26th January, our Republic Day may also be identified in due course as ‘The Retailing Day” as it is celebrated every year for freedom from full prices. The Future Group started it all submitting itself to the absolute power of consumption by the common man in India. I remember when the heavy price-off sales was first organized only for a day – on the Republic Day – the Big Bazaar stores almost had ‘stampedes’ within their premises. It was in January 26, 2006 the big sale was organized in Future Group’s Big Bazaar and Food Bazaar outlets and the group launched its home electronics, appliances and furniture as well on that day. Crowds of customers poured in every store and became unmanageable. The store shutters in many stores had to be pulled down often to prevent overcrowding in the shop floors to manage the throngs of people already bursting at the seams within the stores. Future group decided from the following year to continue the event spread over a few days so that customers may have an opportunity to shop in peace! History repeats itself every year, with respect to the notching up of sales through heavy price offs and discounts on the Republic Day while taking precautions to manage crowds well, not allowing any near stampedes to happen, though. It has not taken much time for competitors like Reliance Mart/Reliance Super, Star Bazaar, etc. to catch up with the event hurling their price challenges and with many other retailers too following suit, the day has almost become India’s Retailing Day!
In retail stores clearance sales are organized as a routine effort to clear merchandise for obvious reasons: to clear saleable quality accidents, shop soiled merchandise, shelf warmers, broken assortments, obsolescent styles, etc. by marking prices down. The perils of holding on to such stocks are the consequent loss of margins and the loss of opportunity to stock new items. The holding of stocks that don’t sell fast results in incurring huge interest costs that cause loss of margins. To the customers, it is tiring to see obsolescent styles and old stocks on the shelves and purchasing becomes increasingly difficult. New merchandise can come into the store only if stores make room in the stock plan for new stocks. This is because retail stores would work with a specific base stock plan that ensures the achievement of the necessary stock turns for the store and it is good stock turns that generate good gross margin returns on inventory! In many professionally run retail organizations, the process of effective markdowns itself is planned during the store’s stage of merchandise planning for the season. In reality, as the close of the season approaches, the process of scaling down the margin in merchandise pricing takes place with the percentage of markdowns becoming higher and higher and this is a silent markdown until it is pronounced during the ‘sale’. If the volume of such merchandise to be marked down is more, ‘normalization’ for the next year takes place by this learning, which is the process of looking at history and ironing out ‘creases’ for better planning. The overall margin mix for the store’s planned merchandise gets thrown out of gear if the markdowns are higher. Necessary course corrections are done at the category, subcategory and the SKU levels responsible for such huge markdowns to make every store profitable.
Retailing has evolved more and so have our customer expectations too. They want more and more for less and less. The concept of Sales has undergone a thorough transformation. It has become a gimmick to bring more footfalls and notch up sales by leaps and bounds in a short while. Merchandise is ordered in large quantities for the sale from suppliers and retailers co-create discount sales tying up deals with their vendors and suppliers. The whole perspective and attitude towards ‘sale’ have changed not just with our retailers but with customers as well. They are more than happy to wait for such periods when ‘sale’ is announced to make their big purchases.
We have only two selling seasons now – The festival season beginning September going through the middle of January and the Indian summer vacation coinciding with a few auspicious months that constitute the wedding season. So it is only just and fair that we have huge sales organized sometime in the rest of the months for preparatory reasons or for clearing remnants or for the purpose of showing a huge top-line in the balance sheet before the financial year comes to an end! We have now covered only one season of sales. Come August, we may have a huge ‘Independence Day Sale’ also. Watch out and it may just mean freedom from full price for our customers in India!
- Dr. Gibson G. Vedamani
When I saw the advertisement in The Hindu on the 26th morning, I decided to check out Big Bazzar. It was a stampede at the store but I managed to get in, as I wanted to check see this mega sale.
ReplyDeleteDiscount sales like these are not new to the customers in Tamil Nadu, as we have been seeing the “New Year Sales ", for more than two decades. Most of the customers postpone their purchases form October / November and wait for the New Year Sale. But this is confined to consumer appliance and off late, the others are also following this trend.
We have been told stories by our elders that one of the stores was going bankrupt, and wanted to clear all their stocks before they could shut their shop, and had advertised for a clearance sales so that they could have a smooth exit, but then they had so much of sales that they decided to stay in business. Whatever be the stories discount sales like these have taken the customers by storm and will continue to do so.
I would like to ask this question to Dr Gibson, what would be the future of small retailers, if such large retailers continue to have such discount sales?
Eric Manickam
@Eric: I am sure you know that all our small retailers do their business by virtue of their strong relationship with customers. They do not have to go on any discount sales as they always do prudent merchandising. To me the future of small retailers is bright as long as they are able to maintain their 'back-of-the-palm' relationship practices. Further, the penetration of large retailers in India can never be like that of the small ones who can spread over to the streets and by-lanes of our colonies and residential catchments even in the towns of lower tiers fast. In future while smaller stores may keep going to the customers, the larger ones will continue to keep waiting for customers to come to them. To the Indian consuming masses, 'small' will always be 'beautiful'!
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