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The lure of discounts

It is the sale season in the capital. All and sundry shops are showing big blown signs of "SALE". Customers run to get the bargains for all they wanted to buy.

Somehow, sales on garments appear to be the biggest draw. There are many caveats to the sales. I spent good couple of hours trying to understand the psyche of "SALE" by outlets. As one shopkeeper mentioned to me, the key objectives of a sale are:

- push non-moving stocks
- push volumes
- keep real discount levels low

It is the 3rd point that got me intrigued and then I looked for what is actually happening.

1. Sale declares

"upto 75% off SALE"

Only about 10% goods are at the highest slab of discount. Almost 50% are on the lowest slab of discount which invariably is 20%. 30% of goods are not on sale. So the effective discount is 20%.

2. Buy 1 get 25%, Buy 2 get 1 free, buy 3 get 3 free. The hidden thing is that goods of higher price are billed and lower price are given free. Garments get sold on design/style (mainly) and fabric. So the effective discount is lower than appears on the face of it.

3. No returns/exchange for goods sold on sale. Nearly 10% of goods are "not fresh/top quality" including 2% that comes as return which normally goes to non fresh category. Considering scrap value of these goods be about 5% of normal price, a discount of 25% translates into 17.2%

4. Most people end up over-buying by about 25%.

5. Many shops are known to inflate the marked prices during the sale and end up giving 0-5% discount.

So, old saying, buyers beware........
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