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Discount retailers make hay while inflation shines

Posted by retailigence on August 30, 2008

Everyone loves a good discount. And it comes in as an incentive especially during times of inflation. For apparel discount retailers, inflation has proved to be a blessing. Arvind’s branded discount retail chain Megamart has seen an improvement in walk-ins of 15% in the past few weeks.

“During inflation, customers always prefer to shop in a value retail outlet,” says K E Venkatachalapathy , business head of Megamart. The increased footfall is reflecting in the sales figure of Megamart as well. While he refuses to divulge exact numbers, Venkatachalapathy says there has been a 20% increase in sales compared to the corresponding period last year. Discounts here vary from 10% to 30%.

“Inflation and discount retailing are directly proportional. Customers normally tend to flock to value retail stores where they are assured of good quality at reasonable prices,’’ says Raghunath Narayanan, MD of Chennai based discount retailer Europa.

Discount retailing, a post World War II phenomenon, is an established market practice in countries like the US. This concept is now picking in India, where customers are extremely price sensitive. Discounts have always worked well with apparel and factory outlets in the suburbs of many Indian cities and shopping hubs like Fashion Street in Mumbai and Maratahalli in Bangalore bear testimony to this. Now inflation has come to the aid of these retail majors.

The Loot, a discount chain, has seen footfalls increase by at least 10% in the last few weeks across its 35 stores in 15 cities. “In Mumbai alone, our footfalls are up by 17% in the last three weeks. In the first quarter, we had sales of Rs 15 crore. In the next quarter, we expect this to climb upto Rs 25 crore,” says Jay Gupta, MD of The Loot.

In apparel, children’s wear seem to be the biggest beneficiary. “As children, especially toddlers, normally outgrow their clothes pretty fast, parents are flocking to discount stores such as ours more than ever before,” says Narayanan. While the discount offered by Europa is between 25 and 30%, in kids wear it’s 30% – 40%.The consumer base is also widening. “From largely middle class audiences, I now see people getting out of cars like Honda Accord and Mercedes Benz outside our stores,” says Gupta. The rush to such outlets is also due to the fact that regular apparel retailers and multi-brand outlets mostly offer off season sale only twice in a year. “But in times of inflation and continued price rise, the consumer is looking to cut spends across categories on a daily basis,” says Venkatachalapathy.

Brand Factory too has seen a 5% – 7 % increase in our sales over the past few months. “While we cannot say that entirely due to inflation, we cannot rule out that it has played a role,” says Vishnu Prasad, CEO of Brand Factory.

Source: Economic Times


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