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E-tailers woo customers with gifts this festive season

Raghavendra Kamath & Shivani Shinde, Business Standard
Mumbai, October 29, 2012

E-commerce sites are giving out home makeovers, wardrobe offers and free gift deliveries during the ongoing festive season to woo customers. Most of the sites offer additional products, other than discounts, to lure customers.

For instance, ‘members only’ site fashionandyou.com will launch a 15-day ‘home makeover’ campaign, wherein three highest shoppers will get home improvement products costing between Rs 10,000 and Rs 50,000.

The e-commerce site is running a month-long promotion called “Festival of indulgence” from October 16 to November 16, wherein the highest shopper can win a designer gold necklace worth over Rs 3 lakh.

Private label-focused site Zovi.com is running a ‘wardrobe offer’, wherein the buyer gets accessories worth Rs 399 for free on purchases worth Rs 1,500 and above.

“We do not believe in discounts. We thought by giving free accessories, we can engage with them better and strike a personal chord,” said Kavindra Mishra, founder-member and vice-president, sales at Zovi.com.

Zovi is also looking to launch the kidswear segment on its site and add a range of winterwear next month to its offering. Another site, Jabong.com, is launching exclusive international products on its site and has started free delivery of gifts.

“Free delivery of gifts requires a lot of effort and processes. We thought the festival period is ideal to launch this service,” said Praveen Sinha, co-founder and managing director at Jabong.com.

Online market place eBay, too, has been promising goodies during the festive period. For purchases made between October 5 and October 15 for up to and above Rs 5,000, gifts such as branded headphones, iPod shuffle, mobiles, iPads and laptops were given out. During October 16-31, buyers need to make purchases only for Rs 2,500 to get gifts.

Besides, eBay has come out with an offer for purchases worth Rs 20,000 to Rs 4 lakh between October 19 and 31. On such buys, customers get gifts such as LED televisions and laptops.

Another player, Snapdeal, is also offering special Diwali offers around home products, consumer durables and others. According to consultants, the strategy of e-commerce sites will not only push sales of products, but also increase margins and positioning in the minds of customers.

“There are two ways of giving offers. Either you can give a discount of 50 per cent on a Rs 500 product, or you can offer the product for Rs 400 and give an additional product,” says Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy firm.

According to Dutta, this (the additional product) would push up the implied value of the product in the minds of customers.

Retailers not bullish on this festive season

Dipti Jain, The Times of India

New Delhi, October 25, 2012

After a sluggish start for retailers this year, even the festival season might not be a mood-lifter. With consumer spending still not encouraging, retailers are not as ambitious on their prospects this festive period as compared to the previous years even as they expect a pick up in sales.

While most retailers that TOI spoke to said this quarter (October-December) sales would definitely be higher than the rest of the year, not many expect the increase to be same as during a typical October-December period. According to industry estimates, the retail sector has been reeling under the impact of steep price increases and a significant depreciation of the rupee.

Growth in the industry has nearly halved between 2010-11 and 2011-12 , causing most retailers to aim for even lower growth targets this financial year, analysts said. While the luxury sector has performed relatively better, it is the mid to premium range of brands that have been worst hit. "Festival quarter has always been good but there is still a fair bit of slowness in the economy. Retailers will push very hard to revive some optimism ," said Mohit Bahl, partner , transaction services at KPMG India.

Madura Garments-owned Louis Philippe, said while it was expecting around 20% growth this quarter, it is significantly lower than previous years. The brand, which is currently witnessing a 15% annual growth, said growth has declined from 50% in 2010-11 . Even last year, sales growth was in the range of 20%-25 %. "Raw material prices have gone up. Plus excise duties have increased and so imports are costlier . Even hiring is low in the industry so the sentiments are poor," said Jacob John, brand head, Louis Philippe.

Having taken multiple price hikes in last one year, retailers said any further increase would not be possible either as it would further dent purchasing sentiment. The industry has seen a 20%-30 % increase in prices in the last one year.

"Retailers are cautiously optimistic and are focusing on improving footfalls through promotions as well as margins by promoting higher priced and higher margin products. Expansion plans are more realistic ," said Devangshu Dutta, CEO, Third Eyesight, a specialist consulting firm.

With the festival season setting in late this year, the window for raking in huge profits for retailers is smaller too. DLF Brands, which has the franchise rights for international brands like Claire’s , Alcott, Boggi, Sunglass Hut, said it has significantly ramped up its marketing and promotion activities this year to increase footfalls. "The reform measures announced by the government in the last few weeks will take time to show its benefits. So people are more cautious. Brands which have come up new might perform well, but those existing already will continue to feel the pinch," said Pradeep Bhanot, senior vice president (accessories), DLF Brands.

