Retailers are concerned over the tepid response to end of season sales (EOSS) and are offering discounts of up to 75% amid worries they will need to extend the period as business is yet to reach last year’s levels. The next few weeks will be crucial as retailers look to clear out inventory before new-season stock is due to come in.
According to ICICI Securities, higher discounts are reflective of the relative stress in underlying inventory. The company analysed Shoppers Stop, Reliance Trends, Lifestyle, Pantaloons, VMART, Max and Westside and found that due to a revenue decline of 5-15% YoY in the April-May period most brands have kicked off EOSS two weeks early, it said in a report released on Sunday.
Retailers traditionally launch EOSS by June end, before fresh season merchandise hits their shelves. However, brands started the sale mid-June and it’s likely to continue till mid-July.
As business slowed February onward, brands had been expecting revenue to reach 2022 levels during EOSS, retailers said. Some started the sale early to improve revenue.
“Last year there was a strong momentum leading to EOSS but this year momentum was being built from the second half of May due to the wedding season,” said Satyen Momaya, CEO of French apparel brand Celio. “But sales haven’t reached the last-year level. During EOSS, it should come to last-year level as we are expecting up to 40% increase.”
Revenue performance in the March quarter had already been weak for most apparel retailers.
“The growth has been slow in comparison to last year but the next two-three weeks are crucial,” said Lifestyle CEO Devarajan Iyer. “The task is to liquidate the inventory. Currently, the majority of the brand is on sale, which might increase footfall and sales.”
At the store level, Shoppers Stop is the most aggressive in offering discounts (up to 62%) against peers (25-40%). Discounts offered by Reliance Trends, Lifestyle and Pantaloons were as much as 41%, 39% and 25%, respectively.
Private label retailers such as Westside, Max and VMART continue to follow a strict discounting-window policy and have not participated in the early EOSS.
According to mall operators, brands should go on sale together to push footfall and that will ultimately give a boost to their efforts.
“Retailers in India need to plan the sale on the lines of Dubai–this will create the momentum and will benefit everyone,” said Muhammad Ali, CEO, Forum Malls of the Bengaluru-based Prestige Group. “When a customer looking for discounts comes to the mall, he would want every brand on sale. Similarly, there is a separate customer base for fresh stock and for them the sale should end on time.”
While there has been some improvement since May due to the wedding season, the revenue till mid-June is still not at the 2022 level, when pent-up demand had pushed sales to a record high.
The weather has been a key factor.
“Rain during weekends has also played spoilsport in Delhi and Mumbai,” said Ravinder Choudhary, vice president at Unity Group, which operates over a dozen malls in the National Capital Region (NCR) and Punjab. “People do not want to go out and get stuck in traffic.”
Several lifestyle, apparel and footwear brands had started mid-season and flash discounting weeks before the usual end of season sales to clear unsold inventory after demand faltered over the past two months.