Marketers cut down discounts, sales as demand improves, costs rise

Marketers across categories including apparel, fashion and grocery have brought down the quantum of discounts they offer on products and the number of sale days this fiscal, thanks to improved demand and, in the case of packaged goods, higher input costs.

Discounts will continue to be lower than the usual or pre-Covid period, leading retail chains, brands and fast-moving consumer goods (FMCG) companies said.

Apparel retailers and manufacturers like Aditya Birla Fashion & Retail (ABFRL), Shoppers Stop, Lifestyle, and Marks & Spencer said there is already good demand due to wardrobe refresh and hence the need to discount has come down, while for categories like FMCG, discounts have largely been lower even in online platforms with FMCG company margins coming under stress due to input cost inflation and online platforms focusing more on instant ecommerce where cost of operations are higher.


Shoppers Stop managing director Venu Nair told analysts recently that in terms of the sale days overall, there was a reduction of ten days in the total number of sale days in the first half of this fiscal. He said the consumer sentiment is strong, which gave confidence to the brands to focus on fresh merchandise.

“One thing we did specifically see was the mix of full price went up even during the end of season sales period, which again is a reflection of the strong consumer sentiment,” he said.

Shoppers Stop posted 50 basis points growth in gross margin in the quarter ended September vis a vis pre-Covid period, aided by lower discounted business.

Sangeeta Pendurkar, chief executive of Pantaloons stores at ABFRL, told analysts recently, “The fact that we've been able to keep our markdowns despite a full end of season sales quarter under check, I think, has helped us improve our profitability as well.”

The FMCG industry had seen up to 20% jump in input cost pressure in the last three quarters due to record high commodity prices and crude prices, fuelled by the Russia-Ukraine war, forcing many packaged goods companies to either increase prices or reduce pack grammages.

This has impacted demand, particularly in rural markets. Discounts on packaged snacks, biscuits, soft drinks and personal care products, which used to be higher, have also fizzled out, industry executives said.

B Krishna Rao, senior category head at the country’s largest biscuit maker Parle Products, said companies have resorted to cut in trade margin to balance the impact of high input cost inflation. This is to cushion customers from passing the entire cost load, whereby discounts get squeezed out.

“The situation may remain so this fiscal since commodity inflation is still higher than last year despite some commodities cooling down a bit,” Rao said.

At the same time, companies said FMCG sales and promotions in large online marketplaces were impacted due to change in FMCG sellers and some focusing more on instant commerce where margins are lower, reducing discounts.

In apparel, retailers said discount and discount days will remain low for the rest of the fiscal.

Lifestyle International chief executive Devarajan Iyer said with old merchandise reducing due to sell through of fresh merchandise and also due to the fact that festive sales have been good, brands have less old season merchandise. “Hence, the need to discount has reduced,” he said. “Also, with winter setting in soon, consumers will move to new winter merchandise which will be sold at full price.”

Ritesh Mishra, managing director of Marks & Spencer Reliance India, said the revenue from merchandise sold at full price has been one of the highest this year and will continue going forward.