Description
Indian organised retail industry is poised for growth. Apparel sector in particular has a
great opportunity with alignment of Indian economy to globalised markets. With the
widespread use of sales promotions- short term activities which provide material
inducements to consumers and trade it becomes imperative for managers to understand
such practices and understand challenges. This study investigates sales promotion
activities of six apparel stores in Ahmedabad market and compares them on various
dimensions. It presents major findings and provides insights on consumer behaviour.
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Managerial challenges are posed in planning and implementing such
activities. The paper concludes with future bright outlook.
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD INDIA
Research and Publications
Sales Promotion Practices in Apparel Retail Sector
and Challenges Ahead
Preeta H. Vyas
W.P. No.2007-11-02
November 2007
The main objective of the working paper series of the IIMA is to help faculty members,
research staff and doctoral students to speedily share their research findings with professional
colleagues and test their research findings at the pre-publication stage. IIMA is committed to
maintain academic freedom. The opinion(s), view(s) and conclusion(s) expressed in the
working paper are those of the authors and not that of IIMA.
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD-380 015
INDIA
IIMA INDIA
Research and Publications
Sales Promotion Practices in Apparel Retail Sector
and Challenges Ahead
by
Dr. Preeta H. Vyas
Indian Institute of Management, Ahmedabad
Abstract:
Indian organised retail industry is poised for growth. Apparel sector in particular has a
great opportunity with alignment of Indian economy to globalised markets. With the
widespread use of sales promotions- short term activities which provide material
inducements to consumers and trade it becomes imperative for managers to understand
such practices and understand challenges. This study investigates sales promotion
activities of six apparel stores in Ahmedabad market and compares them on various
dimensions. It presents major findings and provides insights on consumer behaviour.
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Managerial challenges are posed in planning and implementing such
activities. The paper concludes with future bright outlook.
Page No. 2 W.P. No. 2007-11-02
IIMA INDIA
Research and Publications
Sales Promotion Practices in Apparel Retail Sector
and Challenges Ahead
Introduction
In India, clothing retail accounts for 36% of organised retail business. It is the largest
sector. Ready-made apparel accounted for an estimated 20% of domestic clothing sales in
2005
1
. With growing working women wearing western wear to work, and pressed for
time, market for good readymade clothes is likely to grow.India is a film-crazy nation,
and the largest producer of films, with more than 1,000 every year. They provide
entertainment and an escape from reality for India’s masses, and set the popular fashion
trend. Bollywood fashions have become pan Indian. They affect various sectors of the
market including clothing, footwear, weddings and fashion accessories.
With the advent of modern format retailers and the growth of plastic cards, affluent urban
Indian women are shopping like never before. They spend mornings browsing in stores
looking for deals or latest styles.Upper income urban women are adopting ethnic chic.
These are designer clothes that incorporate Indian motifs, ethnic fabrics and are a fusion
of western and Indian styles.
In the large urban centres, apparel retailers, like Shoppers Stop, Westside and Pantaloon
have popularised their private labels, which have attracted urban shoppers. Westside
carries only its own private labels, while for the other stores, 20-30% of their apparel
turnover is from private labels. Customers have loyalty to a store rather than any
particular garment brand. This has led to a thriving unbranded or local brand market for
ready-to-wear clothes leading to severe competition. Hence organized retailers like
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Customers look to design and fit of the clothes, and use the shop’s
name as a quality standard.
Page No. 3 W.P. No. 2007-11-02
1
Consumer Lifestyles in India, Euromonitor International Consumer Lifestyles Database(2005)
IIMA INDIA
Research and Publications
According to a report by Datamonitor (2006)
2
, global apparel, accessories & luxuries
market is likely to grow by 4.5% annually and Asia Pacific region is anticipated to
acquire leadership position by 2011. Apparel sector in India poses a lot of challenges to a
marketer. So far India’s share in world apparel trade has been insignificant(less than 3%).
World garment trade is estimated at around 195 Billion US$ annually. The Biggest
manufacturer & supplier is China producing over 50 billion $, followed by Mexico which
produces over 8 billion and followed by many countries like India, Sri Lanka and
Bangladesh, being the third place countries making and exporting garments worth 5 - 6
billion $ annually.
Characteristics of Apparel retail sector
As apparel retail is led by fashion, a player needs to keep a close watch on fashion
amongst teenagers as they are the trend setters. Role of Bollywood in spreading fashion
needs to be understood. Seasonal variations on stocking pattern and need to clear
inventory at the end of season should be understood by apparel retailer. Typically once an
item is sold from the outlet, retailer ensures that there is no repetition of same. It gets
replaced by different design, style, colour. Importance of store layout, décor is very
critical. A browser visiting the store frequently likes to see changes in the layout
otherwise he may carry the impression that stocks are not moving out of the store.
Category management becomes very crucial function as transformation of design into
production and delivery has to be completed before fashion or fad changes in the market.
This highlights the importance of sales promotions- short term activities which induces
trade or consumer to buy now rather than in future as the value of apparel after the
season, goes down substantially and inventory carrying burden turns out to be very high.
Apparel retailer needs to understand critical role of sales promotions. Attractive
promotions induces purchase acceleration, stock piling and brand switching on the part of
a consumer which substantially reduces retailer’s financial and inventory risk and
consumer’s financial risk and psychological risk.
