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Year-end discounts start early

 
 

Sharleen D'Souza & Raghavendra Kamath, Business Standard

Mumbai, January 4, 2012

Hit by a sharp slowdown in sales, apparel brands and retailers are either extending their end-of-the-season sales or sometimes advancing it by weeks to clear their inventory and free up cash.

While French menswear retailer Celio, which has a joint venture with Future group, is on a sale for almost one-and-a-half months till February 14, UK-based brand French Connection is having its year-end sale till March. Normally, these brands have their end-of-the-season for a month.

If Celio and French Connection have extended their sale, German brand Esprit not only advanced its end-of-the-season sale by a over a fortnight to December 31 this year (it was January 16 last year), it is even offering a 40 per cent discount on the purchase of three items. Similarly, Italian premium brand Diesel is already on sale for the one last week. Its sale normally starts in end-January.

Central, the mall concept of Kishore Biyani’s Future group, which is to go on a year-end sale next week, did an unusual thing. It went for a three-day shopping event between December 30 and January 1, and offered 25 per cent discount on 500 brands.

“The slowdown has caused many retailers to advance their sales and extend their sales,” notes Pranab Barua, CEO, Madura Fashion and Lifestyle, which has a distribution agreement with Esprit.

Even many international brands such as Mango, Vero Moda, Forever New are doling out discounts — up to 40 per cent. “The season has been below expectations,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight. “There is significant amount of inventory that has to be cleared out. The retailers have to get fresh inventory by February-March; before that they need to clear old merchandise. Otherwise, cash would be stuck in that.”

According to analysts, the inventory levels of Pantaloon Retail, the country’s largest retailer by market value, have touched Rs 35-40 of sales per square feet, which is one of the highest in the last many quarters.

A recent newspaper advertisement by FBB (earlier Fashion at Big Bazaar), a fashion format run by Pantaloon, said it was offering a 40 per cent off on all items till January 15 at the standalone stores and those within Big Bazaar stores also.

“They have high inventory levels,” notes an analyst. “It is most likely that they will advance the end of the season sales for their apparel stores by a couple of weeks like most other retailers.”

Pantaloon Retail executives could not be contacted for comment. The company, though, had in a recent presentation said, “lower consumer spend due to increase in prices, especially in fashion category, also resulted in most competitors extending their end of season sales by a week or two”.

Apparel retailer Provogue, which used to buy 1,800 pieces from vendors every season, now buys only 1,500 pieces due to the current slowdown in sales. The chain is also giving a Rs 1,000 gift voucher on purchase of material worth Rs 4,000 to “motivate our customers”, according to managing director Nikhil Chaturvedi. “In a bullish market, we do not mind inventory. But in a slowdown, we do not want a pile-up on our inventory,” Chaturvedi had told this newspaper recently.

Kiran Kothekar, one of the promoters of Vector Consulting Group, says the extending or advancing sales will impact profitability of retailers, but Third Eyesight’s Dutta says taking a hit of margins is better than cash getting stuck in inventory.

Apparel sales have been hit as prices have gone up 30 to 40 per cent in 12-18 months due to rise in raw material prices, increase in excise duty on branded apparel and so on, which has discouraged buyers. A slowing economy, falling markets and rising equated monthly instalments have left lesser disposable money in the hands of people, say analysts and companies.

“There is a stagnancy in growth,” says Arvind Singhal, chairman at retail consultancy Technopak Advisors. “Retailers should offer more affordable products and cut out on the premium products.”

 
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