The biggest attraction of shopping online for grocery or any other categories such as apparels or mobile phones for most consumers is the discounts. However, discounting on online grocery platforms during the coronavirus lockdown has dropped significantly with limited or no consumer promotions by both brands and grocery platforms, says Rishav Jain, Senior Director and Consumer & Retail Sector Lead, Alvarez and Marsal. "Reduced availability of essential food products is the key reason for reduction in discounts. In most cases, less than 45 days of inventory throughout the chain at the start of COVID-19, less than 50 per cent production levels in the last 30-40 days and supply chain issues have led to the reduction in availability."
All the online grocery platforms are selling at MRP, agrees Arvind Mediratta, CEO, Metro Cash & Carry. "Everybody is trying to build their bottomline. With non-food sales completely going down, most of them are bleeding. Even trade promotions such as buy-one-get-one-free offers have stopped." A lot of platforms such as Swiggy and Zomato which have recently forayed into grocery delivery, says retail expert Govind Shrikhande, are bundling products in order to increase the ticket size. "Grocery has become a volume delivery game."
In fact, most experts don't expect discounting to go back to the earlier levels. "Convenience will be the game-changer. Online grocery retailers will start to work on full price. Moreover, the fear of hygiene and safety is so high now that consumers also won't mind paying full price while shopping online," says Shrikhande.
Pre-COVID-19, online grocery retailers were operating at 12-15 per cent average discount levels and Jain of Alvarez and Marsal doesn't expect discounting of essentials to return to its usual level over the next three-six months. Albinder Dhindsa, Co-Founder, Grofers, agrees that discounts have been lower than what those were earlier. "Discounts are lower as supplies are low. Moreover, supply chain costs are also up by 20-25 per cent. However, we continue to offer honest pricing, we are still selling below MRP."
Arvind Singhal, Chairman of retail consultancy, Technopak, doesn't agree that discounting would go away from online platforms anytime soon. "Discounting is part of life as far as e-commerce is concerned. If they reduce discounts, they will lose market share. Also, I don't expect dramatic growth in online grocery shopping unless they offer the kind of assortment and value that will push consumers to shop online at full price." Singhal expects all the modern retail stores that are sitting on huge inventory to offer deep discounts as soon as the lockdown ends in order to clear their inventory. "If brick-and-mortar stores offer discounts, why will the online grocers not discount?" he argues.
"Discounts will be back to usual level once the situation returns to normal," adds Dhindsa of Grofers.
Apparel retailers such as House Of Anita Dongre are hoping to sell full price and even launch their new collection online (most apparel retailers sell their earlier season merchandise at a discounted price online). However, experts believe that the apparel sector will see extended periods of sale at least for the next 1-2 quarters. "Most of the retailers have high inventory to clear. With limited throughput due to relatively slower ramp-up, the inventory might take longer than usual to liquidate. There will be extended sale periods in both offline and online channel," says Jain of Alvarez and Marsal.
Kannan Sitaram, Venture Partner, Fireside Ventures, agrees that discounting will not stop. "Brands will try to create ways of meeting their revenue targets. If I was a category manager of a brand, my annual budgets would start from April. While the revenue loss in April and May is understandable, from June onwards, I will be expected to cover up the revenue lost in the previous months. So, there will be more fighting for revenue. Sales and events around categories will multiply," he explains.Vaccine could be ready in 12 months, says Bill Gates; pledges 'total attention' to coronavirus