Leading clothing and footwear brands across the country are trying to boost their sales by offering repeated discounts, as they are seeing lower sales due to the economic slowdown in Pakistan.
The unabated inflation rate has had a negative impact on the purchasing power of customers, particularly the brand conscious and middle-class income group of the society. This has resulted in declining sales of these brands.
A majority of large companies have adopted a strategy to bolster their sales in the market by offering handsome discounts of up to 70 percent to attract new and old customers.
“We had an annual sale event to clear out our stock last year, just like every year, but this time, we have had three such sales events in 2019,” said a salesman at the leading footwear brand, Hush Puppies, located in Clifton. The customer turnout has improved and their sales have recovered.
The discount offers on different brands could be seen on different occasions such as Pakistan Day, Mothers Day, Fathers Day, Independence Day, Summer Sale, etc. The sale season even continued before and after Eid-ul-Fitr and Eid-ul-Azha—two of the biggest sale seasons of the country.
High Inflation Rate
High inflation has pushed a significant section of customers to adopt austerity measures in their households, who are now spending less for their day-to-day essentials such as foods, medicines, utility bills, transportation, etc. On the other hand, the revised income tax on the salaried class has reduced their disposable income.
“This is our third sale event this year,” said a sales manager at a Diner outlet situated in Millennium Mall, Karachi.
If sales continue to stay low, we have to offer discounts every other day to attract customers, forcing us to sell our products at smaller margins.
Most of the brands put their products at up to 70 percent sales. Some of the struggling brands offered a flat 50 percent discount on most of their products. Some of these major brands are Hush Puppies, Urban Sole, Bata, Stylo, Diner, Outfitter, Gul Ahmed, Levis, Kids and Kids, etc.
This way, these brands not only offload their older items but they also attract new customers to their outlets.
Following this trend, the emerging or tier two brands of clothes have also hopped on the bandwagon to sell off their products at discounted prices. Brands selling various household articles, cosmetic products, toiletries, kids products, etc. have held multiple discount sales this year.
High-Interest Rates on Credit Cards
Besides high inflation, one of the factors for lower clothes and footwear sales is high interest rates on credit cards.
In the past one and half year, interest rates have recorded an astronomical hike of double-digits in tandem with staggering high policy rates, which saw a surge of 7.5 percent in this period and pushed up the interest rates on credit cards.
Some banks introduced discount offers on using credit cards but these offers have had limited success.
Recent Expansion in Retail Outlets
Various brands have expanded their network of retail outlets in big cities at shopping centers such as Packages Mall, Emporium Mall, Lucky One, Hyperstar, etc. Some of the brands such as Khaadi, Levis, Hush Puppies also increased their franchises to widen their sales network for dealing with the increasing demand of customers and tough competition.
These brands gradually received a better response from the customers with better purchasing power and the availability of financing options from banks, but the graph of sales became gradually stagnant from 2018 and things have been getting tougher in the last few months.
Inflation and interest rates are not the only two factors affecting their sales. Competition among renowned international brands is also a key factor, which will not only persist but immensely increase in the local market with the expansion of online shopping channels. Franchise networks like these give more options to customers to choose from.
Sales managers are of the view that sales targets are elusive at most of the outlets, though heavy discounts help maintain the supply and demand at the cost of reduced profit margins. However, adding insult to injury, the cost of operations has picked up due to the high cost of utilities.
In time, a segment of customers will enjoy their shopping experience, particularly the ones who can afford them and have savings. The middle-income customers will also get to try out international brands thanks to high discounts.