This paper compares various sales promotion activities followed by apparel retail stores
in organized sector. Both exclusive and multibrand retailers in apparel retail sector are
Page No. 4 W.P. No. 2007-11-02
2
Global Apparel, accessories and luxury goods, Datamonitor, (2006)
IIMA INDIA
Research and Publications
studied. On the basis of practices, it poses few challenges which managers in the sector
encounters.
Literature review:
Several studies on apparel retail sector and usage of promotions are reported in the
context of developed markets. A brief overview is presented below:
Deeter-Schmelz, Dawn R.; Moore, J esse N.; Goebel, Daniel J , (2000) examined Prestige
clothing shopping by consumers by a confirmatory assessment and refinement of the
PRECONscale. Aspects studied include background on the symbolic aspects of
consumption; prestige shopping behavior; reassessment and refinement of the PRECON
scale and impact of income and age on prestige shopping. The paper concludes with
managerial implications for the United States apparel retailers dealing in prestige
clothing.
Kincade, Doris H.; Woodard, Ginger A.; Park, Haesun (2002) studied Buyer–seller
relationships for promotional support in the apparel sector which is critical for success.
The purpose of the study was to define promotional support categories offered to apparel
retailers by manufacturers, to identify the retailer's perceptions of the offering frequency
and importance of the promotional support, and to investigate the relationship between
offering frequency and perceptions of importance. Results indicated that monetary
support was regarded as the most important promotional support.. A positive and
significant correlation was found between items the buyers perceived as important and the
frequency of offerings of these items.
Liu, Yuping, (2007) found out the Long-Term Impact of Loyalty Programs on Consumer
Purchase Behavior and Loyalty. Using longitudinal data from a convenience store
franchise, the study found out that consumers who were heavy buyers at the beginning of
a loyalty program were most likely to claim their qualified rewards, but the program did
not prompt them to change their purchase behavior. In contrast, consumers whose initial
patronage levels were low or moderate gradually purchased more and became more loyal
to the firm. For light buyers, the loyalty program broadened their relationship with the
firm into other business areas. Thus there is a need to consider patronage to decide
rewards for loyalty programmes.
Page No. 5 W.P. No. 2007-11-02
IIMA INDIA
Research and Publications
In the context of French market, Meyer-Waarden, Lars; Benavent, Christophe. (2006)
studied the Impact of Loyalty Programmes on Repeat Purchase Behaviour based on the
Behavior Scan single-source panel which has been compared with the store data base .
The double jeopardy phenomenon was present and loyalty programmes did not
substantially change market structures. When all companies had loyalty programs, the
market was characterized by an absence of change of the competitive situation.
Hyllegard, Karen; Eckman, Molly; Descals, Alejandro Molla; Borja, Miguel Angel
Gomez (2005), studied Spanish consumers' perceptions of US apparel speciality
retailers' products and services. The study emphasized that speciality retailers' success in
international markets is contingent upon their knowledge of culturally-defined values,
norms and behaviour that influence consumer decision making and impact acceptance of
products and services. The study examined consumers' store patronage and apparel
purchase behaviour, acceptance of US apparel brands, perceptions of retailers' products
and services, and perceptions of the impact of foreign retailers on local communities. It
found out that the perceptions differed regarding quality, fashionability, product
assortment, extent and quality of customer service, convenience of location, payment
options, national brands and store layout. Consumers' acceptance of US apparel brands
was a function of age, household income, apparel product country of manufacture and
price.
Motivation for the study
In spite of the widespread use of sales promotion activities in India no study was found
examining sales promotion practices in apparel retail sector. Apparel sector is poised for
growth in domestic and global markets due to liberalization. With the rapid growth
organized retailing in India, there is a dire need to understand such practices, explore
rationale behind it and pose managerial challenges.
Objectives
Hence, the present study attempts study practices of sales promotion of apparel retail
outlets
i) To compare usage across exclusive and multi brand outlets
Page No. 6 W.P. No. 2007-11-02
IIMA INDIA
Research and Publications
Page No. 7 W.P. No. 2007-11-02
ii) To explore rationale behind such activities by examining consumer behaviour
iii) To pose challenges ahead
Methodology
Six apparel retail outlets in organized sector were selected for studying sales promotion
practices. As the purpose of the study was exploration, sample of six was deemed fit as
they would represent the population of organized apparel retail outlets in Ahmedabad
market- a mini metro in western part of India. Ahmedabad being an important hub for
textile industry in past as well as current times such practices were studied in this market.
Also nature of such activities is not likely to vary across different markets because most
of the outlets were a part of chain and their head office would typically plan such
activities and endorse the budget and promotional calendar which these outlets would
undertake during the year. An in depth structured guide was prepared to gather the data
about store profile and sales promotion activities undertaken by the store.
Findings
The table-1 below gives Comparative Apparel Store Profile and information about sales
promotion activities.
