Full Price, Full Focus: Indian fashion retailers rethink discount strategy
Indian fashion and apparel retailers are moving away from the heavy discounting model that has dominated the market in recent years. Faced with falling online sales despite persistent promotions, major players like Shoppers Stop, Arvind Fashions, Aditya Birla Fashion and Retail, and Lifestyle are prioritizing full-price sales and focusing on strengthening their brick-and-mortar presence.
This move signals a growing concern about the long-term impact of deep discounts on brand value and profits. Retailers are realizing that the relentless pursuit of online sales through aggressive markdowns is not sustainable, and are now aiming for a more balanced approach.
The discount dilemma, a case of diminishing returns
The past two years have been challenging for the Indian retail sector. Inflation, financial pressures, and the rise of discount-driven digital-first brands have contributed to a sales slowdown. While online channels initially thrived on discounts, the strategy has proven unsustainable for many established retailers.
In a Times of India report, Devarajan Iyer, CEO, Lifestyle International, India’s largest departmental chain, highlighted the company’s shift. “We have completely come out of discounting online and moved to fresh stock at full price.
As a result, we have seen our brick-and-mortar sales recover, but online sales are still struggling since the channel is used to having discounts,” he says. He further adds, “We give offers only to liquidate old stock but discounted merchandise as a percentage of sales has come down dramatically.”
In the same report, Biju Kassim, CEO-beauty at Shoppers Stop tell, emphasizes the need for a sustainable growth model. “Obviously, we are not going to ignore the competitive landscape, but we’ll try and do what is appropriate, so that we don’t get into that desperate measure and get sucked into that situation where then you are compelled to burn to earn,” he opines.
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The impact of marketplace discounts
While brands are attempting to control discounts, online marketplaces continue to offer significant markdowns, particularly during sales events like the End-of-Season Sale (EOSS). This creates a challenging environment for brands trying to maintain their pricing integrity.
As per Rajesh Jain, Managing Director, Lacoste India they mostly do discounting during EOSS or similar select occasions and all discounts are controlled by them. Marketplaces do not add to the discount that they as a brand are offering. They ensure the brand values are not diluted and hence control the pricing themselves.
A report by Vector Consulting Group in partnership with NielsenIQ highlights, over a third of apparel sold on discounts in India is due to inventory mismatches. This highlights the need for improved inventory management and demand forecasting.
Table: Inventory mismatch and discounting
|
Factor |
Impact on discounting |
|
Inventory planning errors |
Significant increase |
|
Demand forecasting inaccuracy |
Significant increase |
|
Online platform competition |
Moderate to significant increase |
|
Economic pressures |
Moderate increase |
Focus on efficiency and brand value
Retailers are now focusing on improving their backend operations to minimize inventory mismatches and optimize their supply chains. Ashish Dikshit, MD, Aditya Birla Fashion & Retail, points out they are tightening their back ends to narrow the demand-supply gap, leading to less inventory liquidation and reduced discounts. This strategy aims to drive profitable growth through efficient operations and a focus on brand value.
Therefore, the shift towards full-price strategies indicates a change in the Indian fashion retail landscape. While discounts will likely remain a part of the market, retailers are aiming for a more balanced approach that prioritizes profits and brand integrity.
This involves strengthening brick-and-mortar experiences; optimizing inventory management; controlling online discounting; and focusing on brand building.
