template that urban Indian consumer uses to calculate this value.

Proliferation of e-commerce, time poverty, trade-offs between need- and aspiration- based shopping... these are some of the factors that have compelled the Urban Indian Consumer to redefine value across each category. For instance, today one can buy an Adidas T-shirt 40% cheaper online (that too without using any credit card). As much as retailers hate it, this is slowly becoming the new value reference.

Many such triggers are playing in the consumer’s mind. This is forcing her to redefine the price-value trade-off. Whenever this trade-off is matched by offers, spikes in shoppers@stores will be witnessed.

— The writer is associate director-retail at Technopak Advisors