Online retailers have been luring consumers with deep discounts and its clearly paying off. With a 20-70% discount available all around the year on apparel, footwear, books, home furnishing etc, it’s no surprise that consumers are clicking till they shop and drop.
However, even though consumers are clearly enjoying it, offline retailers are not very happy with the deep discounts that is being offered. Since the brick-and-mortar retailers cannot match up, they are clearly wary of the offers being doled out.
Manish Kapoor, COO of French Connection, explains that this sort of discounts are leading to channel conflicts. “Franchisee and distributors clearly cannot offer similar discounts that are being offered online and so they are having an issue with this discount-game. And these discounts are not only available during the sale period but are available all throughout the year. As a result several brands are taking the decision to lower online discounts during the main season period.”
Even the online retailers are finding it difficult to sustain deep discounts through the year. Ganesh Subramaniam, COO of myntra.com explained that profitability has become a key concern for e-commerce players and as a result they may lower discounts. “Discounts mean lower margins and when you are chasing profitability you can’t work on paper thin margins. So its definitely likely that we will start seeing discounts coming down.”
E-commerce players explain that till a couple of years ago discounts use to range up to 70% even during the off sale period and this has come down to 30-50% now. Going ahead, online retailers say that discounts are likely to stabilise to around 20-30% range as far as apparel or books are concerned. In high margin products like electronic items, retailers expect discounts to come down to 5-10%.
Retailers who have both online and offline presence are also finding it increasingly difficult to match the pricing in the two different retail channels. Moreover, the risk of price cannibalisation is very high for such players and that is becoming a huge concern.
“All of this is not just impacting profitability but is also creating dissonance for a brand that operates both in the online as well as offline retail space in terms of the discounts and pricing. We will (hopefully) eventually witness a phase when the discounts will stabilise; but it has to be a collective move by all online players,” explains Anurag Rajpal, Director and Chief Executive Officer at The American Swan Lifestyle Company.
Praveen Sinha, co-founder of Jabong also believes that deep discounts cannot be sustained through the year and are definitely going to stabilise in the near term. He explained that initially new players may try and lure consumers by giving them hefty discounts but that will last only for a short period.
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