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End of season sale for premium brands starts early due to demonetization

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What do you do if you have too much of stock lying unsold? Logic says, you sell them at a discount and that is precisely what premium brands of apparels like Zara, H&M and Massimo Dutti are doing. They have advanced their mid-season sale which generally starts in May to March this year. The effects of demonetization which was started in India in November 8 refuses to die down and the fashion industry is seeing consumer confidence and sales plummeting until February. Demonetization is said to have impacted 20 % on business compared to last year. These companies believe that advancing the end of season sale will bring back consumer confidence and result in increase sales.

Zara, Promod, Massimo Dutti in New Delhi have already started offering 50 % discounts on a wide range of products while Tommy Hilfiger and Nautica are giving vouchers and products free on sales. A customer buying Tommy Hilfiger would be getting a voucher of Rs.9,000 on a purchase of Rs.24,999 and for a purchase of Rs.11,999 Nautica is giving products worth Rs.2,000. Brands such as US Polo and Peter England  are giving gifts as part of the Ugadi festival sale. Melange and Flying Machine are also using the same strategy. For purchase of Rs.8,999 and more US Polo is giving shoppers a free shirt and not be left behind Peter England is giving away sunglasses worth Rs 2,499 on purchase of Rs 5,000.

Marks & Spencer, the brand from UK is also giving 50% off to the customers.  According to Venu Nair, Chief Executive of Marks & Spencers “These are planned promotions. It was there last year. We do these promotions to give incentives to consumers to come to the store.”

By advancing the end of season sale, the brands are trying to stretch the sales season as sales saw a sharp drop since February and it is a good 25-30% fall in February and March, compared with the sales of December and January.

 

Though brands like H&M feel that it is not unusual and feel that the mid season sale is part of H&M’s global strategy in between seasons to sell out transitional garments as we move to the new season extending discounts to make up for the sale is surely going to bleed the companies. Since fashion changes over time there is no point in selling the brands at market price as well. The companies need to balance the discounted sale and revenue and arrive at a proper trade off. Growth at the cost of bleeding revenues is not a good strategy for the long run and attributing the blame entirely to demonetization will also not hold any good. The companies should innovate and try to push the brands in the market by leveraging the brand name and by drawing strategies where a tradeoff between discounted sales and revenue is done. The question is how much of it is good?

 

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