Offering heavy discounts is not on the cards for most brands but retailers are looking at adding new range of low-priced products to increase footfalls. Adventure sports brand Woodland is planning to come up with "well-priced" products apart from offers for its loyal customers. The brand, which grew 30% last year, is expecting a 12-15 % same store growth for this quarter. "These three to four months are very important for us. We are tying up with a lot of advertisers to increase sales this season," Woodland India MD, Harkirat Singh said.

At Horniman Circle opener, Starbucks sets premium tone

Nupur Anand & Ashish K Tiwari, DNA (Daily News & Analysis)

Mumbai, October 20, 2012

The Seattle, US-headquartered Starbucks on Friday opened its first store in India, kickstarting what could be a sedate rollout, going ahead.

Yet, if the 4,500 sq ft store in the historic Elphinstone Building in South Mumbai’s Horniman Circle — with an upscale brand Hermes at sniffing distance — is any indication, the company has positioned itself at the premium end, about 50-60% costlier than Café Coffee Day.

The experience is akin to “walking into a shrine of Starbucks coffee”, Howard Schultz, chairman, president and CEO, Starbucks Coffee Company, said of the flagship store, which sports tastefully done up, wood-and-leather interiors.

Two more stores are slated to open in the city next week — in the Taj Mahal Palace Annexe (Gateway of India) and the Oberoi Mall in Goregaon East — before the coffee chain hits Delhi and elsewhere with another 3 stores in the next 6 months.

Beyond that, officials of Tata Starbucks Ltd, an equal joint venture (JV) between New York Stock Exchange-listed Starbucks Coffee Company and BSE-listed Tata Global Beverages Ltd, were tight-lipped, underscoring a circumspect debut.

The bigger question, say experts, is whether Starbucks can really crack the India code, coming in now?

Schultz appeared gung-ho. “The size of the market is very large. If you look at other countries where we have stores — 700 in mainland China, 800 in the UK, 1,000 in Japan, 8,000 in the US — this is a very large opportunity and putting an overall number for stores here will not be possible at this stage. But with Tata’s help and the size and scale of this market, we believe this is where we will grow significantly and make investments over the near future,” he said.

Experts feel the brand name, too, will work its magic — at least initially.

“It is a very successful brand. They have been able to establish themselves in other Asian markets such as China, which is predominantly a tea drinking country. In fact, they are believed to have created the demand for coffee in the Chinese market and have met with roaring success. Therefore, India may not be difficult either,” said Arvind Singhal, chairman of retail consultancy Technopak Advisors.

Technopak expects India’s cafe market to touch $410 million by 2017, up from $230 million now, with the number of cafes rising from 1,950 to 2,900.

Others feel Starbucks will benefit from localisation, as it has in other markets. For instance, in China, it worked with ingredients like green tea.

Something similar will work just fine here, said Gaurav Sharma, assistant vice president, Technova.

Schultz appeared to concur. “Though we will be importing coffee beans, for the first time in our history, we will be sourcing and roasting coffee locally,” he said.

“This apart, we will also offer a host of localised food items sourced from Tata’s food and beverage operations. So, you will see items like elaichi mawa croissant, murg tikka panini, tandoori paneer roll among others,” said Avani Saglani Davda, CEO, Tata Starbucks Ltd.

But will this be enough, given that competition is rife, with several players in the fray?

Singhal of Technopak feels it would take a herculean effort to upstage the market leader, Café Coffee Day. But of course, the positioning of two brands is different and so a clone war is not impending, he is quick to add.

Some analysts believe that in order to succeed Starbucks will have to focus on the location and quality.

To be sure, the café chain is not a leader in all the markets that it is present in, Devangshu Dutta, chief executive, Third Eyesight retail points out. According to him, pricing, product offering and location will decide its success.

Yet others feel the company will do well to focus on smaller sizes and cheaper beverages.

The world’s largest coffee chain will need options that are priced as much as 33% lower than its US offerings to succeed in the Indian market, said Saloni Nangia, president at Technopak Advisors.

For example, Café Coffee Day, the nation’s biggest chain with 1,360 stores across the country, sells a regular cup of cappuccino for Rs61 in Mumbai, while its closest competitor Barista, with 318 stores, sells for Rs69. This, in a nation where the World Bank says about two-thirds of the people live on less than $2 (around Rs108 as at Friday’s conversion) a day.

