Brand Discounting Online- New Market Menace

Discounting is often termed as a desperate measure by a marketeers to please a consumer by trying to provide better value of the product. A phenomenon which was used on few occasions earlier has now become a regular trend after e-commerce started picking up in India.

E-commerce portal have forced quite a few brands to start discounting products on regular basis but real question arises here... why discounting? are these brands not confident of providing enough value to their consumers without discounting or is it some kind of rat race where every other brand is taking desperate discounting measure to beat others?

Let us dissect it further.... when we open any ecommerce website... these days first thing that we come across is big discounts mentioned on brands such as PUMA, REEBOK, MAXIMA, CASIO, TITAN, FASTRACK, FOSSIL, CITIZEN....all these big brands seem to have jumped on the bandwagon of discounting. When we talk to these brand owners... they look worried but also seems to have resigned to the fate. Reason is quite evident that they have all loaded e-commerce portals with huge stocks to sell with the temptation of having a larger market share online so they don't want to force these portals too much to fall in line and follow the brand guidelines as it may backfire with stocks/inventory coming back to them if it do not sell within a specified period.

If we take the example of watch brands we see Titan brands, Maxima and Casio sharing about 75% of market share online among themselves in terms of volume. They sell almost 1000 watch a day from online portals. Casio has been able to restrict the discounting to 5% which makes them one of the strongest brand online because even with lesser discounting their market share has not reduced too much. Titan brands have also been able to restrict themselves to 5-15% discounting without too much sale loss. Maxima which was earlier going on 15-25% discounting now seems to have restricted to 10-15% discounts with their numbers intact. Interestingly their numbers with and without discounting are pretty much same. So the idea of going for too much discounting has failed in their cases.

Almost all the big brands have started realizing this fact now that going for bigger discounts is only diminishing their value and in longer run they are going to suffer from this big discounting spree and their offline market is suffering.

We see a considerable change in strategy from mainline brands after Flipkart's famous "The Big Billion Day Sale". Ground/offline retail market has reacted very sharply to this and most of the brands have faced huge critisim from their offline trade partners for letting this happen. This has forced most of these brands to start restricting the discounting online to reasonable level.

We hope to see considerable price-rationalisation happening online which will make it a level-playing field for all the players in the market be it online or offline.

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