Sale! Boon or bane?
Tias Chakraborty takes a closer look at the EOSS phenomenon and what it means for the retail industry.
Cut-throat competition in the retail industry has forced brands, retailers and distributors to revise their strategies from time to time. Even for a local departmental store, it is no longer a simple process of buying from the distributor and selling it to the buyer. With more options available than ever, buyers are willing to invest time in order to save money. So, how does one cope? The End Of Season Sale (EOSS) has been an old phenomenon in the retail industry that appears in various formats under various names. The ‘Black Friday,’ though sinister sounding, is as important a day in North America as any other national holiday. In the apparel industry, till mid2000s, there would be a fixed period in a year when clearance sales took place. Today, however, things have changed and the supply chain has evolved. Retailers can afford two or even three sale periods in a year. This means higher volumes, better visibility and definitely greater footfalls. Let us analyse whether this is a positive or a negative development for the industry and what it means for brands selling their products through brick-and-mortar and online retailers.
TWO SIDES, SAME COIN
When we start to factor in the EOSS in an already complex retail scenario, we can see that the negatives and positives are balanced out. Let us start by analysing what it means for the average retailer. A multi-brand retailer or a franchise store will often have to depend on the EOSS to ensure clearance of its stocks.
While they are glad that they are getting more footfalls than ever and there is constant volume in sales, there also lies the concern about customers only approaching the place at the time of EOSS. This means, new launches and fresh collections can barely leverage these kind of footfalls. It also means that the margins are lesser but are compensated by higher volumes. Some retailers, however, factor in the sale, well in advance, and set their margins accordingly. However, it is the intensity of the competition that can determine how much extra one can really take home. Interestingly, there are equal number of advocates and critics in the retail industry, of the EOSS phenomenon. Satrajit Das, Operations Head and Spokesperson at Amantran Bazaar, Kolkata, explains, “There are definite advantages of an EOSS because it ensures that your stocks are liquidated quickly. This means that you are paying lesser insurance and can create better strategies with the help of the extra space and time. I also think it is an advantage for certain brands in the apparel category. An EOSS ensures that collections no older than one year are sold out since designs have a tendency to go out of vogue very quickly; brands can thus afford to bring out new collections faster, with the previous lot cleared out of store shelves through the EOSS. However, since the products are sold at lower prices, the margins might be slightly lesser.”
QUANTITY V/S QUALITY
For retailers selling niche products such as designer clothes and high-end fabrics, there is always the question of quantity vis-à-vis quality. Since niche products have higher margins and lesser frequency of sales, it is often difficult to opt for EOSS as there could be a scenario where customers become used to the sale period prices and only purchase during that period. Also, price expectations from the brand that has a price point matching its target audience may come down. This is a common problem in the e-commerce space where the margins are already tight due to competition. For those selling unique products, the challenge is greater while opting for an EOSS. Sudhakar Sahoo, owner of Odisha Saree Store, an online handloom retailer, says, “We have always looked to give the best price to the creator of the product. Unfortunately, most of the handloom owners in Odisha are poor and therefore, we do not have the option of getting low rates. There are charges of selling it online and there is the logistics aspect, too. Our margins are so tight that if we opt for an EOSS, we would be running into losses. However, there are strategies that can be worked out once the volume promise is good.”
THE CONSUMERS’ POINT OF VIEW
It is a well-known fact that consumers make up their mind about what to buy when they head to the store and it is the
job of the retailer to ensure that they buy more than what they have planned. In the case of an EOSS, most buyers, especially the middle class, urban shopper, plans ahead of the sale season. Take for example, the EOSS that takes place right before the Dusshera/Diwali/Eid period in October-November. This is the most productive time for apparel retail in India and this is mainly because people are looking to buy in bulk, at a low cost. The EOSS serves as a major draw for the average middle class shopper who is looking to afford high-end brands. For example, a shopper looking for a shoe in the R1,800 to R2,200 range is more likely to go for a 40% off at Woodland than Bata’s new arrival, considering that both the stores are located conveniently for the buyer.
A great deal of planning goes in an EOSS from the retailer’s perspective. Nowadays, online stores have also started giving seasonal discounts that seem to take place throughout the year. This, in fact, makes the competition not only tougher but also more complex; considering that the lengths of the supply chains for these two categories of retailers are different. In the long run, the EOSS will become grander and the GOSF, smarter. And at the end of the day, there will be a larger number of customers going home with the comforting thought that they got a better deal at the store than their neighbours!