End of Season Sale: Consumer Surplus and Brand Loyalty

The month of July is awaited for two reasons. Along with the spell of monsoon, that comes a mad rush of season sales across all lifestyle categories like fashion apparels; footwear; cosmetics, watches and even jewelry brands. The malls across the cities are flooded with large number of customers who avail deep discounts over brands which promise deep discounts up-to 70%.

This end of season sale is offered by all brands. The deluge of customers towards purchase of different brands during the end of season sale apart from their commitment to a particular brand reflect the huge satisfaction they perceive when premium brands slash prices way below the market prices. Almost all brands, be they retailers like LifeStyle, Pantaloon, Shopper Stop or luxury brands like Vera Moda, Esbeda, or apparel brands like van Heusen, Louis Phillipe and even designer labels like Ritukumar all vie for attracting customers by offering attractive discounts.

The consistent trend of such merchandise retailers to come up with huge discounts in month of monsoon has influenced the buying behavior. Large number of young corporate – business consumers postpones their yearly requirements wait for the season sale to overhaul their wardrobe. These EOS apart from adding footfalls to the shop heavily contribute to the revenue and improve the top line.

Does End of Season sales have to do with merely stock and inventory clearance in anticipation for the new season?
or
Does such an orchestrated attempt to increase revenues have their theoretical underpinnings in consumer surplus, on which large number of brand sales thrives?

In economic parlance, consumer surplus is the economic measure of surplus satisfaction that a consumer avails and experiencing by paying a price much lesser than what she is actually paying. Consumer surplus is when a consumer derives more benefit (in terms of monetary value) from a good or service than the price they pay to consume it. It hence gives us an estimate of a monetary measure of the benefits to consumers from being able to buy what they want at the going price. The end of season sales attracts more customers since customers perceive a higher value for the brand than the discounted price they actually pay.

Prestigious brands position themselves throughout the year as appealing to their target consumers at a premium pricing. The premium brands target customers are the affluent class with high degree of discretionary spends on these categories and are the early adapters to the fashion trends. As the brand’s design begins to look commonplace, it is imperative for brand to don fresh look and appeal through its new seasons offerings. This leaves the marketers with two options.

They could either go for a stock clearance sale through outsourced vendors, or bring the aspiring middle class into its fold. These End of season sales through the brands owned outlets make the brand accessible to the aspiring middle class without too much of brand experience dilution. Even the large malls like Central, Phoenix Market City, R City cash in on this phenomenon by riding piggy back on individual premium brands end of season sale strategies talked earlier.

Globally, large organized retailers like JC penny, Marks and Spencer, Zara use these end of season sales with their mark down price management strategies , flash sales and many other such in store promotions to prepare for the new season offering.

These perceived surpluses alleviate ones guilt of consuming more. This adds to the top line form increasing the volumes and sales revenue.

These end of season sales have been great revenue spinners for countries and economies of Singapore, Dubai where the economy and markets thrive on huge tourism.

India the story is a little different. As per a study Indian consumption expenditure are estimated to be in clothes and footwear segment will be 40.7 trillion dollars. Here in India these events like the end of season sales only seem to make consumers bunch up their annual purchases, to avail the consumer surplus and higher satisfaction that stems from perceived deep discounts offered during this period

The moot point, which brand owners of such categories need to answer is- have the end of season sales become their Achilles heel? Where even the affluent who have the power to buy the brands at full prices; do not do so.

Perhaps Brand acceptance and loyalty is being acquired at the cost of profit; through these mega sales. We fear that that soon India as the story of an emerged market will remain a distant dream for these brands, the worst scenario would be if both the consumers and the brand owners turn apathetic to the brand’s ethos and values which form the core of the brand’s positioning.

Some insights about the consumer behavior and brands are discussed. The End of season sale today has become very predictable and not an adhoc activity for merely inventory and stock clearance. This regular feature has discernibly influenced the consumer behavior. Consumers postpone and bunch up their purchases to avail deep discounts during End of season sale. This leads to a consumer surplus, since consumers perceive they pay a price for prestigious brands much lower than the market price.