Retailers offer deep discounts to clear piled up inventory

The festival season discount is back, but what would cheer the shoppers more this time are the sharper discounts offered by retailers across categories -- from kitchenware and electronic items to apparels -- to clear off the inventory.

Facing worst sales slowdown in the last two decades, automakers have lined up hefty discounts and other offers to lure buyers. The biggest car maker Maruti Suzuki is offering discounts and other benefits in the range of Rs 40,000 to Rs 1,01,200 on its popular models. Other companies like Honda, Nissan, Hyundai and Renault are also offering competitive benefits to beat the slowdown blues.

While offline retailers are offering a discount in the range of 10-30 per cent, online retailers like Amazon are giving discounts in the range of 10-80 per cent.

Delhi-based traders body Confederation of All India Traders (CAIT) National Secretary General Praveen Khandelwal said the discount level this year is more compared to last year due to high inventory pile-up in the wake of slowdown.

"Last year, the discounts averaged from 5 to 10 per cent. This year, those are in the range of 10-30 per cent. For the stocks lying unsold for the last one year, the discount is more than 30 per cent. Online retailers are giving discounts upto 80 per cent to corner more market share," Khandelwal said.

The wholesale price index (WPI), which reflects producers' pricing power has been consistently low and economists see it further dropping in the face of unsold stock and sub-optimal capacity utilisation. The lower capacity utilisation in manufacturing sector is one of the main reasons private investment has remained subdued. The WPI has been showing downward trend and it was lowest in August in the last 25 months.

Fitch group firm India Ratings and Research had last month in a report said that it does not see private investment picking up anytime soon as manufacturing sector capacity utilisation has hovered in the range of 70-76 per cent since FY14 and unless it reaches optimum level no company would invest.

Most retailers have complained of squeezed margins due to deep discounts, which are necessitated to maintain cash flow even if it means loss.

"The market was gung-ho for a long time as the consumption was only soaring. Keeping with that the manufacturers created huge inventory, which has got stuck all of a sudden due to the slowdown. Now the best way to clear the inventory is to get the goods going at deep discounts," said brand strategist Harish Bijoor.