That may prompt Starbucks to sell its drinks for about $2-2.50 a cup, Nangia said, compared with about $4 in Beijing and $3.50 in the US.

But it may well choose not to do that and remain a premium player, said Larry Miller, an Atlanta-based analyst at RBC Capital Markets Corp. “I wouldn’t be surprised to see similar levels to other markets around the world, which would be a pretty expensive proposition for the Indian consumer,” he said. “In China, their products are just as expensive as they are in the US.”

With Bloomberg

How to get the best deal for your old car

Prashant Mahesh, The Economic Times
Mumbai, October 19, 2012

"Bring the old and take a new one." Manufacturers and dealers of white goods and cars come up with exchange offers during the festive season. With Navratri and Diwali around the corner, you are likely to see many such offers in the coming days. For example, car companies are offering Rs 20,000 to Rs 1 lakh as exchange bonus this festive season, depending on the model you choose. Similarly, you could get Rs 2,000 to Rs 8,000 for your old refrigerator depending on its condition.

"In the case of consumer durables and white goods, there is no organised resale market. Given the hassles involved in locating a buyer for your old product and the time and energy it will consume, it makes sense to go with an exchange offer," says Devangshu Dutta, CEO of Third Eyesight, a consulting firm on retail and consumer durables. However, the rule doesn’t apply to cars.

"If you upgrade your car to the same brand, it makes sense to opt for an exchange offer. However, if you are changing your brand, it may be better to sell the car in the second-hand market and buy a new one," says Roshun Povaiah of Cartoq, an automobile website.

THE TROUBLE WITH RESALE

There is an active resale market for cars, but there is no such market for white goods or consumer durables. Your neighbourhood scrap dealer won’t offer you more than Rs 1,000-1,500 for a fridge or a washing machine in perfect working condition. You could advertise on some websites, but getting a buyer and the right price depend a lot on your luck.

Even if you are lucky to find a buyer, transportation cost would be another issue. Also, going through the drill may consume a lot of energy. That is why many people prefer to give it away to friends, relatives or domestic helps than selling these dirt cheap.

"In most cases it may make sense to dispose of your old appliance to the dealer itself," says Devangshu Dutta. However, check with at least two to three dealers to get a fair idea of the resale price before taking the final decision.

CARS ARE DIFFERENT

If you are looking to sell your old car and buy a new one, zero down on the model first. If you are upgrading to the same brand, the manufacturer or dealer may offer you a loyalty bonus. This could be crucial in your decision making.

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For example, if you plan to sell your old Maruti Alto and upgrade to another Maruti car, say Maruti Swift, you may get a loyalty for staying with the same manufacturer. The loyalty bonus could vary depending on the model. It is typically around Rs 15,000 to Rs 25,000.

"Chances are when the loyalty bonus is added, the resale amount you are getting could be higher than what you may get by selling your car in the second-hand market. Also, since it’s the same dealer, the total amount is adjusted easily and helps you make a down-payment for your new car," says Roshun Povaiah.

However, if you plan to shift to another brand, things won’t be the same. For example , if you wish to sell your Maruti car and shift to a Toyota make, you may not get any loyalty bonus.

"In this case it would work better if you independently sell your old car, than giving it to the dealer in an exchange offer," says Banwari Lal Sharma AVP (marketing), Carwale, Automotive Exchange.

Since cars enjoy an active second-hand market, you do some research to estimate what kind of price you can get for your old car. Manufacturers have their used-car buying arms also.

For example, Maruti True Value, Mahindra First Choice and Hyundai Advantage are some manufacturer secondhand dealers. Added to this, there are websites, local used-car dealers and even garage mechanics who double up as car agents. They too can help sell your car. Get an estimate from a couple of dealers on what they are ready to pay for your car. Compare that with what the new car dealer is ready to pay, and go with whoever is paying you more.

Starbucks opens its first store in India

Sapna Agarwal, MINT (A Wall Street Journal Partner)

Mumbai, October 19, 2012

A welcome sign in six languages—Hindi, Marathi, Tamil, Gujarati, French and English—greets customers at the entrance to India’s first Starbucks store, which opened Friday at Horniman circle in south Bombay, offering a glimpse of the localization that the Tata group and Starbucks Corp. are attempting.

The atmospherics are spot on. There’s the aroma of freshly-roasted coffee; the decor is identifiably Indian, thanks to the signature jali (lattice) design; the mugs are emblazoned with Starbucks India along with an image of India Gate; iron trunks and jute bags stamped with Tata Coffee Ltd line the walls.

