It rained patakhas and discounts!

The festival of Diwali not only lights up homes with lamps but also illuminates retailers’ cash registers, with one-month sales that rake in more revenues than the remaining months!

This festival season, however, was witness to a tug-of-war between the offline and the online marketers, with the former doling out discounts and offers to happy customers like never before, even at the cost of hitting their bottom line. Is this changing the customer purchase sentiment in a way that will never return to normal?

When Diwali is around the corner, there is typically much gusto in the air — amid eager customers and even more excited retailers. However, this festival season, we were witness to a completely altered scenario. In contrast to brick-and-mortar stores increasing their inventories ahead of the festival season, and selling products at a premium, the buzz of discount, even on new products, was high all across. But how did this turnaround come about, especially during this home-grown Black Friday?

The chain reaction of offering discounts has been set off by e-commerce players, who went the whole nine yards this festival season. Outdoor advertisements and TV commercials promoting Flipkart’s Big Billion sale on October 6 were a common sight. At the same time, rivals Snapdeal and Amazon were closely behind, offering their own slew of discounts.

The shrinking bottom line Festival or not, massive sales are sure to get the cash registers ringing. A clear example is that of Flipkart, where, amidst a flurry of complaints of marking up prices to the sale date and technological glitches comprising crashing web pages, error messages and products getting sold out minutes into the sale, the e-tailer managed to rack up $100 million in sales in just 10 hours. Snapdeal claims to have raked in similar numbers going at the rate of earning ₹1 crore a minute.

Online marketplaces are currently focusing on grabbing the biggest market share amidst severe competition. They are heavily investing capital even if they have to take a hit on their margins. That is why, despite recording sales figures that run into hundreds of crores, Flipkart, Snapdeal and Amazon are expected to clock in sales of $4 billion in 2014 — e-commerce companies have still not broken even. But online players are not worried. Backing their agenda is the funding being poured in by venture capitalists and PE funds. According to Indian Private Equity and Venture Capital Association, PE investment in the country in 2014 will likely touch $12 billion, with e-commerce expected to attract a huge chunk. With increasing Internet penetration, especially through the skyrocketing number of smartphone users, expected to touch 500 million by 2020, according to Ericsson, investors sense the potential in the sector and are willing to invest.

This, however, is reason enough to impact traditional brick-and-mortar shops, which are, expectedly, not too happy. While the festival season of Diwali is one big opportunity for offline players to offer new, undiscounted collections, e-commerce players are offering merchandise at up to 80 per cent discount during festivals. On other days, their websites may carry regular deals, yet, it almost makes the concept of seasonal offline sales passé.

Compelled to offer discounts to boost sales, brick-and-mortar stores have also jumped on to the sales bandwagon. While earlier, customers were only offered discounts during stock clearances in the seasonal sales every six months, with the advent of online stores, there’s always a sale going on. This has sparked off a never-seen-before trend — of discount becoming the new normal. It has also had a reverberating impact on the offline retailers, who have to work with much lower margins. Earlier, the festive season was when offline retailers would witness higher sales. But now they are being forced to follow suit and bring in discounts in their highest selling months.

The treasure seekers With jaw-dropping discounts and a dizzying array of products across categories just a click away, the customer-buying sentiment has moved from need-based to deal-based, where customers flock in anywhere where huge discounts are being doled out. In this war between online and offline, customers are the ultimate beneficiaries. Offline players can no longer overcharge customers for products if they are available at discounted rates online, especially during such frequent intervals in the year. By comparing sellers online, the customer now has easy access to the best deal, without having to actually look for one.

However, online sales currently capture 10 per cent of the complete market share, which is expected to increase to 15 per cent by the year 2015, with increasing mobile and internet penetration across the country.

The rest, a massive 85 to 90 per cent market share, still remains with the offline retailers. The companies will have to walk the tightrope between offline and online retailers to not just balance top lines and bottom lines but also the consumer’s expectations.

(Anisha Motwani is Director and CMO, Max Life Insurance)

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