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD INDIA
Research and Publications
Table-1
Store profile and information on sales promotion activities
Store name Pantaloon Megamart Lifestyle Westside Wills lifestyle Max
Format Type Multibrand Exclusive
Arvind’s brand
Multibrand Exclusive Tata
(Trent group
Exclusive ITC Multibrand Landmark
group
Positioning Family store Value for Money Style &
affordability
Enjoying the
change
Family shopping
destination & value
pricing store
Floor Size 28000 sq. ft 5000 sq.ft. 50,000 sq. ft 15,000-
30,000sq.ft
Location CG Road,
Ahmedabad
(posh locality)
Drive in Road,
Ahmedabad (not
very posh,
crowded)
Satellite
Highway,
Cross Road
CG Road,
Ahmedabad
C.G. Road,
Ahmedabad
Gallops Mall, Sarkhej
Highway, Ahmedabad
categories Apparel &
accessories for
men, women &
children
Menswear,
women wear,
home furnishing
Apparel &
accessories for
men,
women
Stylized
clothes,
footwear &
accessories
Relaxed wear,
body care
products, appareal
& accessories
Foot wear, accessories,
home furnishing
#of skus 45000 450 categories 34 categories NA NA NA
#of suppliers 20-25 1 (Arvind Mills) 94 NA NA NA
Average
billing per
customer
Rs.1800 NA Rs 800 Rs199-1999 3000 during sales
promotion and
2500 without sales
promotion
Rs750 to 1450
Average
footfalls
1000on weekday
& 1500 to 2000
on weekends,
holidays
100-120 on
weekday & upto
250 on weekends
1200 in week
days & 6000
during week end
25-45 per hour 65 per day & rise
upto 120
450 per day &
Weekend 1200
IIMA INDIA
Research and Publications
Page No. 9 W.P. No. 2007-11-02
Sales
Promtions
1.End of
season
Yes No No Yes Yes Yes
2.Festive
Promotions
(Diwali,
Christmas etc)
Yes No Yes Yes No Yes
Loyalty card
Programme
Yes No Yes Yes Yes No
Special
Promotion
(event)
Yes (Exchange
offer)
Yes Yes No Yes No
J oint
promotion
No No Yes No No No
Media used Hoardings,print,
electronic (SMS,
E-mail),POP
Instore,
Electronic
Hoardings, In
store
Print,
electronic,
hoardings, In
store
Tele marketing,
print, Electronic,
outdoor
In store
Promotion
type
Price off, free
gifts, exchange
offer
Price promotion,
free gifts,
contests, combo
offer
Lucky draw,
discounts,
contests, free
gifts
Cause related,
gift vouchers,
discount,
contest,combo,
coupons
Discounts, gift
vouchers
Lucky draw, free coupons,
discounts
Evaluation
of promotion
Sales, Quarterly
profit
Sales Sales Sales,
Quarterly
profit
Conversion,
footsize, sales,
average bill size,
stock movement
Sales, average bill size,
conversion (footfall)
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD INDIA
Research and Publications
• From the above table which gives comparative picture of various sales promotion
activities and manner of announcement, evaluation etc., it is clear that four out of
six stores engage in end of season sale. This reinforces the fact that seasonality
affects apparel sector and hence it becomes critical for a retailer to clear off the
stocks at the end of season otherwise he may have to incur substantial inventory
carrying costs, allocate scarce shelf space and out of fashion apparels maybe
worthless- may remain unsold forever! Thus stock clearance seems to be very
important objective for apparel retailer in using end of season sale twice in a year
wherein discount given is upto 50% of the MRP(Maximum retail price).
• Four stores, both mulitbrand and exclusive use loyalty cards to reward loyal users
and encourage them to visit the store often and buy more by offering wide range
for men, women and children. Some store also offer home furnishings, accessories
and footwear, thereby providing convenience for one stop shopping. Examining
the various terms and conditions of loyalty programme revealed that some
rewards were quite complex and confusing. e.g. lifestyle’s card- Inner circle. The
conditions to be fulfilled is not very clear to a card member.For example, if any
other promotions are prevalent then purchase made during those promotions
would entitle for the card reward points or not was not very clear.
• All the stores used in store media to announce promotions. However use of mass
media and electronic media varied across the sample under study. Use of only
instore media would restrict the announcement to those who walk into the store. It
can be assumed that only loyal/ frequent visitor would know about the offers.
Whereas variety of media used would enhance footfalls to the store and trigger
word of mouth.
• Only one store used joint sales promotion tieing up with brands like, MacDonald,
Havmore, Gold’s (local) Gym and Kaya skin clinic. No other store has yet
explored avenue of joint sales promotion. Such joint promotions have advantages
in terms of sharing costs of promotions, cross selling opportunities to each other’s
customers, higher visibility etc.
• In terms of type of consumer sales promotions, almost everyone used discount,
coupon programmes and few used lucky draws, contests, gift, buy one get one free
type of promotions. Only Pantaloon had a unique scheme of an exchange offer
which is normally prevalent in durable goods industry. Relating it to a cause-
IIMA INDIA
Research and Publications
donating old pairs collected in exchange scheme to charity would enhance the
brand value among the consumers.
• Every retail outlet measures impact of sales promotion activities by looking at
sales made during the promotional period. Few others also look at the footfalls,
conversion from footfall to buyers, average bill size during promotions etc. Very
few measure profits made during promotions by relating revenues to costs of
promotions. Beyond that no evaluation is done. The problem of isolating effect of
different promotions in a situation of promotion overlap is not addressed. Rich
database that a retailer possesses is yet to be explored for further diagnosis and
building future promotions.