The pricing has been aligned with that of Café Coffee Day and Barista, starting at Rs.85 for a cup of brewed coffee excluding taxes. There are 42 items on the mixed menu but no pork or beef items.

The first Indian store is a big deal for Starbucks, which needs to make sure that it can pack in more international customers as markets back home get saturated and habitues gravitate towards other brands and stand-alone coffee shops.

Howard Shultz, founder and chief executive officer of Starbucks, was on hand at the opening.

“This is the largest market in the world for Starbucks and we will make significant investments here and build a leadership business,” he said. The company had waited for many years to come to India and had been frustrated that its entry was getting delayed due to the financial crisis and a lack of suitable partners.

Shultz declined to give details of the investments planned or the roll-out strategy. In January, when the firm announced its joint venture with Tata Global Beverages Ltd, Starbucks said it would roll out 50 stores by the end of the year. That target may be difficult to achieve.

Starbucks plans to open two more stores in Mumbai next week at the Oberoi mall and the Taj Mahal Palace annexe—before launching in New Delhi early next year.

“India is a complicated and complex market; it has become easier to enter due to Tata,” Shultz said.

Globally, Starbucks has 18,000 cafes in 60 countries. It has 700 in China, 800 in the UK and 1,000 in Japan.

“They have got their pricing similar to the other coffee chains present in India,” said Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy. A localized menu is a must in India as food is a big part of café culture, he said.

The Starbucks café also offers Himalayan water beverage packs besides tea that’s branded Tata Taazo.

In its 40-year history, India is the first location where Starbucks is sourcing and roasting its coffee locally. A sign in the shops says: “Be prepared to be delighted. Our rich expresso made with coffee beans, grown in India, for India.”

“The decision to locally source is not because of economics,” said Shultz. Sourcing locally is a part of being “respectful” to the country and taking advantage of the huge coffee plantation heritage of the Tatas, he said.

The organized food market which includes fine dining, quick service restaurants, cafe chains is a $2 billion market, of which the cafe business—which consists of chains such as Cafe Coffee Day, Costa Coffee and Barista—is already a $230 million market, according to an October report by Technopak Advisors, a retail consultancy firm.

“There are close to a dozen coffee shop brands, with 1,700 cafes in India and at least another 10 coffee retail firms looking at setting up here at the moment,” said Siddharth Bafna, a partner and head of the corporate finance and transaction services practice at Lodha and Co., a consulting firm that helped Costa Coffee set up operations in India.

The high growth is also attracting many firms from the US, Australia, Thailand and Hong Kong. In May, Dunkin’ Donuts opened its first store in India and has plans to open 10 in its first year of operations. Krispy Kreme, another coffee and doughnuts retail chain, plans to open 80 stores in India in the next five years. Jubilant FoodWorks Ltd is the master franchise for Dunkin’ Donuts in India.

The promoters of HT Media Ltd, which publishes Hindustan Times and Mint, and Jubilant are closely related. There are no promoter crossholdings.

Mahindra Group plans to rejig retail business, may open stores outside India

Sagar Malviya, The Economic Times

Mumbai, October 18, 2012

Mahindra Group plans to rejig its retail business by changing the product mix at its stores with more apparels, expanding aggressively through franchisee stores and even setting up stores abroad.

"We might look at apparel centric mother and kids store," K Venkataraman, MD of Mahindra Retail, said. He said the company plans to increase the share of apparel in the total merchandise at its ‘Mom & Me’ stores to 60% from 40% now.

Mom & Me caters to children and expecting and new mothers across categories such as baby food, strollers, toys and apparel. Mahindra Retail also owns toys chain Beanstalk.

So far, the Rs 200-crore company has been selling apparels mostly through its own private labels along with some of its exclusive licensee brands such as Disney and Fisher-Price. It recently started stocking kids brands such as Benetton and Puma in their stores and plans to bring a few international brands in the country.

That’s because apparel offers almost double the margins compared to other merchandise such as toys and baby products. The product mix change will reflect in almost half their stores, said the company.

"This move will surely increase the viability of their stores," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said. "But women’s wear is fashion driven and it requires more planning in merchandising and stocking needs to be appropriate compared to other products within the segment. Hence, the risk also increases," he added.

