Retailers not bullish on this festive season


October 25, 2012

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.