Rationale for sales promotion activities
Usage of sales promotion activities has a direct impact on behaviour as it motivates a
consumer to buy now rather than in future, enhances value of an offer temporarily till
the promotion period, encourages switching, reinforce or reward loyalty etc. Broadly,
objectives set for these activities are; i)to generate store traffic, ii) to move excess
inventory, iii)to enhance store image and iv)to create a price image( high or low).
Traffic building is achieved by special event promotions like Diwali, Rakshabandhan
promotions; inventory reduction through end of season sale; creation and building
store image through feature advertising and displays and joint promotions and price
image by highlighting the discounts. It helps consumer reduce not only financial risk
but also psychological and social risk by making consumer confident of his/her
purchase, conformation to group norms by shopping at famous stores/brands and
possibility of acquiring well known branded apparel during promotions. Promotions
may induce non buyers to walk in to the store and loyalty programmes may encourage
to buy more, more often or upgrade to better quality. Exciting promotions also have
tendency to generate positive word of mouth and help consumer feel a smart
shopper. Thus not only utilitarian benefits like, saving of money, time or quality
upgradation but hedonic benefits like feeling confident, feeling of excitement and
entertainment etc.
Managerial challenges
From the findings it is apparent that use of sales promotions is quite widespread and
variety of activities are used to address variety of objectives; clear off old stock, load
Page No. 11 W.P. No. 2007-11-02
IIMA INDIA
Research and Publications
the consumer, encourage brand switching, to reward the loyal user, to create
excitement at point of purchase etc. The manager in charge of apparel retail
operations need to understand impact of various types of promotions on consumer
behaviour and objectives attained. In a crowded promotional environment it is
challenging to retain loyal consumers. Too frequent use of promotions may evoke
indifferent attitude among consumers or shape deal to deal buying. Predictability of
promotions (promotions linked to festivals like Diwali) may result in coinciding
purchase with such promotions leading to loss of margin an opportunity loss to sell at
full price. A manager needs to be aware of these problems and have to plan strategies
to overcome them. Loyalty card programmes require good administrative support and
good database records and data mining abilities to exploit to the fullest. Also IT
investments are required to keep records and evaluate the impact. Big players like
Pantaloon have a policy to invest in IT. They have implemented SAP so database is
available. Such investments in decision support systems may give competitive edge to
retailers. For that one would need trained people to handle decision support systems.
Manager needs to strike a delicate balance between percentage split across proactive
and reactive promotions. If it gives a first mover advantage then manager needs to
allocate higher proportion of budget to proactive promotions. Mangers also need to
plan such activities which will synergise company’s positioning and advertising
campaign efforts rather than erode brand image or equity. He needs to understand
critical role of integrated marketing communications which will signal unified
message and image about the brand/ store. To what extent promotional calendars need
to be unified across markets for the chain and to what extent local managers need to
be given freedom to plan their promotions in local areas is a constant struggle
between head quarter and regional chain stores.
Execution of these activities also require proper coordination of selling effort,
availability of promoted merchandise and managing product line pricing. At times, if
certain item in a product line is promoted, it may disturb the logic of line pricing.
Future outlook
Apparel sector is likely to grow with growing Indian economy. Many multinational
players either have already plunged into Indian market or plan to do so in apparel
sector. They will bring many promotional practices which they have been following
Page No. 12 W.P. No. 2007-11-02
IIMA INDIA
Research and Publications
in developed markets which will increase the use of sales promotion activities even
further. Indian brands will have to withstand turbulent conditions and learn to survive.
If the role of such activities is understood well it may help any player a long way to
survive and grow.
References
1.http://apparel.indiamart.com/lib/textile/textile07301998.html
2. Hyllegard, Karen; Eckman, Molly; Descals, Alejandro Molla; Borja, Miguel
Angel Gomez., ”Spanish consumers' perceptions of US apparel speciality retailers'
products and services “J ournal of Consumer Behaviour, Sep2005, Vol. 4 Issue 5,
p345-362, 18p, 7 charts.
3. Kincade, Doris H.; Woodard, Ginger A.; Park, Haesun,”, International J ournal of
Consumer Studies, Dec2002, Vol. 26 Issue 4, p294-302, 9p.
4. Liu, Yuping,” The Long-Term Impact of Loyalty Programs on Consumer
Purchase Behavior and Loyalty,” J ournal of Marketing, Oct2007, Vol. 71 Issue 4,
p19-35, 17p.
5. Meyer-Waarden, Lars; Benavent, Christophe,” The Impact of Loyalty
Programmes on Repeat Purchase Behaviour,” J ournal of Marketing Management,
Feb2006, Vol. 22 Issue 1/2, p61-88, 28p.
6. Lara, Pedro Reinares.,” Exploring the Benefits Obtained in a Loyalty Programme
applied to Retailing,” European Retail Digest, Winter2005 Issue 48, p48-52, 5p.
7. Deeter-Schmelz, Dawn R.; Moore, J esse N.; Goebel, Daniel J .,” prestige clothing
shopping by consumers: a confirmatory assessment and refinement of the precon
scale with managerial implications”, J ournal of Marketing Theory & Practice,
Fall2000, Vol. 8 Issue 4, p43, 16p.
