Every major online retailer in the world claims to offer deep discounts during festive seasons to boost sales and revenues. In India as well, customers wait for special sales days so that they can buy products at “highly discounted” prices. But a report by retail technology firm Ace Turtle reveals that online retailers do not offer significantly higher discount on sales days.
The myth of sales days
For their research, Ace Turtle collected data of 1 million products sold by over 30 fashion brands to more than 20,000 locations across India. The research team used sales data from January to August 2018 for their study and included special sales like Amazon Freedom Sale in August and Myntra End of Reason Sale in June.
Ace Turtle found that the average sales price of products sold during special sales days were only 17 percent lower than the offer price during non-sales days. Such a discount “is not a significant change considering the overall price fluctuations in the given period,” according to the report (QZ).
So when an online retailer puts up a “75% off” during a special sales day, it does not mean that you won’t get such deep discounts on regular days. In fact, you might still be able to get a pretty good discount of 55-65 percent on the product once the “special sales” end.
This completely smashes the idea that e-commerce companies offer an unimaginable discount during sales days. Such a frenzy is created by the retailer’s promotional campaigns, which create an illusion of “bargain prices” when in reality the discounts during sales days are minimal at best. And the marketing tactics seem to work wonders, as the team discovered that purchase orders during the period grew four times when compared to normal days.
Though a big chunk of orders come from metros, it is the customers from non-metros that seem to be sucked in by the marketing campaigns. Non-metros saw a 50 to 100 percent jump in orders during sales days, indicating that e-commerce companies might start investing in more aggressive marketing campaigns targeted at tier 2 and tier 3 cities.
Controlling e-commerce discounts
While there might not be much of a difference between discounts offered by online retailers during special sales and normal days, they do offer better discounts than offline retailers. Some websites even put up an “80% off” label on products, making one wonder how sellers end up making a profit. There is apparently a simple trick behind such discounts.
“There just can’t be margin to offer more than 60 percent off on all products. Every company takes a calculated risk here. If 10 percent merchandise is discounted at 80 percent, the rest is discounted less; the weighted average may still be 20-25 percent,” Arvind Singhal, Chairman at management consulting firm, Technopak, said to Business Insider.
Meanwhile, offline retailers are putting pressure on the government to pass laws to stop online retailers from offering huge discounts. “Though discounts are good for the consumers and the market becomes very competitive, players like Reliance and other offline players are aiming to get a level playing field against foreign players. Many small players in the e-commerce sector will further be gobbled up by big players and only a few players will be left in the market,” Kris Lakshmikanth, founder and CEO of Head Hunters India Limited, said to The Week.
The government has reportedly set up a think-tank to look into the matter and limit the deep discounting done by online retailers. If their recommendations come to pass, the e-commerce websites will have a tough time trying to stand out from offline traders when it comes to product prices.