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Sunday, October 11, 2009

Discount the Talk

The pinnacle of the festival season – Diwali – is just a week away and there is a lot of discounts, exchange schemes out there trying to entice shoppers. It goes without saying that if they have managed to discount a washing machine (and pretty much everything else) for you, then the usual maximum retail price (MRP) is really about making money at a bigger margin, all at your expense.

The smart shoppers always come out in hordes around major festive seasons. In India, it roughly starts from the month of August and lasts until October. Abroad, the Thanksgiving and Christmas shopping binges are when the major sales happen. This period should be labeled the smart shopping season.

Ever wondered though, how some retailers in India might be undercutting brands? Let’s take the example of clothing brands like Barbie and Lilliput, which have dedicated stores in upscale malls like Atria (in Mumbai) and possibly elsewhere in India. I’ve noticed that some large supermarkets and hypermarkets that retail these brands will offer a discount to coincide with the single format stores and actually plug their sales as if it were something unique.

Seen those advertisements enticing you with ‘Up to 50% off on Barbie clothing’? Well, around the same time, the brand itself is having an up to 75% sale at their in-house store. But in the shopping frenzy of buying everything from groceries, toiletries, stationery and food, people tend to do their clothes shopping in the very same place for convenience sake. So, the bigger sale discount offer on at the other branded store is hardly ever noticed.

I’ve actually visited a supermarket chain and a single format brand store in the same week, during a sale period and witnessed the stark difference. One is empty with sales staff trying to summon up enthusiasm to work through the day and the other is doing roaring business with people stepping on each other’s toes, trying to grab at stuff. Guess which is the successful one and which just got stiffed?

After observing this for a while, I’ve often wondered if I could walk into the supermarket and buy a pair of Barbie jeans for my neighbour’s cute little girl and ask them to give me the original brand discount of “up to 75%” and then tack on what they are offering of “up to 50%” and walk off with a whopping 125% discount on those jeans?

Realistically, depending on what I buy, let’s say I get 50% off from the brand (instead of the entire mythical 75%) and an additional say 30% off (instead of the entire 50% that’s being touted by the supermarket), then I still should get 80% off right? Well, it’s elementary math but not cool marketing from the supermarket management’s perspective and they never pass on this discount that the brand is anyway offering in the first place.

Otherwise, I would pick up those jeans, if priced at Rs 2,000 MRP prior to the sale, with the cool 80% off (if given) I would pay only Rs 400! Without this grand discount, at the supermarket chain, I’m paying (at 30% off) Rs 1,400. Meanwhile, I stand to pay less at the luxury store selling this brand exclusively during the sale period because it works out to Rs 1,000 at the 50% discounted rate value.

Not many people realize this and if they do, they are not questioning the wisdom of the great discount talk that is happening in these places. I wonder why? It’s your money and your right to ask pertinent and relevant questions, especially if your kids insist on using only branded merchandise. Without knowing it, you might be actually helping in undercutting the brand’s snob value, for the very things you buy with so much pride…and at such expense.

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