8. “Consumer Lifestyles in India” Euromonitor, International Consumer Lifestyles
Database(2005)
9. “Global Apparel, Accessories and Luxury Goods” Datamonitor, (2006)
Page No. 13 W.P. No. 2007-11-02
doc_359708926.pdf
Indian organised retail industry is poised for growth. Apparel sector in particular has a
great opportunity with alignment of Indian economy to globalised markets. With the
widespread use of sales promotions- short term activities which provide material
inducements to consumers and trade it becomes imperative for managers to understand
such practices and understand challenges. This study investigates sales promotion
activities of six apparel stores in Ahmedabad market and compares them on various
dimensions. It presents major findings and provides insights on consumer behaviour.
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Managerial challenges are posed in planning and implementing such
activities. The paper concludes with future bright outlook.
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD INDIA
Research and Publications
Sales Promotion Practices in Apparel Retail Sector
and Challenges Ahead
Preeta H. Vyas
W.P. No.2007-11-02
November 2007
The main objective of the working paper series of the IIMA is to help faculty members,
research staff and doctoral students to speedily share their research findings with professional
colleagues and test their research findings at the pre-publication stage. IIMA is committed to
maintain academic freedom. The opinion(s), view(s) and conclusion(s) expressed in the
working paper are those of the authors and not that of IIMA.
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD-380 015
INDIA
IIMA INDIA
Research and Publications
Sales Promotion Practices in Apparel Retail Sector
and Challenges Ahead
by
Dr. Preeta H. Vyas
Indian Institute of Management, Ahmedabad
Abstract:
Indian organised retail industry is poised for growth. Apparel sector in particular has a
great opportunity with alignment of Indian economy to globalised markets. With the
widespread use of sales promotions- short term activities which provide material
inducements to consumers and trade it becomes imperative for managers to understand
such practices and understand challenges. This study investigates sales promotion
activities of six apparel stores in Ahmedabad market and compares them on various
dimensions. It presents major findings and provides insights on consumer behaviour.
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Managerial challenges are posed in planning and implementing such
activities. The paper concludes with future bright outlook.
Page No. 2 W.P. No. 2007-11-02
IIMA INDIA
Research and Publications
Sales Promotion Practices in Apparel Retail Sector
and Challenges Ahead
Introduction
In India, clothing retail accounts for 36% of organised retail business. It is the largest
sector. Ready-made apparel accounted for an estimated 20% of domestic clothing sales in
2005
1
. With growing working women wearing western wear to work, and pressed for
time, market for good readymade clothes is likely to grow.India is a film-crazy nation,
and the largest producer of films, with more than 1,000 every year. They provide
entertainment and an escape from reality for India’s masses, and set the popular fashion
trend. Bollywood fashions have become pan Indian. They affect various sectors of the
market including clothing, footwear, weddings and fashion accessories.
With the advent of modern format retailers and the growth of plastic cards, affluent urban
Indian women are shopping like never before. They spend mornings browsing in stores
looking for deals or latest styles.Upper income urban women are adopting ethnic chic.
These are designer clothes that incorporate Indian motifs, ethnic fabrics and are a fusion
of western and Indian styles.
In the large urban centres, apparel retailers, like Shoppers Stop, Westside and Pantaloon
have popularised their private labels, which have attracted urban shoppers. Westside
carries only its own private labels, while for the other stores, 20-30% of their apparel
turnover is from private labels. Customers have loyalty to a store rather than any
particular garment brand. This has led to a thriving unbranded or local brand market for
ready-to-wear clothes leading to severe competition. Hence organized retailers like
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Customers look to design and fit of the clothes, and use the shop’s
name as a quality standard.
Page No. 3 W.P. No. 2007-11-02
1
Consumer Lifestyles in India, Euromonitor International Consumer Lifestyles Database(2005)
IIMA INDIA
Research and Publications
According to a report by Datamonitor (2006)
2
, global apparel, accessories & luxuries
market is likely to grow by 4.5% annually and Asia Pacific region is anticipated to
acquire leadership position by 2011. Apparel sector in India poses a lot of challenges to a
marketer. So far India’s share in world apparel trade has been insignificant(less than 3%).
World garment trade is estimated at around 195 Billion US$ annually. The Biggest
manufacturer & supplier is China producing over 50 billion $, followed by Mexico which
produces over 8 billion and followed by many countries like India, Sri Lanka and
Bangladesh, being the third place countries making and exporting garments worth 5 - 6
billion $ annually.
Characteristics of Apparel retail sector
As apparel retail is led by fashion, a player needs to keep a close watch on fashion
amongst teenagers as they are the trend setters. Role of Bollywood in spreading fashion
needs to be understood. Seasonal variations on stocking pattern and need to clear
inventory at the end of season should be understood by apparel retailer. Typically once an
item is sold from the outlet, retailer ensures that there is no repetition of same. It gets
replaced by different design, style, colour. Importance of store layout, décor is very
critical. A browser visiting the store frequently likes to see changes in the layout
otherwise he may carry the impression that stocks are not moving out of the store.
Category management becomes very crucial function as transformation of design into
production and delivery has to be completed before fashion or fad changes in the market.
This highlights the importance of sales promotions- short term activities which induces
trade or consumer to buy now rather than in future as the value of apparel after the
season, goes down substantially and inventory carrying burden turns out to be very high.