In India, brands such as Lilliput, Gini & Jony, Catmoss and Benetton Kids account for nearly two-fifth of the total organised children’s apparel market worth Rs 3,000 crore. However, there is an influx of international brands in the segment since last year. Tommy Hilfiger, Zara Kids, Benetton Kids, Disney Mothercare, Chicco and Burberry Kids have steadily increasing their presence nationally and even in smaller towns.

Mahindra Retail plans to bring local entrepreneurship into play as it charts an ambitious expansion plan that will cover several small towns.

The car-to-creche retailer, which launched its first store in 2009, plans to add around 50 outlets, including franchisee stores, to its existing network of 100 Mom & Me stores. Mahindra Retail is also looking at some proposals to take Mom & Me to South Asia and Africa, Venkataraman said.

"It is something that we are considering actively but we have no clear-cut plans now," he added. He said Mahindra Retail plans to remain focused on specialty formats and has no plans to enter crowded retail segments such as food and grocery. Experts too feel that specialty retail with a razor sharp focus is generally more viable in the long run.

Mahindra plans retail blitz with 65 new stores, e-comm integration

Raghavendra Kamath, Business Standard

Mumbai, October 17, 2012

After opening 100 stores in the last four years under ‘Mom & Me’ brand, Mahindra Retail, the low profile retailing arm of of $15.5 billion Mahindra Group, wants to go full steam.

The company, which retails maternity and baby products under ‘Mom & Me’, wants to open 50 stores under that brand, another 15 stores of its toy store Beanstalk in the next five and half months besides integrating e-commerce venture with physical stores and expanding its kidswear category by signing agreements with global brands.

The company has also set up ‘Destination Maternity’ store as a master franchisee of the latter which is based in US.

Besides, the company will also consider setting up franchisee stores in Middle East and Africa for which it has got requests, said its managing director K Venkataraman today.

The idea to integrate online and physical formats will be part of its ‘hub and spoke model’ where it has larger stores of 3,000 to 4,000 sq ft in cities and smaller on the peripheries, and aimed at increasing customer comfort besides saving on real estate costs.

“You can either click at home and collect products at the store after seeing it yourself or click at the store and get the products delivered at home." Venkataram said.

The e-commerce sites will also help stores which are smaller in size, around 2,500 sq ft, which do not have the full range, he added.

When asked about the potential of e-commerce venture, he said: “There is a certain potential of e-commerce venture. We are developing the market first," he said.

Consultants such as Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy, believe that integrating both channels augurs well for the business.

“An offline retailer who has built that relationship with customer has better chance in online venture. You can encourage customers to cross shop across channels," Dutta said.

Besides, the company is also looking to expand its stores via franchisee way. Currently, the chain has two franchisees out of 100 stores is also looking to have 10-15 stores out of the planned 50 stores, he said.

“Cities such as Mumbai and Delhi can take 40 to 50 stores each but due to expensive real estate costs, we need to go slowly," he said. Mahindra Retail has 25 stores in Bangalore.

“Out of 700 cities, top 100 are important for us but we have not decided how many stores we will open in the next three years," he added.

The company which has got Rs 300 crore from the parent till now, looking at revenue of Rs 200 crore this financial year.

Mahindra Retail is looking at concluding licensing pacts with UK apparel brands in kidswear in the next couple of months.

The company is also looking other brands such as Benetton and Jiny & Jony to expand its kidswear segment, Venkataraman said. Mahindra already has exclusive agreement with US-based Disney and Fisher Price of Mattel.

“Till July last year, we had only private lables but we realized that older kids need more products and brands. We would like to add more brands," he said.

Third Eyesight’s Dutta believes there is enough headroom in the segment given that there are not many brands in the segment and consumers want more choice.

VIP repositions itself as lifestyle brand

Sapna Agarwal, MINT (A Wall Street Journal Partner)
Mumbai, October 15, 2012

VIP Industries Ltd, India’s largest listed luggage company, is positioning itself as a lifestyle brand by diversifying into handbags.

“Forty years ago, there was no branded luggage company in India. VIP created the category,” managing director Radhika Piramal said. “Now with Caprese (handbags), we hope to do the same thing,”

VIP has a 65% share in the branded luggage market that is estimated to be anywhere between Rs.650 crore and Rs.1,000 crore, according to Piramal.

Caprese aims to become a Rs.100 crore brand in five years and hopes to generate revenue equal to VIP’s luggage business within a decade, she said.

The company will also get into complementary categories such as clutches, wallets and leather bags.

“The idea is to be a lifestyle brand,” said Piramal, who took over the business three years ago as managing director. Since then, she has relaunched Skybags as a youth brand with a focus on backpacks and doubled revenue from the segment.

