Chillin' out till it needs to be funded
Mumbai: Consumers have started trickling back to malls and department stores as the economy is stabilizing, say many large retailers, who expect sales to further improve in the months ahead.
This sentiment is spread across segments, from value retailers such as Vishal Retail to specialized chains such as The MobileStore, which sells cellphones and accessories and is part of the conglomerate Essar Group, to Reliance Retail, part of the Reliance-Anil Dhirubhai Ambani Group.
Pantaloon Retail (India) Ltd, the country’s largest retailer by revenue, witnessed around 8%
growth in same store sales for the month of May compared with the same period last year. In April, the company said it had an increase of 7% and 5% in March.
Vishal Retail, which shut two apparel manufacturing units and two stores during the downturn, is now seeing sales picking up again. Chief executive officer (CEO) Ambeek Khemka said, “Sales are picking up gradually and the company has seen a surge of around 20% overall sales in the last three months.”
A Reliance Retail official, who did not want to be identified because of company policy, said, “From April, definitely, the consumer sentiment is positive and we have witnessed an increase in sales by around 15% in the last two months and June is looking better than May.”
Rajeev Agarwal, CEO of The MobileStore, said, “In the last three months the sales of the company have increased by around 20% which definitely indicates a positive sentiment.”
The upturn comes at a time when economists around the world have been speaking of so-called “green shoots” of recovery after an unprecedented global slowdown sharply cut consumer spending.
Falling stock indices, declining housing prices, rising inflation and the global economic crisis had led to Indian consumer confidence declining by 26.5 points between January 2008 and March 2009, according to a May report titled Winning Indian Consumers In The Downturn from the Boston Consulting Group.
Analysts, too, feel the worst is over for retailers and the sector, whose market size has been estimated at about $25 billion (Rs1.2 trillion), is likely to witness slow and steady growth.
During the period, most retailers, among them Spencer Retail Ltd, Aditya Birla Retail Ltd, Future Group, Reliance Retail Ltd and The MobileStore, went slow on expansion, closed stores that were no longer viable, and regularly pitched promotional offers and deep discounts to counter the decline in discretionary spending.
In addition, some retailers laid off employees, renegotiated rental agreements signed in a healthier financial climate, and consolidated operations by merging teams, warehouses and back offices.
The MobileStore, for example, shut down at least 70 stores, while opening an equal number of new ones after November. Reliance Retail added 100 stores and shut down at least 20.
However, some retailers such as Subhiksha, Mumbai-based Foodland Fresh, and Indiabull’s Retail Service Ltd were the worst hit. While Foodland Fresh and Indiabulls Retail Services Ltd have only three and four stores operational, respectively. Subhiksha had to shut down operations due to lack of funding.
However, things are looking better for the industry as a whole. Kishore Biyani, founder and CEO of Future Group, said, “We are seeing positive sentiments in consumer behaviour due to the sense of security in terms of job and stable government. With asset prices increasing people have started to feel more secured. Moreover consumption in the country is not going to come down and will continue to grow.”
A New Delhi-based analyst with a domestic brokerage said in the last three months the consumer sentiment is gradually improving, and that almost all retailers are seeing a rise in sales across categories. “Retailers may once again see a double digit growth in the next few months if the consumer sentiment continues to grow at the present level,” he said. He declined to be identified because he is not allowed to speak to the media.
zyakaira notes: In other related news, in Bangalore – Mysore Bangalore Infra Corridor is being used effectively by the traffic, while the paid toll roads from and to the NICE road have picked up some traffic though they are not there yet. Whitefields projects coming up include a Prestige Seconds’ mall. Prestige forum in Koramanagala remains the stellar success and malls in Bangalore like Forum and even the new Oasis / Lifestyle Mall show continued traction throughout the week.
We are backing the property at Innovative Film City which is available cheap at rents of $4 psft and less and retains 50000 footfalls in a week without the congestion and with a complete leisure and holidaying destination story around it
The Mysore-Bangalore Corridor is likely to see a larger support esp. along the SH-17 which is a regular attraction for Bangaloreans.
And personally, someone like Kishor Biyani should not be in this Industry at all and there should be more options for teams like Bharti and Walmart to provide choice to consumers rather than start a shackled business under Business to Business pretext because of FDI restrictions