Apparel retailer needs to understand critical role of sales promotions. Attractive
promotions induces purchase acceleration, stock piling and brand switching on the part of
a consumer which substantially reduces retailer’s financial and inventory risk and
consumer’s financial risk and psychological risk.
This paper compares various sales promotion activities followed by apparel retail stores
in organized sector. Both exclusive and multibrand retailers in apparel retail sector are
Page No. 4 W.P. No. 2007-11-02
2
Global Apparel, accessories and luxury goods, Datamonitor, (2006)
IIMA INDIA
Research and Publications
studied. On the basis of practices, it poses few challenges which managers in the sector
encounters.
Literature review:
Several studies on apparel retail sector and usage of promotions are reported in the
context of developed markets. A brief overview is presented below:
Deeter-Schmelz, Dawn R.; Moore, J esse N.; Goebel, Daniel J , (2000) examined Prestige
clothing shopping by consumers by a confirmatory assessment and refinement of the
PRECONscale. Aspects studied include background on the symbolic aspects of
consumption; prestige shopping behavior; reassessment and refinement of the PRECON
scale and impact of income and age on prestige shopping. The paper concludes with
managerial implications for the United States apparel retailers dealing in prestige
clothing.
Kincade, Doris H.; Woodard, Ginger A.; Park, Haesun (2002) studied Buyer–seller
relationships for promotional support in the apparel sector which is critical for success.
The purpose of the study was to define promotional support categories offered to apparel
retailers by manufacturers, to identify the retailer's perceptions of the offering frequency
and importance of the promotional support, and to investigate the relationship between
offering frequency and perceptions of importance. Results indicated that monetary
support was regarded as the most important promotional support.. A positive and
significant correlation was found between items the buyers perceived as important and the
frequency of offerings of these items.
Liu, Yuping, (2007) found out the Long-Term Impact of Loyalty Programs on Consumer
Purchase Behavior and Loyalty. Using longitudinal data from a convenience store
franchise, the study found out that consumers who were heavy buyers at the beginning of
a loyalty program were most likely to claim their qualified rewards, but the program did
not prompt them to change their purchase behavior. In contrast, consumers whose initial
patronage levels were low or moderate gradually purchased more and became more loyal
to the firm. For light buyers, the loyalty program broadened their relationship with the
firm into other business areas. Thus there is a need to consider patronage to decide
rewards for loyalty programmes.
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Research and Publications
In the context of French market, Meyer-Waarden, Lars; Benavent, Christophe. (2006)
studied the Impact of Loyalty Programmes on Repeat Purchase Behaviour based on the
Behavior Scan single-source panel which has been compared with the store data base .
The double jeopardy phenomenon was present and loyalty programmes did not
substantially change market structures. When all companies had loyalty programs, the
market was characterized by an absence of change of the competitive situation.
Hyllegard, Karen; Eckman, Molly; Descals, Alejandro Molla; Borja, Miguel Angel
Gomez (2005), studied Spanish consumers' perceptions of US apparel speciality
retailers' products and services. The study emphasized that speciality retailers' success in
international markets is contingent upon their knowledge of culturally-defined values,
norms and behaviour that influence consumer decision making and impact acceptance of
products and services. The study examined consumers' store patronage and apparel
purchase behaviour, acceptance of US apparel brands, perceptions of retailers' products
and services, and perceptions of the impact of foreign retailers on local communities. It
found out that the perceptions differed regarding quality, fashionability, product
assortment, extent and quality of customer service, convenience of location, payment
options, national brands and store layout. Consumers' acceptance of US apparel brands
was a function of age, household income, apparel product country of manufacture and
price.
Motivation for the study
In spite of the widespread use of sales promotion activities in India no study was found
examining sales promotion practices in apparel retail sector. Apparel sector is poised for
growth in domestic and global markets due to liberalization. With the rapid growth
organized retailing in India, there is a dire need to understand such practices, explore
rationale behind it and pose managerial challenges.
Objectives
Hence, the present study attempts study practices of sales promotion of apparel retail
outlets
i) To compare usage across exclusive and multi brand outlets
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Research and Publications
Page No. 7 W.P. No. 2007-11-02
ii) To explore rationale behind such activities by examining consumer behaviour
iii) To pose challenges ahead
Methodology
Six apparel retail outlets in organized sector were selected for studying sales promotion
practices. As the purpose of the study was exploration, sample of six was deemed fit as
they would represent the population of organized apparel retail outlets in Ahmedabad
market- a mini metro in western part of India. Ahmedabad being an important hub for
textile industry in past as well as current times such practices were studied in this market.
Also nature of such activities is not likely to vary across different markets because most
of the outlets were a part of chain and their head office would typically plan such
activities and endorse the budget and promotional calendar which these outlets would
undertake during the year. An in depth structured guide was prepared to gather the data
about store profile and sales promotion activities undertaken by the store.
Findings
The table-1 below gives Comparative Apparel Store Profile and information about sales
promotion activities.
