Deep discounts persist across categories as brands struggle with high inventory & subdued demand

Discounts have peaked in categories such as apparel, shoes and general household products while auto manufacturers are continuing the high promotional offers of December even in January and delaying the proposed price hike, with brands and retailers continuing to be saddled with high unsold inventory amidst subdued demand and delayed onset of winter.

Several brands such as H&M, Zara, Levis, Lacoste, And, Gas, Bata have started to offer discounts as high as 50-70%. Discounts during upcoming Republic Day sales will also be steep with some like Fab India already promoting it. Even ecommerce marketplaces are going to offer up to 80% discounts this year during their Republic Day sales expected to start mid-January, industry executives said.

Car dealers said there has been no major reduction in inventory levels as compared to December. Even electronic and household appliance manufacturers are not going for any price hike for televisions and refrigerators despite rupee’s steep depreciation against the dollar.

Department store chain Lifestyle International chief executive Devarajan Iyer said demand pressure is continuing and sentiments are not hunky dory despite discounts. “The Christmas day sale was good, but the pressure is continuing. Footfalls remain under stress and the turnaround in sentiments is happening at a very slow pace,” he said.

Car manufacturers, who had proposed to increase prices by up to 3-4% from January, have put it on hold to clear inventory while continuing with the December discounts. The auto industry had said there has been a 10-12% increase in vehicle dispatches from factories to dealers last month, but dealers said end consumer sales have been at a slower pace.

Vinkesh Gulati, executive committee member at Federation of Automobile Dealers Associations (FADA), said most of the manufacturers have not yet implemented the price hike.

“Registrations will be lower than retail sales being quoted in December by the companies. Customers will get some benefit on account of delay in price hikes. Promotional offers are likely to go up, but probably after a month,” he said.

A second auto industry executive said inventory has not corrected to the extent manufacturers wanted by year end and there are still substantial stocks in the channel.

“Promotional schemes on vehicles in stock will continue in January. These will have to be sold at the same price and with the same offers in December, as dealers need to liquidate stocks. The revised prices will be applicable on new vehicles manufactured this year, announcements to which effect are yet to be made by the manufacturers,” he said.

Consumers have been holding on to their purse strings due to continued high inflation in their daily lives while preferring to spend only for necessities. India’s goods and services tax (GST) collections rose 7.3% year-on-year in December from the year earlier, slowing from an 8.5% year-on-year increase in November, indicating consumption slowdown.

Godrej Appliances business head Kamal Nandi said while electronic companies usually increase prices in January, this year it has been put on hold despite steep rupee depreciation since demand is not good. “We are trying to offset it with the low price of some commodities like copper,” he said.

Upper middle to high income consumers are also spending more on experiences such as multiple vacations. Demand during 2024 Diwali was marginally better compared to previous year but below expectations, whereby most brands latched on to Black Friday sales with higher discounts and started an early end of season sales last month fearing the delayed winter would increase inventory levels.