Up For Sale: Are you Game?

Chennai has become a shopper’s paradise as most of the high end apparel companies have their booties up for grab. The results are clearly visible, in normal days you will find little crowd inside magnificently decorated show-rooms and the yellow display board with SALE written over it has remarkable effect. It’s surely a crowd puller as the regular brand shopper take it as a chance to pre-pone their future purchase and the low end shopper welcomes it as an entry to the brand conscious club.

The question is what’s the logic behind the sale? Are the prices really low? In some cases it’s yes and in some cases they simply markup the price and then offer a discount which actually means only 10-15% for the customer instead of
the promised 40-50%.

The UpTo deal: - I often get frustrated when I see the UpTo SALE like upto 40%. The simple idea is that they offer high discount on slow moving items so that to recover the loss in revenue from the quantity and utilities are frustratingly priced at a premium. So for the company it’s always a win-win situation. Like I went into this Adidas showroom to find out that their 50% sale condition is that you have to pay full on the product you price and then you can redeem the discount on some other article. So if you have to buy a shoe worth Rs. 5000/- you will get discount worth Rs 2500/- on the next purchase which has to be made on the same day. I doubt that consumers are not dumb enough to fall into the trap and most of the shoppers are the brand loyals only. So their purpose might only be to drive traffic into their lavishly maintained showrooms.

The purpose: - The purpose behind SALE offers are ideally one of these clearing the stock and making way for new arrivals as taste and preferences changes every six months, targeting those people who have the desire and offering them some incentive to take purchase action or simply driving traffic to store by putting a SALE banner. Consumers are not that ignorant now, they have their own mental accounting and they can quickly guess that what should be the ideal price of the product and the sale tag really add some value to them or not. Simply putting a sale banner and charging exorbitant prices are not going to do any justice to your sales and the volume turnover won’t differ much. It could be the opposite way also where you run your promotions for so long that the discounted price is actually perceived as the real price. Koutons is an excellent example where the company runs promotion for like all round the year with discounts as high as 60%. Now, there are few takers for Koutons at the markup prices. But, the company is still happy because they have penetrated into the market segment where loyalty is little and people are willing to switch a brand if they get value for money. So, a short term tactical decision for Koutons may become long term strategy for the pricing of their products. The big question is that where will these promotions stand after the entry of big brothers in retail like Wall Mart and Sears? May be apparel industry should start looking inward and focus on implementing a target costing approach.