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD INDIA
Research and Publications
Table-1
Store profile and information on sales promotion activities
Store name Pantaloon Megamart Lifestyle Westside Wills lifestyle Max
Format Type Multibrand Exclusive
Arvind’s brand
Multibrand Exclusive Tata
(Trent group
Exclusive ITC Multibrand Landmark
group
Positioning Family store Value for Money Style &
affordability
Enjoying the
change
Family shopping
destination & value
pricing store
Floor Size 28000 sq. ft 5000 sq.ft. 50,000 sq. ft 15,000-
30,000sq.ft
Location CG Road,
Ahmedabad
(posh locality)
Drive in Road,
Ahmedabad (not
very posh,
crowded)
Satellite
Highway,
Cross Road
CG Road,
Ahmedabad
C.G. Road,
Ahmedabad
Gallops Mall, Sarkhej
Highway, Ahmedabad
categories Apparel &
accessories for
men, women &
children
Menswear,
women wear,
home furnishing
Apparel &
accessories for
men,
women
Stylized
clothes,
footwear &
accessories
Relaxed wear,
body care
products, appareal
& accessories
Foot wear, accessories,
home furnishing
#of skus 45000 450 categories 34 categories NA NA NA
#of suppliers 20-25 1 (Arvind Mills) 94 NA NA NA
Average
billing per
customer
Rs.1800 NA Rs 800 Rs199-1999 3000 during sales
promotion and
2500 without sales
promotion
Rs750 to 1450
Average
footfalls
1000on weekday
& 1500 to 2000
on weekends,
holidays
100-120 on
weekday & upto
250 on weekends
1200 in week
days & 6000
during week end
25-45 per hour 65 per day & rise
upto 120
450 per day &
Weekend 1200
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Research and Publications
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Sales
Promtions
1.End of
season
Yes No No Yes Yes Yes
2.Festive
Promotions
(Diwali,
Christmas etc)
Yes No Yes Yes No Yes
Loyalty card
Programme
Yes No Yes Yes Yes No
Special
Promotion
(event)
Yes (Exchange
offer)
Yes Yes No Yes No
J oint
promotion
No No Yes No No No
Media used Hoardings,print,
electronic (SMS,
E-mail),POP
Instore,
Electronic
Hoardings, In
store
Print,
electronic,
hoardings, In
store
Tele marketing,
print, Electronic,
outdoor
In store
Promotion
type
Price off, free
gifts, exchange
offer
Price promotion,
free gifts,
contests, combo
offer
Lucky draw,
discounts,
contests, free
gifts
Cause related,
gift vouchers,
discount,
contest,combo,
coupons
Discounts, gift
vouchers
Lucky draw, free coupons,
discounts
Evaluation
of promotion
Sales, Quarterly
profit
Sales Sales Sales,
Quarterly
profit
Conversion,
footsize, sales,
average bill size,
stock movement
Sales, average bill size,
conversion (footfall)
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD INDIA
Research and Publications
• From the above table which gives comparative picture of various sales promotion
activities and manner of announcement, evaluation etc., it is clear that four out of
six stores engage in end of season sale. This reinforces the fact that seasonality
affects apparel sector and hence it becomes critical for a retailer to clear off the
stocks at the end of season otherwise he may have to incur substantial inventory
carrying costs, allocate scarce shelf space and out of fashion apparels maybe
worthless- may remain unsold forever! Thus stock clearance seems to be very
important objective for apparel retailer in using end of season sale twice in a year
wherein discount given is upto 50% of the MRP(Maximum retail price).
• Four stores, both mulitbrand and exclusive use loyalty cards to reward loyal users
and encourage them to visit the store often and buy more by offering wide range
for men, women and children. Some store also offer home furnishings, accessories
and footwear, thereby providing convenience for one stop shopping. Examining
the various terms and conditions of loyalty programme revealed that some
rewards were quite complex and confusing. e.g. lifestyle’s card- Inner circle. The
conditions to be fulfilled is not very clear to a card member.For example, if any
other promotions are prevalent then purchase made during those promotions
would entitle for the card reward points or not was not very clear.
• All the stores used in store media to announce promotions. However use of mass
media and electronic media varied across the sample under study. Use of only
instore media would restrict the announcement to those who walk into the store. It
can be assumed that only loyal/ frequent visitor would know about the offers.
Whereas variety of media used would enhance footfalls to the store and trigger
word of mouth.
• Only one store used joint sales promotion tieing up with brands like, MacDonald,
Havmore, Gold’s (local) Gym and Kaya skin clinic. No other store has yet
explored avenue of joint sales promotion. Such joint promotions have advantages
in terms of sharing costs of promotions, cross selling opportunities to each other’s
customers, higher visibility etc.
• In terms of type of consumer sales promotions, almost everyone used discount,
coupon programmes and few used lucky draws, contests, gift, buy one get one free
type of promotions. Only Pantaloon had a unique scheme of an exchange offer
which is normally prevalent in durable goods industry. Relating it to a cause-
IIMA INDIA
Research and Publications
donating old pairs collected in exchange scheme to charity would enhance the
brand value among the consumers.
• Every retail outlet measures impact of sales promotion activities by looking at
sales made during the promotional period. Few others also look at the footfalls,
conversion from footfall to buyers, average bill size during promotions etc. Very
few measure profits made during promotions by relating revenues to costs of
promotions. Beyond that no evaluation is done. The problem of isolating effect of
different promotions in a situation of promotion overlap is not addressed. Rich
database that a retailer possesses is yet to be explored for further diagnosis and
building future promotions.
