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Slump in sales force Future Group, Reliance Retail, Shoppers Stop advance discount sales by 3 weeks

Writankar Mukherjee & Sreeradha D Basu, The Economic Times
Kolkata,January 4, 2012

India’s leading retail chains such as Future Group, Reliance Retail, Shoppers Stop, Style Spa and Woodland are advancing their annual discounts by up to three weeks facing a huge slump in sales since Diwali.

Most of the retailers have recorded up to 30% slump in sales in the November-December period, except in some geographies like the North where categories like winter wear has been a saving grace.

The categories which are hit the most are apparel where prices have gone up by 10-15% this year due to excise duty and high cotton prices, followed by furniture, consumer durables and mobile phones where prices increased by 5-15% in the last two months due to the falling rupee which increased import cost.

"The market has slowed down and the November-December months has not been as we had expected it to be. Apparel has not at all done well, home segment has performed relatively better, while electronics is another weak spot. Caution is creeping into retail," says BS Nagesh, veteran retail professional and chairman of the apex industry body, Retailers Association of India.

India’s largest retailer, Future Group started heavy discounts in apparel and electronics in stores like Big Bazaar and Ezone since the New Year weekend as compared to the usual Republic Day period. The group is also planning to prepone sales in the lifestyle format Pantaloons by a week.

"Winter sales were delayed because of the late onset of the season this year and were not as expected," says Pantaloon Retail CEO Kailash Bhatia.

Another chief executive of the Future Group, who requested anonymity, said the group is seeing a slower consumer demand across categories. "The signs are not too encouraging and is beginning to remind us of the early days of the 2008 slowdown," he said. Even Westside advanced their sales by a few days, while Lifestyle is going on sale two weeks earlier than the usual. Spencer’s Retail too has started their sales on December 31 as opposed to January 25 last year. The retailer says it has not much problem with the winter inventory, but is still clearing the last summer merchandise.

"Our inventory situation is not bad, but we also started our sales since the entire market is getting into discount mode. The surprise element provided by the discount sale gave the consumers some impetus," says Spencer’s Retail executive director (apparel) Subrata Siddhanta. He said the discounts helped to double Spencer’s sales during New Year’s eve over last year. Retail consultancy Third Eyesight CEO Devangshu Dutta says almost all retailers’ growth plans have not been as per expectations and hence there is a lot of inventory that is remaining unsold.

"As a result, there is a mad rush to clear inventory through big and early discounts. Consumers are cutting down on their discretionary spends as the fear of a fall in income has become more magnified now due to the economic volatility," says Dutta. Woodland MD Harkirat Singh said consumers are constantly looking for deals and an incentive to buy. "With the discounts, footfalls and customer billing has gone up," says Singh, which too preponed sales by few days.

Reliance Retail too is running discounts in its apparel format Reliance Trends, in electronics format Reliance Digital and its shoe format, Reliance Footprint. "Without clearing stock, it would be difficult to get fresh inventory for summer," says Reliance Trends CEO Arun Sirdeshmukh.

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