Discount Frenzy: Are Indian brands paying too much for discounts?

12 January 2024, Mumbai

Indians consider themselves bargain hunters: TOI's earlier survey 

 ``Indians are extremely skilled at bargaining (21%), as opposed to Singaporeans, who don't think they drive a hard bargain (17%)."

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The Indian fashion landscape is heavily influenced by discounts, creating a vibrant but intricate scenario. While discounts attract customers with promised savings, their impact on the industry has both benefits and drawbacks.

This analysis explores the factors driving the discount trend, its consequences for various segments, and anticipates the potential future state of the Indian fashion market.

Fueling the discount furnace

Several factors stoked the flames of India's discount inferno. A fiercely competitive market necessitates aggressive promotional strategies. "Without discounts, your voice gets drowned," explains Ankur Bhatia, CEO of a rising menswear label.

The rise of e-commerce, with its flash sales and price transparency, further intensifies the pressure.

Additionally, managing inventory plays a crucial role. To clear unsold stock and make space for new arrivals, brands often resort to markdowns, like clearing instruments after a season's finale.

The Price Tango: Sell-Through, Margin, and the Harsh Reality

Indeed, discounts boost sell-through rates, yet they come with a double-edged sword. By consistently offering reduced prices, there's a risk of diminishing the perceived value of regular-priced items and conditioning customers to await sales.

This trend may result in price compression, putting pressure on profit margins, and constraining investments in quality and innovation.

Maximum Retail Price (MRP) can find itself overshadowed by the clamor of discounted figures. Meenakshi Singh, Founder of a sustainable clothing brand, expresses her concern, stating, "Customers cease to recognize the true value of our garments."

Winning Strategies and Cautious Steps

Myntra's sales skyrocketed during their ‘Big Fashion Days’ extravaganza, showcasing the power of discounts. However, experts point out the strain on margins.

In contrast, Fabindia's controlled discount approach, focusing on brand identity and value perception, has built customer loyalty without sacrificing profitability. Kavita Bhartia, CEO, Fabindia, emphasizes, "Telling the story of our weavers justifies our premium pricing."

Discounting's Uneven Symphony

Discounts impact segments and categories differently. Here is a look:

• Premium: In the exclusive realm of luxury, discounts are a careful balancing act. Brands such as Sabyasachi and Tarun Tahiliani tread cautiously, opting for exclusive trunk shows or time-limited sales. Their emphasis is on delivering a unique brand experience and maintaining exclusivity, with substantial price tags narrating stories of craftsmanship and heritage.
• Mid-Range: In this busy market, brands like Mango and Zara use seasonal sales, flash deals, and loyalty programs to attract customers seeking affordable luxury. However, the key challenge is to strike a balance between grabbing shoppers' attention and safeguarding profit margins.
• Economy: In this space, retailers like Max and Shoppers Stop, among others, target budget-conscious consumers by incorporating discounts into their business models. While this ensures affordability, it may also raise quality concerns and limit room for innovation.

Different Beats for Different Styles

Discount strategies also vary across categories:

• Menswear: Unlike the rapid discount frenzy in women's fashion, menswear follows a more measured approach. Brands like Raymond and Allen Solly prioritize brand loyalty and heritage, focusing on fewer but targeted discounts, such as corporate tie-ups or festive promotions.
• Womenswear: In this rapidly evolving sector, the discount is the fastest. From online flash sales to clearance racks in brick-and-mortar stores, the avenues for bargain-hunting seem limitless. While this caters to impulsive shopping, it also runs the risk of overstocking and accumulating unsold inventory.
• Kidswear: Discount are the softest in this segment. Brands like H&M and Mothercare understand the delicate balance between affordability and quality, offering strategic markdowns on seasonal clothing or end-of-line products. Frequent discounts can be counterproductive, as parents prioritize comfort and safety over mere price tags.

Statistical View

• The Indian fashion apparel market is expected to reach $119.3 billion by 2025. (Statista)
• Online fashion sales are projected to grow at a CAGR of 22.4 percent between 2023 and 2028. (Statista)
• The average discount offered during major sale events in India is around 50-70 per cent. (RedSeer Consulting)

The Future Symphony: Beyond Monotonous Thrum of Discounts

As the Indian fashion market evolves, brands must compose a more nuanced discount symphony. Understanding the unique needs of each segment and category will be the key to striking the right chords.

Focusing on value, personalized offers, and omnichannel experiences can help brands move beyond the monotonous cycle of discounts and create a sustainable melody that resonates with customers.

2024: A Turning Point in the Fashion Narrative?

With changing consumer spending patterns and a growing chorus demanding value and sustainability, 2024 could be a pivotal year for the Indian fashion industry.

Brands that orchestrate a delicate balance between compelling narratives, ethical production practices, and strategic discounts will be poised to lead the fashion symphony in this evolving landscape.

5 Key Insights 

1. Competition Fuels Flame: Fierce market demands discounts to be heard, especially online.
2. Sell-Through Tango: Discounts boost sales but risk devaluing regular prices and squeezing margins.
3. Uneven Symphony: Luxury treads carefully, mid-range balances deals and profit, economy prioritizes discounts with potential quality concerns.
4. Gendered Beats: Menswear discounts slower, women's faster, kidswear softest with focus on value and quality.
5. 2024: Beyond Discounts? Brands need to move beyond monotonous discounts, crafting sustainable strategies with personalized offers and value-driven narratives.

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