Rationale for sales promotion activities
Usage of sales promotion activities has a direct impact on behaviour as it motivates a
consumer to buy now rather than in future, enhances value of an offer temporarily till
the promotion period, encourages switching, reinforce or reward loyalty etc. Broadly,
objectives set for these activities are; i)to generate store traffic, ii) to move excess
inventory, iii)to enhance store image and iv)to create a price image( high or low).
Traffic building is achieved by special event promotions like Diwali, Rakshabandhan
promotions; inventory reduction through end of season sale; creation and building
store image through feature advertising and displays and joint promotions and price
image by highlighting the discounts. It helps consumer reduce not only financial risk
but also psychological and social risk by making consumer confident of his/her
purchase, conformation to group norms by shopping at famous stores/brands and
possibility of acquiring well known branded apparel during promotions. Promotions
may induce non buyers to walk in to the store and loyalty programmes may encourage
to buy more, more often or upgrade to better quality. Exciting promotions also have
tendency to generate positive word of mouth and help consumer feel a smart
shopper. Thus not only utilitarian benefits like, saving of money, time or quality
upgradation but hedonic benefits like feeling confident, feeling of excitement and
entertainment etc.
Managerial challenges
From the findings it is apparent that use of sales promotions is quite widespread and
variety of activities are used to address variety of objectives; clear off old stock, load
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the consumer, encourage brand switching, to reward the loyal user, to create
excitement at point of purchase etc. The manager in charge of apparel retail
operations need to understand impact of various types of promotions on consumer
behaviour and objectives attained. In a crowded promotional environment it is
challenging to retain loyal consumers. Too frequent use of promotions may evoke
indifferent attitude among consumers or shape deal to deal buying. Predictability of
promotions (promotions linked to festivals like Diwali) may result in coinciding
purchase with such promotions leading to loss of margin an opportunity loss to sell at
full price. A manager needs to be aware of these problems and have to plan strategies
to overcome them. Loyalty card programmes require good administrative support and
good database records and data mining abilities to exploit to the fullest. Also IT
investments are required to keep records and evaluate the impact. Big players like
Pantaloon have a policy to invest in IT. They have implemented SAP so database is
available. Such investments in decision support systems may give competitive edge to
retailers. For that one would need trained people to handle decision support systems.
Manager needs to strike a delicate balance between percentage split across proactive
and reactive promotions. If it gives a first mover advantage then manager needs to
allocate higher proportion of budget to proactive promotions. Mangers also need to
plan such activities which will synergise company’s positioning and advertising
campaign efforts rather than erode brand image or equity. He needs to understand
critical role of integrated marketing communications which will signal unified
message and image about the brand/ store. To what extent promotional calendars need
to be unified across markets for the chain and to what extent local managers need to
be given freedom to plan their promotions in local areas is a constant struggle
between head quarter and regional chain stores.
Execution of these activities also require proper coordination of selling effort,
availability of promoted merchandise and managing product line pricing. At times, if
certain item in a product line is promoted, it may disturb the logic of line pricing.
Future outlook
Apparel sector is likely to grow with growing Indian economy. Many multinational
players either have already plunged into Indian market or plan to do so in apparel
sector. They will bring many promotional practices which they have been following
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in developed markets which will increase the use of sales promotion activities even
further. Indian brands will have to withstand turbulent conditions and learn to survive.
If the role of such activities is understood well it may help any player a long way to
survive and grow.
References
1.http://apparel.indiamart.com/lib/textile/textile07301998.html
2. Hyllegard, Karen; Eckman, Molly; Descals, Alejandro Molla; Borja, Miguel
Angel Gomez., ”Spanish consumers' perceptions of US apparel speciality retailers'
products and services “J ournal of Consumer Behaviour, Sep2005, Vol. 4 Issue 5,
p345-362, 18p, 7 charts.
3. Kincade, Doris H.; Woodard, Ginger A.; Park, Haesun,”, International J ournal of
Consumer Studies, Dec2002, Vol. 26 Issue 4, p294-302, 9p.
4. Liu, Yuping,” The Long-Term Impact of Loyalty Programs on Consumer
Purchase Behavior and Loyalty,” J ournal of Marketing, Oct2007, Vol. 71 Issue 4,
p19-35, 17p.
5. Meyer-Waarden, Lars; Benavent, Christophe,” The Impact of Loyalty
Programmes on Repeat Purchase Behaviour,” J ournal of Marketing Management,
Feb2006, Vol. 22 Issue 1/2, p61-88, 28p.
6. Lara, Pedro Reinares.,” Exploring the Benefits Obtained in a Loyalty Programme
applied to Retailing,” European Retail Digest, Winter2005 Issue 48, p48-52, 5p.
7. Deeter-Schmelz, Dawn R.; Moore, J esse N.; Goebel, Daniel J .,” prestige clothing
shopping by consumers: a confirmatory assessment and refinement of the precon
scale with managerial implications”, J ournal of Marketing Theory & Practice,
Fall2000, Vol. 8 Issue 4, p43, 16p.
8. “Consumer Lifestyles in India” Euromonitor, International Consumer Lifestyles
Database(2005)
9. “Global Apparel, Accessories and Luxury Goods” Datamonitor, (2006)
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