Shopping is a brand new science

When is a bargain a bargain? The National looks at four different companies in the retail sector to understand how they price their brands

Tight margins and even tighter control on prices by manufacturers make sales difficult for multi-branded electronics stores. Pawan Singh / The National

When is a bargain really a bargain? The National looks at four different companies to understand how they price their brands. With shoppers especially determined to seek out value for money in the current climate, discounts have a crucial role to play.

Easy does it for discerning customers

Subtlety is paramount for a high-end fashion retailer during the sales season.

Plaster the words "bargain", "knock-down" and "promotion" all over your shop front and that air of exclusivity could be lost in an instant, damaging the brand in the long term.

But designer boutiques also need to manage their stock and attract new customers, so a sale is never out of the question.

"Our sale is usually promoted in a more subtle way and is not splashed all over and in your face," says Ziad Matta, the chief executive of Boutique 1 Group, the Dubai retailer that is the franchisee for a number of brands in the UAE, including Mulberry and Chloe.

It also has own-branded stores that recently signed deals with both Lily Allen and Claudia Schiffer to bring their fashion collections to the Emirates.

"If you're at the premium end of the market, brands will be more discreet with their sale. They do not want to encourage all and sundry into the stores," says Karl McKeever, the brand director at the UK retail consultancy Visual Thinking. "If it is mid-season sales, then they will never have signs at the door, it will be inside."

The amount that Boutique 1 discounts is often dictated by the individual designer brands it sells in its stores. The timing of promotions can differ from standard sales in Dubai because Boutique 1 takes its cue from luxury goods going on sale in international fashion cities such as London and Paris.

"The percentages of discount generally start lower and then further reductions are applied as the sale continues," Mr Matta says. "So it may start at 30 per cent, for example, and go up to 50 per cent."

With some brands, there is no sale tag attached.

Customers are either told of any reductions while they are in the store by staff, or they might be contacted via phone or e-mail.

The way in which the sale is conducted adds to the air of exclusivity.

A few little extras to help clinch the sale

Tight margins and even tighter control on prices by manufacturers make sales difficult for multi-branded electronics stores.

"With margins being as slim as they are in the consumer electronics industry, we don't typically follow a fixed formula for discounting like they would in fashion," explains Ashish Panjabi, the chief operating officer at Jacky's.

Discounting by huge percentages is not really an option in electronics because the retailer would end up with little, if anything, on its bottom line.

"We do not have the luxury of being able to discount hugely because we never start with 100 per cent margins," Mr Panjabi says. Margins are often much less than 10 per cent for electronics stores, so marketing managers need to come up with innovative ways to attract bargain-hunters.

Mr Panjabi's task has become increasingly difficult because there are now more promotional periods in the UAE shopping calendar.

"There used to be three to four periods before the recession, but there were at least eight last year," he says. "You cannot afford to put a full-page advert in the newspaper at a time of each promotion. We have had to look at other ways to use that money, be it in-store activity, e-mail competitions and social media."

To offer bargains, Jacky's tries to bundle deals during sales periods, throwing in complimentary accessories or offering small discounts.

But these promotions must be brand-supported because the retailer works with various household names.

Brands often decide what will be bundled in a deal each time there is a promotional period, while others agree at the start of the year which products can be added as inexpensive sales accessories.

"It's on a brand-by-brand basis on how you negotiate about sales," Mr Panjabi says. "If a product hasn't done well commercially, then the brand may support us in discounting products and moving them out."

Special offers that demand close attention

Sales periods are all about making sure an increase in revenue translates to an increase in profit.

That is one of the basic lessons of retailing, according to Fred Watts, the operations director at Al Maya Group, which runs supermarkets and hypermarkets throughout the UAE. "You have to get the top line up and make sure that runs through to the bottom," he says. "If you're measuring performance [during a sales period] on your top line but it's not delivering to your bottom line, that's dumb. That's dumb retailing."

For supermarkets, Mr Watts says a number of elements might dictate what and when items are put on sale during a promotional period, including the shelf life of goods, oversupply in the market and level of stock.

"There are many factors that do it," Mr Watts says. "The supplier might come through and say: 'I've got too many of these and I'll twin-pack them for you at a discount price.' That then becomes an offer you can pass on to your customers."

Al Maya has opened nine convenience supermarkets across the Emirates in the past three years and has 36 supermarkets in total, with a further four in Oman.

Often, customer demand and an appetite for certain products might be only a small factor in determining what goes on sale in the supermarket. New products that a brand wants to market or discontinued products that need shifting are popular sale items. Ramadan and the hot summers in the UAE also dictate which products go on sale.

"It's no use trying to sell barbecue briquettes in the height of summer as a special, just as an example," Mr Watts says.

From a shopper's perspective, there are people who love to snap up bargains and stock up their shelves at home.

"It's a psychological thing that works." Mr Watts says. "It's not me that's driving it. As soon as you put buy-one-get-one-free everybody thinks they're getting a bargain and your sales will go up. It's one of those mental things, everybody loves to get something free or get it at a cheaper rate."

Mr McKeever at Visual Thinking believes it is important that stores grab the attention of impulse buyers during promotional seasons.

"A 10 per cent discount won't attract the impulse buyers," he says. "But 30 per cent off compared to what it originally cost, the value for money then increases significantly."

Multiple purchases the smart way to save

Giordano's reach is wide throughout the region, and this is one of the reasons the retailer rarely offers discounts.

This is an unusual strategy for a fashion chain, particularly in the UAE, which has several promotional periods each year, such as Dubai Shopping Festival and Dubai Summer Surprises.

"If you manage your inventory well, why should you have to go on sale? We prefer customers to buy now," says Ishwar Chugani, the executive director for Giordano in the region.

The brand, originating in Hong Kong and with more than 2,000 stores worldwide, makes 75 per cent of its sales from items such as plain T-shirts, polo shirts, crew neck shirts, jeans and trousers. It is fashion for the boy or girl next door.

"We want our customers to know that the price won't halve tomorrow," Mr Chugani says.

"Our promotions are all in bundles, like maybe two-for-one. We never discount our core products."

Instead of a sale, Giordano uses its stores to transfer products and manage inventories.

Only in rare circumstances do low-selling items become discounted and these are sent to outlet malls rather than sold in Giordano's normal stores.

Unlike many brands in the region, Giordano is not a franchise but works as a partnership, so it has more flexibility in moving stock around the world.

The brand's clothes do not have grand designs embroidered on them but have simple patterns such as stripes in different colours.

The company's strategy is to offer premium quality clothes, at a fair price, with many products 100 per cent cotton or linen.

"We are more everyday fashion, and from time to time, if we have to clear merchandise, we will do it, but only at an outlet mall," said Mr Chugani.