Fibre2fashion

January 12, 2012

Apparel retailers in India are extending their end-of-the-season discount sales period to clear inventory that has been piled up due to slowdown witnessed in earlier months.

Apparel sales in India have been affected due to the increase in prices by 30-40 percent in last 12 months. The rise in the price of raw material and the imposition of excise duty by the Government on branded apparels has led to the increase in prices.

The consumer sentiment had also been affected due to rising inflation that had left shoppers with lesser money to spend on clothing, according to analysts.

Mr. Abhinav Zutshi, Brand Head - Jack & Jones (India), told fibre2fashion, “Winter season was little delayed this time. Secondly, the market did not get enough boost that it needed during October-December period - the best quarter for retail. So, most companies have either advanced or extended their sale period to cover up on that.”

“People have become skeptical because of recession in Europe and the US. So, people are holding back the money in big cities. Secondly, customers have more choices now. There are more brands, so the money is getting split among brands, especially in big cities,” he adds.

Analysing the approach of extending discount sales, Mr. Devangshu Dutta, Chief Executive, Third Eyesight, says, “The decision about timing and duration of any retailer’s discount sale, and the level of discounts offered are determined by two major factors: how much inventory needs to be cleared, and what the competition is doing.”

“Sales over the last few months have been below expectations, and I believe retailers have also been careful in growing the square footage. Put together, that means that there is excess inventory in the stores and distribution centres that needs to be sold, to free up cash and to create space for fresh merchandise. This is especially true in cases where there is a clear season-based change of merchandise as it happens with most fashion brands,” he explains.

Explaining consumer sentiment and discount sales equation, he says, “Consumer spending, especially discretionary purchases such as fashion, is highly susceptible to sentiment. At this time, consumers are certainly being careful with their money, though the spending sentiment has not hit the lows seen in 2008 and 2009. In such an environment, discount sales are certainly a way to get consumers into the stores. The problem, of course, is that everyone is spending on “loud advertising” at the same time. For most retailers, it is a Hobson’s choice – to spend on promoting discounts, or to not promote at all.”

Forecasting about the current year for apparel retailers in India, he comments, “Everyone has to remember the old saying: 'This, too, shall pass!' India’s growth story will continue, more people will come into the folds of the middle-class. Apparel retailers just need to ensure that their business is alive and around to benefit from that growth. If margins have to be sacrificed to achieve better cashflows, it is better to do that, than to hold out the pricing.”

Mr. Aditya Nadkarni, Brand Head - Debenhams at Planet Retail, adds, “The speed of evolution of the Indian customer is amazing, its like stone rolling down the hill – the speed increases at an accelerated pace. The consumer is very aware of the international trends and is also now very demanding about the offer, the price, the ambience, etc. So, it is very important for apparel retailers to be ready to serve today’s customer.”