There are more than 200 international fashion and lifestyle brands in India and more are coming, according to Third Eyesight, a retail consultancy.

Lifestyle brands such as Espirit, Guess, Calvin Klien and Tommy Hilfiger sell everything from apparel and watches to handbags and accessories.

Ikea explores giving India touch to different products and designs

The Economic Times

Mumbai, October 11, 2012

Swedish furniture retailer IKEA is playing "a local carpenter" by taking cues from Indian consumers on product design and function as it waits for the government nod to open stores in the country.

"We have found that maybe we need to do things differently in India," Juvencio Maeztu, country manager of IKEA Retail India, said. "Maybe, we need to have different product function and quality in India that we don’t have globally," he said on the sidelines of the Indian Retail Forum on Wednesday.

A few months ago, a team from IKEA visited Indian homes across various income groups to understand what kind of design and products could work in India.

The world’s largest single-brand retailer has proposed to invest up to Euro 1.5 billion (more than Rs 10,000 crore) in two phases to open 25 stores in the country.

Experts say such a localisation strategy will help IKEA connect with Indian consumers.

"Food and home category require huge localisation and consumers can provide insights on what kind of products could sell," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said.

IKEA had faced initial hiccups in China when it entered the market with global products and ideas.

Maeztu, who worked for IKEA in Europe for 12 years before moving India, said the company will retain its global strategy of large-size store formats and build long-term partnership with its suppliers in the country.

"The beauty of India is that we have been working with the whole pipeline since the beginning," he said. IKEA sources goods from India for its global stores and many of its partnerships here were made more than 25 years ago.

India could be the 45th country to have IKEA stores.

Known for its affordable and modern furniture and home products, IKEA has 336 outlets with annual income of more than Rs 1.7 lakh crore in 2011.

After nearly four months of negotiations with the Indian government over a mandatory 30% local sourcing norm, IKEA Group this week said it will comply with the country’s newly diluted single-brand retailing regulations.

Once the government clears its proposal, it will take three years for IKEA to build a supply chain to roll out its first store in India. The company plans to invest Euro 600 million (about Rs 4,100 crore) in the first stage spanning over ten years to set up a chain of ten stores and its allied infrastructure. In the second phase, IKEA plans to bring in another about Rs 6,150 crore to open 15 outlets.

Slowing same store sales to hurt retailers

Nupur Anand, Daily News & Analysis (DNA)

Mumbai, October 6, 2012

The buoyancy in retail stocks is unlikely to last, experts would have us believe.

The sector has been upbeat since the government gave its go-ahead last month to 51% foreign direct investment (FDI) in multi-brand retail and 100% FDI in single-brand retail.

Retail stocks have gained anywhere between 7% and 36% in the past three weeks.

However, analysts believe poor earnings will poop the party.

Brokerage CLSA said in a note earlier this week that September quarter earnings will remain tepid for the sector with players like Shoppers Stop and Pantaloon expected to report up to 43-74% decline in profitability.

The key worry is same store sales growth (SSSG), which refers to sales logged by a retailer’s existing stores during a certain period vis-a-vis the corresponding period a year ago. In short, therefore, the reference is to stores that have been open for at least a year.

According to CLSA, SSSG has been hovering in low single digits for leading formats and is even negative for some.
Other experts corroborate the claim.

Devangshu Dutta, CEO of retail consultancy firm Third Eyesight, in fact, feels any huge improvement in same store sales growth is unlikely. “The business is still under pressure, margins continue to remain thin and it is unlikely that the festive season will be able to fuel growth for the retailers.”

Sales growth for the 14 listed retail players has slowed from 23% in the September 2011 quarter to 10% by the June 2012 quarter.

For a retailer, a healthy SSSG in the current economic scenario would be 14-15%, said Arvind Singhal of Technopak.

But going by analysts, most retailers won’t reach this figure in the coming 2-3 quarters.

Blame it on inflation and dampened consumer spirits.

An extended period of discount sales this year has also nibbled on margins, bringing down overall profitability even though volumes have improved, Dutta pointed out.

This is likely to reflect in the retailers’ balance sheets soon.

To be sure, separate consumer surveys by BluFin and Assocham have found that consumer sentiment continues to remain subdued and is unlikely to improve in a hurry.

Also, in August, rating agency Fitch had revised the outlook for the retail sector to negative from stable for the second half of this fiscal.

In the midst of all this, a slowing SSSG could wreak havoc on retailers’ bottomlines, to put in mildly.