Saturday, April 18, 2009

Is The Retail Romance Over?

Touted as the next big thing after IT and telecom, retail in India is facing trouble moving ahead. Malls which had sprung up all over urban India in anticipation of consumption boom are combating for survival. During the last Valentine Weekend, Select City Walk Mall in the posh south Delhi area was all bejeweled with white and red heart shaped balloons and adorn, because it is that time of the year where everyone from card shop owner to the jewellery retailer solicits attention for their products with a volley of offers. This year, the retailers were doubly keen to make the most of the season and despite lucrative offers, there were not many takers for their offerings. Couple contests, games and massive discounts were not attracting sufficient footfalls. Worried retailers have been extending “ end of season sales” for a long time so as to meet their sales target for the last financial year. In Mumbai’s western suburb Malad, which houses the popular InOrbit Mall, by and far the largest mall in terms of space occupancy, also says the same story.

Currently the eighth largest retail market in the world in dollar terms, India too does not seem to be insulated against the adverse impact of global meltdown. In fact, the year 2008, has not been a significant growth story for Indian retail. Marginal increase in sales coupled with escalating cost pressures has resulted in shrinking bottom lines and large number of retailers shutting shops and slamming the brakes on further expansions. Discount store chain Subhiksha Trading Services Ltd has shuttered its 1600 stores and laid off most of its workers. A Fitch report on the outlook for the retail industry in 2009 said that due to factors such as economic slowdown, high interest rates and the liquidity crunch and the high real estate rates, most retailers have experienced a drop in footfalls and demand, reflected in slowing same store sales (SSS) growth and greater time to break even for new stores.

Controlling costs will be a focal point to offset margin compression from top line pressures, increasing competition and promotional activity. As a result, retailers are likely to focus on inventory management, supply chain efficiencies and labour productivity. Kishore Biyani, CEO, Future Group & Managing Director of Pantaloon Retail has a different take. In his words, “The current phase does not indicate any slowdown in modern retail even though for the time being, it may look as if they this is the end of the growth story. The industry is suffering from the first pangs of growth. Favourable government policies will help in creating and sustaining demand.” In the words of Richard Cuthbertson, Sr. Researcher, Said Business School, University of Oxford, “There is a great deal of learning in the Indian retail story. There will be lot more regional variation and mom and pop stores will continue to exist. The best format for India will be a mix of everything—right kind of stores, pricing and even consumer loyalty.”

Lets wait n watch…….