To give or not to give, is the question that retailers and brands across all apparel categories are asking when it comes to giving discounting schemes to clear inventories piled up during the Covid years as well as to tide over the impending recession. As no two downturns are exactly alike, all branded segments from leading retail chains to global and Indian fashion brands, are now focussing on understanding the evolving post-Covid consumption patterns and fine-tuning their discounting and marketing strategies accordingly in an turbulent markets.
Many leading Indian retail and departmental store chains such as Aditya Birla Fashion and Retail as well as Lifestyle International plan to bring down discount levels with the recovery in demand and increasing sales reaching pre-Covid levels over the last 2-3 financial quarters. Most mid-segment retailers feel that the high discounts of the Covid years are no longer needed and it is mainly the premium high-fashion brands with a stock-pile of high inventory levels, who need to offer a high level of discounts to survive.
Mid-segment brands give lesser discounts as fresh stocks sell well
To improve sales and to survive during the two Covid years, many retailers increased the discount days, and discount percentage and had sudden flash sales in the stores to liquidate stock and bring in customers. But as the work-from-home culture has slowly ebbed out, the sales of apparel, fashion, footwear and other lifestyle products spiked again as consumers felt the need to refresh their wardrobes. However retailers are under pressure to clear out inventory and start afresh in the next fiscal year and balancing inventory well has become the need of the hour.
According to McKinsey's report called 'The State of Fashion', around 84% of industry leaders expect market conditions to worsen or stay the same in 2023. With fresh stocks at regular prices selling well, leading footwear and apparel brand Woodland has brought down the number of days on discount by two weeks in the last end-of-season sales in January as compared to pre-Covid days and also the quantum of discount was lower with an average discount of 20-30% as compared to flat 40% earlier, according to managing director Harkirat Singh in some media inteviews.
Large retail companies such as Shoppers Stop-, owned by the K Raheja Corp with around 125 retail stores in India – have concluded end-of-season salesfarv later this year than usual as the regular price stocks were selling comparatively well. Other big clothing retailers have also felt that the reduction in discounts will help to improve profit margins at a time when fixed costs like high rentals in LF’s, MBO’s and EBO’s are increasing but still have to be maintained.
Premium brands clear unsold inventory through sales
However many high fashion and lifestyle brands are singing a different tune as the stock pile-up of unsold inventories in warehouses and low sales have forced them to prepone their bi-annual end-of-season sales by about two weeks, rather than postpone. Most have had to offer bigger discounts at the beginning of the season itself in a desperate effort to attract buyers and liquidate inventories. Although the premium brands start their sale season with discounts from around 20-40% but in mid-2022 even after Covid, this discounting was up to 50% or more and even then shoppers were not exactly falling over themselves to buy.
Many international and Indian fashion brands including Nautica, American Eagle, The Body Shop, Jaypore, Ritu Kumar, Marks & Spencer, Vero Moda, Guess, Mango, Iconic, Massimo Dutti, Charles and Keith, H&M, Rosso Brunello, Forever New, Hidesign, Rareism, Lacoste and Beverly Hills Polo Club shad started by offering up to 50% off to its customers and this trend is continuing through 2023. Other women’s brands such as Bath and Body Works, Aldo, Aldo Accessories and Global Desi Girl tried to liquidate piled-up inventories by offering flat 50% off on almost everything even during the festive season in December 2022.
At the end of the day, it is for the brand to decide what discount scheme works for them as only the wearer knows where the shoe pinches and what will work in their favor in these turbulent post-Covid times.