Ethiopia: Discount Dilemma
ANALYSIS
On the morning of Wednesday, September 4, 2013, Muluneh Jira, 39, was busy arranging his rented three-by-three boutique, around Hayahulet Mazoria, a few metres away from theGolagulTower.
Muluneh came to this area from Merkato, a year ago, to operate as a clothes wholesaler. Since he moved, his business has been going great. However, due to the road and railway construction that started four months ago, his customer base is beginning to drain.
"Before the construction started, on average 10 customers bought something from my boutique a day," Muluneh told Fortune, while observing the street thoughtfully. "This is not the situation anymore."
Alarmed by the decline of his business and in order to grab the marketing opportunity created by the coming holyday, Muluneh devised a method to attract more customers.
"A week ago, I introduced a 20-30pc sales discount on all the items found in my boutique", said Muluneh. "The sale will last until I run out of stock, maybe by the (Ethiopian) New Year or a few days after. I cannot say for sure."
For Muluneh, who has been in the same business for 10 years now, discount sales, if introduced in a timely and attractive manner, helps to make more money.
After 30 minutes of opening his boutique, Muluneh's luck turned, when Hana Belachew, a student inWelloUniversity, and her auntie Zuriashwork Gesesse showed up in his boutique.
Wishing to purchase a dress for Hana, Zuriashwork planned on spending close to 300Br.However, the price tag on the dress Hana preferred were 50 Br more than that. The price tag on the dress, however, clearly showed a 25pc discount from its original price.
This made Zuriashwork, who lives in the area, question the authenticity of the discount posted on the windows outside.
In the past, it was rare to find boutiques with sticker prices, but now it is becoming more common, especially during holyday seasons. A discount is a reduction in the standard price of a particular product or service. Discounts have an old and quite strategic place in market history.
The use of price discounting as a marketing instrument started during the period between the 1950s and the late 1980s. At the time, discount stores were becoming more popular than the average supermarket or department store in theUnited States.
There were hundreds of discount stores in operation, with their most successful period occurring during the mid-1960s in theUS. Discount store chains around at this time included - Kmart,Amesand E. J. Korvette.
Walmart, Kmart and Target all opened their first stores in 1962. Other retail companies branched out into the discount store business around that time also, as adjuncts to their initial store concepts.
In theUnited States, discount stores had 42pc of the overall retail market share in 1987. In 2010, this had leapt up to 87pc. Many of the major discounters now operate "supercentres", unlike the trend inEthiopia, which attaches a full-service grocery store onto the traditional format.
Unlike in developed countries, discounts are commonly being misconceived. This was the case with Hana and Zuriashwork.
"I toured around a few weeks ago and found" the same dress with the same price, Zuriashwork told Fortune. The boutique, according to her, doesn't offer discounted prices.
"How can I trust the sellers knowing this fact?" Zuriashwork commented.
Recently, the introduction of discounts on sales seems to be losing its valour and level of trust, according to customers Fortune interviewed last week. Many say that they were tricked into buying items for expensive prices in the name of discount.
"I visited a shop in the Merkato area and bought a pair of jeans for 500 Br, at what was announced at the time as a discount price," commented Geremew Kassu, a consumer, who was indignant about the situation. "But, when I showed it to two friends of mine, who knew more about prices, I realised that the shop owner and her assistant had actually cheated me."
The same goes for Marta Eticha, a customer who was touring shops in the Kirkos District. She recalled a similar incident she had recently with a sweater she bought for what she thought was a discount price. But, it wasn't.
"The seller simply removed the brand tag, pasted another one on it and sold the item at an even higher price than it should have been," Marta told Fortune.
That's just a tactic they use to attract customers, exclaims Tesfatsion Assefa, a buyer who was far from being impressed by a 40pc discount, said to be introduced during this holiday season on the shoes he bought from a shop in Merkato.
Semira Yusuf, a shop owner in Kirkos District, says sellers apply only marginal price discounts, but it helps them in two ways.
The first benefit of introducing price discount, according to Semira, is to get rid of old stock, which has stayed too long.
"By selling them at lower prices, a seller can have space for newer ones," she said.
The other benefit is that it avoids negotiations between the seller and the buyer, which saves a lot of time and energy on both sides, according to Semira.
For Mikias Tedla, a marketing expert, the concept of price discount is not correctly understood by sellers and buyers inEthiopia.
First and foremost, discounts should be used to show appreciation, not to retain or increase customers, says the expert.
"Discounts should be one of the many ways to express appreciation of the clients' loyalty and cooperation," the expert claimed.
Announcing a general discount plan can also be risky, according to the expert. Once done, bouncing back to the previous prices can be difficult.
Most of the shop owners Fortune interviewed complained that declining sales and the reduced number of consumers forces them to introduce discounts.
The old trend of shops opening on the main streets of Merkato, Hayahulet, Bole and Piassa is over, according to Shimellis Kebede, whose shop is located in Hayahulet. Rather, there is an expansion of shops and stores near to villages and residential quarters.
Less and less people flock to main spots or shops located in well known areas, because buyers prefer to avoid the hustle and bustle of Addis Abeba's hectic transport system, explains Shimellis.
Muluneh argued that he would have no reason to put items up for discount, without actually slashing any amount off the original price.
"They just don't believe me and maybe for a good reason," he admits. "There are several shop owners who put old items up for discount for no apparent reason, other than to get rid of their stock. Also, it is true, some discount sales are not genuine," Muluneh told Fortune.
Yet another indication of the declining state of discount sales is the few, if any, shops offering them in the areas Fortune visited. Almost none of the shops in the Piassa area had any discount offerings. Most in the Merkato and Hayahulet area told Fortune that they may introduce the sales when the New Year draws nearer. Most of them don't believe they will benefit greatly from introducing price discounts, however.
This is because sellers are using the wrong strategy, says the marketing expert.
"Discounts are effective only once the seller has a stable foundation of clients," the expert suggested.
Offering discounts from the start might sound like a good way to attract customers, but it could leave the sellers short in the balance sheet if they are unable to acquire enough work, according to the expert.
In addition, lowering the value of one's own items may give a different message to the customer, which is cheating, says the marketing expert.
This impression seems to be one of the reasons for Zuriashwork spending no less than half an hour negotiating prices with Muluneh.
Finally Zuriashwork and Hana decided to go to other boutiques around Hayahulet, in search of the same item at a cheaper price.
"I know I can find the same item at cheaper prices if I spend an extra hour," Zuriashwork told Fortune on her way out of Muluneh's boutique.
Comments
Post a Comment