Why big festive discounts do not really mean big savings

Flipkart’s Big Billion Days and Amazon’s Great Indian Sale will begin on 10 October.

You would think that with the buying power of Indian shoppers growing at a steady clip and online shopping making things that much easier, buying has become a year-round thing. But the truth is, the festive season makes people loosen the purse strings and e-commerce companies like Flipkart and Amazon only feed into this shopping frenzy. This year, Flipkart has roped in the who’s who of Bollywood to advertise its Big Billion Day sale, which begins on 10 October, while Amazon is focusing on its wide range of offers and payment options to make shopping easier for its Great Indian Sale, which also starts on the same day.

“Our sale events offer big savings on big brands. Our programs such as Amazon Pay EMI, no-cost EMI on debit and credit cards and exchange will make shopping on Amazon.in even more valuable,” said an Amazon India spokesperson.

We decode the oft-repeated festive sale spiel used by both retailers and online shopping portals and tell you how to navigate it.

Slashed prices

Sumit Tiwari, a Bengaluru-based IT professional, thought he had spotted a great deal when he saw a set of three watches, whose original price was shown as ₹ 5,000, being sold at ₹ 600 on an e-commerce portal’s festive sale. “They looked great in the images, and I thought this was such a good deal and I could gift them. But what I received looked like you could buy it at a roadside stall for ₹ 150,” he said.

Bringing home substandard products in the name of discounts is a common risk you need to guard against; also remember, discounts are usually available on older inventory, which means the latest gadget may still be out of reach.

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Then, of course, you can never know if the discount is for real. “When retailers offer a sale, they also show the original price and the percentage of savings. But in reality the item could be offered at a highly discounted price throughout the year. Consumers have no reference point, so looking at the original price may feel that they have a lot of transaction utility at scoring a deal on such an expensive item, making them more likely to buy it,” said Brishti Guha, associate professor of economics, Jawaharlal Nehru University.

ALSO READ | A guide on global online shopping for Indian buyers

Flash sales

Flash sales or “deal of the day” offers are timed discounts that are only available for a short window of time. Even as you browse or click on the item, a clock will be counting down the minutes till the offer expires. This creates a sense of urgency, since the prices are significantly lower for these sales.

Sanoob Sidiq (27), a finance professional, has bought things that he didn’t need at all during festive sales. Photo: Nithin R.K./Mint

Sanoob Sidiq (27), a finance professional, has bought things that he didn’t need at all during festive sales. Photo: Nithin R.K./Mint

It’s easy to succumb to the temptation, even for seasoned online shoppers. “During sales, there have been situations where I ended up buying things I didn’t need at all. Just because the product is being offered at a throwaway price, I get a feeling that it will go out of stock and that is the biggest impetus to click ‘add to cart’ as fast as possible,” said Kochi-based Sanoob Sidiq, 27, a finance professional.

Also, usually these discounts come with dynamic pricing; so by the time you hit “buy”, the price could change.

“Some retailers will emphasize the scarcity of the items on sale. People interpret this in terms of more people wanting the item. This makes it more desirable, prompting people to snap up the limited stocks themselves,” said Guha.

Cashbacks

Cashbacks have become one of the most popular baits to get your attention. Most online retailers offer cashbacks on purchases now. A cashback simply means a part of your bill is returned to you, but this doesn’t always mean a cash discount. What you may get instead is store credit, which you can use only to buy things from the same retailer later.

Don’t give in to impulse. Plan your purchase, put money aside in the preceding months, and ask yourself if you really need it one last time before you hit the ‘buy’ button– Amol Joshi, founder, PlanRupee Investment Services

Then comes the fine-print: typically cashback offers kick in only beyond a spending limit and the amount is usually capped. So while the banner on a popular e-commerce website will promise a 5% cashback, you may be surprised to know later that it was available only if you spent over ₹ 3,000. Similarly, for someone who planned to purchase something worth ₹ 25,000, might get disappointed to know that she will not get 5% of her spending, but just ₹ 1,000, which is the upper limit of the cashback.

Although rare genuine cashbacks may exist, you should still go through the fine print carefully.

Buy or subscribe to win

Online retailers believe in hooking buyers early, so even before the discounts kick off, they prepare you—one way to reel people in is by offering membership or pre-loaded wallets to win something. Whether the prize is a cashback, deeper discounts, free delivery or a gift, it’s a way to ensure that the customer returns to buy more or check the offer later.

“The customer thinks that to take advantage of the membership fee that they have already paid, they need to buy more from this online retailer rather than from its competitors, or rather than not buying anything at all,” said Guha. This sort of “spend to earn” offer doesn’t usually translate into profits for the buyer. All it does is ensure customer loyalty for the seller.

The most important thing to consider is: will you be using the stuff you buy even once during the year before the next bumper sale? Do the introspection before deciding to buy– Shilpi Johri, financial planner and author

No cost EMIs

If there is one way to artificially increase your purchasing power, it’s through the EMI deals. Both Amazon and Flipkart are pegging their massive festive campaigns around the idea of shopping without worrying about your budget and the “no-cost EMI” option facilitates that. The no-cost EMI option converts your purchases into monthly instalments and the interest that’s levied by the bank is ploughed back in the form of a discount.

But be very careful, because EMIs can be structured in many ways. Some can involve a processing fee or an interest charge, or the product may not be at a discount at all. Even if none of this applies, and you find a great bargain on EMI, tread carefully, because EMIs can give you a sense of affordability that can easily lead to overspending.

Also read | The price you pay for a ‘no­ cost EMI’

“No cost EMIs are being offered by e-tailers for high value or involvement purchases. It is a channel being adopted by online retailers to promote digital payments, wherein the interest cost is either absorbed by the banks, or in the retailer margins or into the product cost,” said Harsha Razdan, partner, head – consumer markets & internet business, KPMG India.

Gayatri Jayaraman, author of Who me, poor?, said whether or not EMIs are a good idea depends on the individual using it. “Whether or not they can afford it, young people today have very easy lines of credit available to them, which makes them participate in aspirational purchases. If they know how to balance their money, they can get away with it. It depends on the individual,” she said.

The festive season has a lot to offer in the way of sales and discounts, but be sure to arm yourself with a shopping list and good judgement to avoid going over your budget or buying things you don’t need.

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