While discounts can help save money if you are organised and careful, there is a high risk of making mistakes such as spending more than you planned and getting bought into deals for things that you don’t really need. We spoke to experts to find out what buyers should be wary of during festive sales.
Don’t fall for flashy discounts: Dilshad Billimoria, director at Dilzer Consultants
When something is on discount, a buyer must always remember the term caveat emptor—let the buyer beware. Prices of goods are normally inflated. Due to the festive season or other vendors and manufacturers providing discounts, the retail outlet may show a “Flash Discount Sale” sign at the entrance. This could be misleading. Actually, the price of the product is inflated to cover their profit margin and then a discount on the same is provided.
For instance, a retailer needs to ensure that an item has to sell for a maximum retail price of ₹ 1,11,000 (this includes his profit margins on pricing). Now suppose the retailer puts that flashy 10% discount sale outside his shop and shows a value of ₹ 1,24,000 and if the value comes to ₹ 1,11,600 after discount; the retailer is still making his profit as the price of ₹ 1,11,600 is met for him.
Customers often fall prey to flashy discount sales. They often end up buying things of poor quality (on discount) or things in the name of festivals and thus an occasion to spend. Very often people buy things they do not need.
Another behavioural ploy is the Bata pricing—using the ₹ 999 or ₹ 499 label. This brings an inherent comfort to the mind of the customer that he has not breached the next band of paying for a product and has been given better pricing; so there is internal justification to buy the product.
Stick to your buying list: Arun Ramamurthy, director at Credit Sudhaar
Deals and discounts are a common phenomenon during the festive season. The marketers come up with innovative offers to convert prospective consumers into actual buyers. Advertisements, discounts and promotions do have an impact on buying decisions. The best way to deal with such temptation is to create a buying list according to need and sticking to it. We have often seen people overspending during big sales. Owing to the availability of multiple credit cards and instant loans, a large number of people go far beyond buying what they actually intended to buy.
The promotional pricing leads to making people over-spend. Going beyond what one can afford is a gross financial error. Just like overeating may lead to health issues, if not managed properly, overspending can severely impact one’s finances and credit profile. Overspending could happen by utilising the credit limit on cards or taking a loan. In both cases, the individual will have to pay interest and the monthly repayment would impact the cash availability. Also, higher credit utilisation does impact the credit score, limiting one’s chance of having access to seamless availability of loans in the future, when they might actually need it.
Plan your spends in advance: Biju Dominic, CEO at Final Mile Consulting
The human mind loves rewards, so when it comes in the form of discounts during the festive season, people get excited and line up for it. Most people will buy into a product if there is a discount. It is because human beings are not rational.
Add to this the abysmal level of financial literacy and the reward system in one’s brain is ready to get hyper active with the words like free, discounts and so on.
In fact, this is what leads to splurging as people end up buying even the things they may not need, because in their mind they are buying things at a discount and, therefore, making a good deal. Over decades, Diwali shopping has become a strong mental account for most Indians. Companies use festive season discounts to encash this mental account.
The trend is here to stay, but as customers two things can hold you in good stead. One is to earmark the budget in advance and not overstep it no matter the temptation; this will force you to prioritise. The second is to plan in advance the things you will buy. This helps because when you plan ahead, you know exactly what you want to buy and are less likely to give into fancy advertisements.
Don’t get driven by best deals: Baqar Naqvi, director (consumer products and retail) at Wazir Advisors
Mega sales have become a yearly event and many consumers postpone purchases to buy during these times. Also, there are some genuinely good discounts, which one may not get otherwise. Thus, purchasing during these events can potentially help consumers save money. However, when shopping during these mega sales, the “theory of gamification” sets in and finding the best deals becomes the “success or the end game” for the shopper. The entire mindset changes from buying what he needs to winning the competition and achieving the best deal. Thus most people end up buying more things that many a times remain unused. This is further catalysed by the availability of easy credit, through credit cards that offer EMIs.
The equation of convenient home shopping, large product range, exciting discounts, easy credit and the return option is fuelling consumption like never before. Consumers don’t want to miss the deal. Retailers are able to sell products that consumers may not have otherwise bought, creating new demand as well as higher replacement demand, accelerating the replacement frequency of many products. Consumers are becoming deal loyalists and are ready to compromise on brands and features for a good bargain. Brands that don’t a give discount, lose out. Brands that do, earn a topline, but bottomline is missing.