Retailers scale back on deep discounts to boost profits

Retailers such as Aditya Birla Fashion and Retail (ABFRL), Arvind, and V-Mart are scaling back on deep discounts to boost profits, which may lead to fewer deals on clothes, electronics, and footwear for shoppers.

Owner of brands like Louis Philippe, Van Heusen, Allen Solly, and Peter England, Madura Fashion reduced discounts by 500 basis points in the second half of the previous fiscal year, particularly in the fourth quarter, to drive profitable growth.

As a part of its cost reduction efforts, the company kept its inventory tight and did not offer many discounts, says Vishak Kumar, CEO. The company experienced week consumer sentiments across apparel and footwear segments as retail sales registered a year-on-year decline every month during FY24. During the year, sales increased in the range of 4-7 per cent with sales in April growing by only 4 per cent, notes Retailers Association of India after a survey of country’s top 100 retailers.

Retailers attempted to counter slowing demand over the last 18 months by offering constant discounts. However, these price cuts had limited effect. A department store operating in smaller towns, V-Mart has shifted focus to scalable, replicable, and sustainable internal capabilities. The company aims to avoid achieving growth through discounts and is not reducing gross margins, says Lalit Agarwal, Chairman.

Demand for atlesiure wear, apparel and lifestyle products rose post -COVID as consumers upgraded wardrobes and social activities resumed. This resulted in sales growing by 13-24 per cent monthly throughout FY23.

To control merchandise, assortment and pricing, retailers shifted to a direct-to-consumer model for online sales, says Shailesh Chaturvedi, Managing Director, Arvind Fashions. This allowed them to aim for a healthier, long-term business, he adds.