Heavy advertising by e-tailers hits physical retailers' sales growth

Online retailers spent Rs 300 cr on advertising in December quarter, almost ten times higher than the physical retailers

Heavy advertising by e-commerce portals is affecting sales of bricks-and-mortar fashion retailers.

Online retailers spent an estimated Rs 300 crore on advertising in the December quarter, almost 10 times more than all physical retailers put together.

Department store chain Shoppers Stop saw 0.8 per cent growth in its like-to-like sales in the December quarter, one of the lowest rates in many quarters. In the previous quarter, its like-to-like sales grew 11 per cent. Like-to-like sales are from stores existing in business for a year or more.

“Huge advertising by e-commerce companies was a big element of disruption during the quarter. Puja shifting to the previous quarter also affected growth by three-four per cent,” said Govind Shrikhande, managing director of Shoppers Stop.

Future Lifestyle Fashions, the fashion company of the Future Group, posted same-store sales growth of 4.3 per cent in its retail segment and 5.4 per cent for department store Central in the December quarter.

It posted same-store sales growth of 10.6 per cent in the retail segment and 11.6 per cent in Central in the previous quarter.

“Same-stores sales growth is affected. But we cannot say whether it is due to the weak festive season or the heavy advertising by e-commerce portals,” said an executive within the group. However, he blamed e-tailers for disruptive pricing.

In a recent report, Edelweiss analysts Abneesh Roy, Pooja Lath and Tanmay Sharma said aggressive discounting by online retailers was likely to continue. “Online players are expected to be aggressive in discounting since they have strong private-equity funding. Online retailers caused more disruption in the menswear and accessories segments,” they said.

However, according to a senior executive at the Tata-owned Trent, the retailer is not much affected by online discounts. "Our department stores mostly sell our brands, which are not available online. Besides, if you sell the same product online as well as offline, shoppers buy online due to discounts," said the executive.
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• Rs 300 cr Online retailers’ estimated spend on advertising in the December quarter, almost 10 times more than all physical retailers put together
• In a report, Edelweiss said aggressive discounting by online retailers was likely to continue