Sep 11, 2008

Mktg - Sale is King

An unlikely hero, Akshay Kumar’s film Singh is Kinng has broken all box office records in India and abroad. I am no expert on Bollywood or the Hindi film industry but it does seem that the relatively low key Akshay Kumar, who seems to reel in hit after hit with such consummate ease, is now the No.1 star in India. Even to the uninitiated film fan like me it seems obvious that Akshay Kumar is no Khan. He has neither the histrionic ability nor the charisma of some of his competitors. But he seems to have the pulse of the Indian audience. Indian audiences seem to love this unpretentious star. In a similar vein, the ‘Sale’, which was the country cousin of strategies for marketers and the last, reluctant choice available to people in business has now assumed enormous importance to people who are in business. While it is not exactly Bangladesh winning the cricket world cup, it is almost like England winning it (Kevin Pietersen notwithstanding)! A recent research report suggests that sales, which used to account for 20 per cent of the annual turnover, now account for as much as 50 per cent. Yes, structural changes are happening in India. So, what are these changes and what do they mean for consumers, mall owners and the brands themselves?
Is se acha kya hai?
Sales, it seems, are now coming thick and fast for longer periods of time in all possible percentages in every possible format. And it is not nondescript brands that we are talking of. Every major brand has been on sale, whether it is Reebok, Van Heusen or Puma. Some brands have offered up to 50 per cent off, even if I did feel that too little of the merchandise on offer genuinely had high discounts. But brands like Reebok had a flat 40 per cent off.
Mind you, I am not complaining as a consumer because very often people like me who are hardly fashion-forward are waiting for the “end of season” sale. My nephew who is getting married in early January has already half finished his wedding shopping, taking advantage of the sales that are currently happening! Talk of long-range planning! But the real catalyst to this entire process has been the increasing influence and importance of organised retail, which, with its superior logistics and innovative schemes, has brought in increased footfalls into its air-conditioned premises.
Big Bazaar has become a prime mover of this phenomenon over the years and has branded its current effort as ‘Maha Bachat Sale’. Hometown branded its efforts as the ‘Mano ya na Mano offer’, giving people an opportunity to recreate their homes. Vishal Retail called its programme ‘Mera Bharat Mahan: Azadi Mehengai Se’ while Ezone the electronics special retailer called its effort the “blindfold sale”. Nor was this all. Big Bazaar offered life insurance cover to every customer who shopped during the days of the sale. Prices too were at an all time low for some if not all products. Big Bazaar offered a Sanyo 32-inch LCD TV for a lowest ever price of Rs 29,990! Ezone, on its part, was offering digital cameras at 40 per cent off. The results have been fantastic for all formats of retail. On a single day, Sunday August 17, 2008 the Future Group’s retail operations crossed a turnover of Rs 100 crore! Last year, the Future Group had recorded a turnover of Rs 250 crore during the duration of the sale period, not to forget footfalls of 1 crore!
Early indications are that this year the group could better this effort by 20 per cent at least. In a significant development for the entire sector, one must observe that while Big Bazaar had pioneered the concept a few years ago every other format, whether it was Shoppers Stop or Lifestyle, have all got their sale and footfall act together.
It is perhaps worthwhile to make an observation about this trend. Given the fact that consumers are expecting discounts and format owners are more than willing to oblige them, it becomes critical for marketers to brand their offerings and create properties that become theirs. It is really not so much about a clever line as it is about the smartness of the offer. I remember Scullers, a brand that I have some familiarity with, came up with the ‘Height Sale’ for its womenswear. The scheme was interesting, you had to come to the store with a tall lady (if you could find one) and you would get a discount equal to the height of the lady. If her height was 5’6” you would get a discount of 56 per cent! It was essentially the end-of-season sale, but customers were intrigued by this, it worked for the brand and the media found it interesting enough to write about it. Sadly though, most offers seem mundane and seem to have been worked out without too much strategy or creativity.The state of the economy
The reality is that the financial year 2008-2009 has hardly been great for the economy or not as heady as the previous years have been. Inflation, it seems, is here to stay. The stock markets seem to display the volatility of the Indian batting line up, alternating between highs and lows. The real estate market seems to be as flat as the Chepauk wicket in which the last test match against South Africa was played out to a dull, boring draw. Consumer sentiment is as circumspect as the rest of the world is towards the BCCI. In the words of a market analyst “the market lacks depth”. Yet there is an important learning from all these sales. That is, getting new consumers in with attractive offers is really the effect of all these sales. These consumers would not have come in otherwise. There is increasing evidence to suggest that people are waiting for sales and actually postponing or advancing their purchases to coincide with this period. I know for a fact that I hardly ever buy anything at full price and I wait for my brands to go on sale. I know I am not alone in this, as I believe I am brand-conscious, to put it mildly. As a prominent retailer told me, “Sales are here to stay! It is examination time for us where our strategies come under scrutiny. We wait with the same anxiety for the results, as a student might wait for his examination results!”But what is happening to the brand?
I think while all this is happening that is helping overall sales if not sentiment, brand owners have to worry about their own brands and what is happening to their equity. I am sure that mall owners would be happy to go on sale 365 days a year but what will be the impact of this on brands? Let us take a look at apparel as this is a major category which is simultaneously the beneficiary and the culprit of this entire ‘Sale’ phenomenon. Worryingly, both the top line and bottom line are pressure points for apparel brands. The industry seems to be struggling from a few problems not the least of which has been the declining percentage of full price customers, increasing real estate costs reflecting in poor first quarter results of all the big apparel brands and the companies that own these brands. Madura Garments, Raymond and the retail chain Shoppers Stop have all gone south. Even a strong brand such as Color Plus is struggling. Companies seem desperate for top line and are striving to beat the sale rush by being the first to offer sales or stay on later on sale after the sale period. Brand owners who are getting dragged willy nilly into the intoxication of the sale must step back and consider the implications for the brand.
Yet there is another dimension to this. A period of sale is a time to evaluate the true equity of the brand. A brand’s equity is judged during a sales period. Strong brands are the ones that will benefit most during a sale, as customers who are probably daunted by the brand’s original price despite its obvious attractions, can afford it now that it is on sale.Bring on the festive season!
We live in times of great opportunity, yet in times which are increasingly challenging. Retailers will be pushing brands and enticing footfalls with their offers. Brands need this incentive and yet run the risk of diluting their equity. Will they be able to hold their own or will they dilute their equity in their quest for top line?
This festival season will be unlike any other as it will really demonstrate how strong brands will emerge. Traditionally such seasons have been seasons of promotions and not discounts. It is a time for full price sale in a market that seems to have been suddenly pampered. Who will win the battle? The consumer who is waiting for offers, the retailer who drives footfalls or the brands that offer the attraction?
Maybe the only prediction that I can make is that the next Akshay Kumar film that will hit the multiplexes this Diwali will be another hit!

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