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| Retailers plan to step up discounts as sales slow |
| Raghavendra Kamath & Neeraj Thakur / Mumbai/New Delhi Jan 20, 2009, 00:37 IST |
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Spencer’s, Vishal Retail, Lifestyle Group’s Max Retail and other Indian retailers admit that sales at stores are slowing even as they were planning to step up discounts to attract customers.
The disclosure comes within days after Kishore Biyani-owned Pantaloon Retail said that same store sales in December dropped for the first time in four years. Analysts were more surprised at the drop in value retailing, which indicated that value retailers were not benefiting from downtrading.
Retailers earn about 12 per cent of their revenue from sales in December and as much as 35 per cent of revenue during the three-month festival period starting October, according to industry estimates.
Vishal Retail, Spencer’s and other retailers admitted that December sales could have been flat or even a drop as they failed to gain from the downtrading. ‘Downtrading’ refers to consumer behaviour of settling for buying lesser value product, or lesser known brands, especially in an economic slowdown.
“Our same store growth has certainly been hit ‘’, said Ambeek Khemka, president Vishal Retail, declining to give details.
Spencer retail’s same store growth has been flat this year. “We have been giving discount offers on our FMCG and other products to not let our same store growth fall,” said Samar Shekhawat, vice president, Spencer Retail.
Retailers in western India saw their sales growth tapering off after stocksfell sharply and terrorist attacks rocked cities such as Mumbai, Jaipur and Ahmedabad, prompting shoppers to stay indoors.
“Same store growth in our Mumbai and Ahmedabad stores during December was zero. We barely achieved last year’s sales numbers. It may have to do with recent terror strikes and stock market crash,’’ said Vasanth Kumar, Executive Director, Max Retail, a unit of Dubai-based Lifestyle group.
“After Diwali, the market has not improved but is seeing a steady decline. We are in the middle of economic slowdown and retail cannot remain insulated from that,’’ said a senior official from Aditya Birla Retail, who wanted anonymity.
Pantaloon Retail, the country’s largest listed retailer, saw its December month same-store growth dip by over 3.5 per cent in value segment, nearly 14 per cent in lifestyle retailing and 10 per cent in home retailing, compared to same month in 2007.
Retailers on their part are planning to step up discounts to boost sales even at the cost of losing margin.
Delhi-based retailer Vishal, which recently admitted to the possibility of missing its annual revenue target, plans to offer a flat 7 per cent discount on the FMCG products.
“We have decided to give 7 per cent flat discount on our FMCG products. We will look for volumes to survive in this downturn,’’ said Khemka.
Kishore Biyani’s Pantaloon Retail on January 11 ended a four-week shopping festival to boost sales. Analysts termed the offer as store clearance and effort to boost sales.
Commenting on the failure of value retailers and others to gain from slowdown experts attributed intense price competition and lack of differentiation among the key reasons for the development.
“When the country’s GDP is growing at 6 to 7 per cent, at least we should have seen a 14 to 15 per cent same store growth. The contraction may be due to competition. Everybody is opening in the same city and loosing out on opportunities in other places,’’ said Arvind Singhal, chairman, Technopak Advisors.
Another possibility could be that customers may have downtraded within the value retail format giving boost to other categories of product. It also indicates that customers are curbing consumption.
“What retailers need to do is differentiate themselves,’’ said Anand Raghuraman, partner & director, The Boston Consulting Group. Most retailers today rely on price and proximity for sale.
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