Sunday, February 07, 2010
By Harish Bijoor
Q: The 4-letter word SALE is suddenly all over in the market. Why? What is the rationale of the sale and what does it do to brands?
-Ron Jeffereson, Mumbai
A: Ron, you obviously belong to the tribe of the marketer, and that’s why SALE is a 4-letter word to you. To the consumer at the other end of the buying spectrum, this is the season of a windfall. A good time to shop.
Reebok offers a flat 40% off on most of its range. Except cleverly the latest styles. My friendly neighborhood Nilgiri’s departmental store offers two days of shopping where if I buy goods worth Rs.1000, I get freebies that I can eat and drink and use in my home worth Rs. 460. Puma offered two days of 50% flat discounting, except of course on my favorite Red Ferrari shoes.
Every retailer in the market seems to have gone berserk. Some have even gone out of the way to tell consumers to loot the store. Others have branded it well. On the whole there is a yen to get those big sales happening. It is raining discounts in the market.
The logic of the sale is a simple one. Money supply in the market is getting tight. The stock markets have been on the slump mode. Inflation numbers have hit double digit numbers over the last several successive weeks. Interest rates have gone up. And everything is being traced back to the price of a barrel of oil which has hit a record high, and which reigns currently at 129 USD per barrel at this point of writing.
Retailers are sitting on deep inventories. The SALE is a great way of liquidating stock. A great way of pushing out money which lies in clots in their godowns and warehouses and stockist points as stock. The SALE is a great device to move out such slow moving stock. A great way of creating that appetite appeal in the customer heart to spend and buy. Maybe even buy things he or she does not need.
A case in point. A friend bought 11 pairs of slippers for all of Rs.10, 000. And guess what, this meant that she can buy more slippers for Rs.10, 000 more! That would make it a possible 22 pairs! Possibly she just needs two.
The retail marketer understands the psyche of the consumer in the Indian marketplace. Time to flog the stock with the appeal of a store on SALE.
To the retailer this undercuts his profit line, but frees up stock. It frees up money stuck in stock, some of which is old style stuff. In tough times such as these, it is prudent enough to make these discounts happen and free up the blood clots of stock and convert it into free flowing blood. And blood here is good old cash.
What does a SALE do to brands?
Firstly it exposes the profit numbers that retailers make to consumers. Consumers suddenly start wondering why retailers keep such big margins. At times, this imagination of margin goes berserk in consumer minds and they do believe brands don’t necessarily make sense on the price side.
Secondly, sales devalue brands. It brings into brand consumption sets of consumers who would have otherwise not come in through their own volition. Such customers are really not positive influences for the brand in question.
Thirdly, it habituates customers to the SALE syndrome. Particularly in items such as shoes, fashion garments, durables and items of the kind, it makes customers wait for the annual sale to buy. This is bad for the brand, as the brand is not a brand at all in many ways. It is a brand for most part of the year, but assumes the avatar of a cheap commodity once a year, when it is bought.
There are several other downsides of a SALE, but let me leave them aside for the moment for want of space.
Q: ITC Foods’ Bingo is a success. If that is the case then what went wrong with ITCs’ apparel division “Wills Lifestyle”? Why is it not amongst the top 5 apparel brands in India?
-Manish Laddha, Mumbai
A: Manish, success in one realm surely does not ensure success in another realm. Further, the kind of work that has gone into by ITC Foods on the snack-food business is a far cry from the kind of consumer understanding that has been used in the Will’s Lifestyle business. The results are apparent, and this is not to say that Will’s is not a happening brand on its own.
Complexity of the fashion-wear business is very different and of a different magnitude than the branded snack-food terrain. The rag trade is a complex business terrain. Its size is huge, is fickle in its appeal, is totally fashion and design centric and there are far too many players attempting to cobble success.
I do believe Will’s Lifestyle is gradually attaining the status of a brand that is getting there. The moment you touch 150 Crore INR in turnover in this market, it means you are there and in the reckoning. From there to the next 850 Crore INR addition, is a long and uphill task for most brands. Fashion shirts such as Louise Phillipe, Arrow and Allen Solly have understood how tough it is to get there and are still on their journey. Will’s Lifestyle to that extent is a relative new-comer. Give it time Manish.
Q: In India (now having a freedom of choice in many sectors) can advertising make people buy something which they don't need?
A: Venkadesh, good question. I do believe this is just about to happen, if it is not happening already in the Indian market.
I would like to quote Scott Adams here and throw a Dilbertism at you which explains it all:
“In the future, the science of advertising will improve to the point where buying what you see in an advertisement is no longer optional”
Sad, but true.
Harish Bijoor is a business strategy specialist and CEO, Harish Bijoor Consults Inc.
Once the sale happens there will be dip in the brand value.