Retailers across categories are lamenting sluggish sales over the last several months. Here’s what they are saying…
New Delhi: Retailers and restaurants across the board have been reporting sluggish sales in the last six months or so and this persisted even during the crucial Diwali season.
Now, fashion brands have advanced their annual end-of-the-season sales (EOSS) by about two weeks in a bid to liquidate their unsold inventories and shore up their coffers. “The last seven months have been a disaster for retailers,” said Kirti Khosla, director at Ark’s Consultancy, marketing agent for Milan-based Pianoforte, which sells lingerie brand Yamamay and Carpisa luggage and bags in India. “Even Diwali was not good this year.”
A chief executive of a global fashion giant said the overall consumer sentiment is playing on the business this year.
“Retail inflation has gone up so much, salaries have not gone up much and high interest rates are not helping,” he said asking not to be named. “It’s not just a slowdown for us, it’s a very bad slowdown,” he added.
Restaurant operators, from Jubilant FoodWorks Ltd. to McDonald’s South and West India franchisee Westlife Development have reported a drop in their same-store sales in the latest quarter.
Jubilant FoodWorks, which operates Domino’s Pizza and Dunkin brands in India, saw a 1.3% decline in like-for-like sales (a retail barometer to gauge sales growth/decline for stores that are open for a year or more) in the second quarter of this fiscal year compared the previous year.
Similarly, Sapphire Foods India, the India franchisee of Yum Brands, reported a like-to-like sales drop by as much as 20% this quarter at Pizza Hut India restaurants amid poor consumer sentiment.
“The first six months of the year wasn’t great and it was a complete washout if I would have to put it,” said Sagar Daryani, co-founder of Wow! Momo Foods Pvt. Ltd. that operates Wow! Momo, Wow! Chicken and Wow! China. “It’s quite shaky and quite topsy turvy,” he added.
IndiaRetailing spoke to a broad spectrum of retailers to gauge the reasons behind the slowdown. Here are the four that stood out:
End of the revenge-buying spree
Top executives at brands said Indian consumers went on a revenge buying spree post-Covid in 2021 and 2022 and are saddled with more products than they need. They therefore don’t see any urge or reason to purchase more stuff as their wardrobes are already full.
High inflation
Many retail executives cited persistent high inflation as one of the culprits behind the slowdown. Government data shows that retail inflation in India, measured in terms of the consumer price index (CPI), jumped to 5.5% in November, up from 4.8% in October. India’s CPI has been rising in the last two years—from a low of 4.06% in January 2021 to the current level of 5.5% and that is also denting sales of goods from food to fashion.
High-interest rates
The Reserve Bank of India (RBI) has raised short-term lending rates by 250 basis points (bps) since May 2022 amid surging inflation. However, since February, the RBI paused its rate hike spree and has maintained the repo rate at 6.5%. Due to high-interest rates, equated monthly instalments (EMIs) for consumers on their housing and automotive loans have gone up, forcing them to cut household budgets and avoid discretionary spending.
Cautious Consumer Sentiment
All the above factors are weighing in on the consumers’ psyche and they are cutting their non-discretionary spending. Fashion brands have unleashed their deep discounting this month to lure consumers and liquidate their unsold stocks. While Puma has started a flat 40% discount, ethnic brand Kazo has started the EOSS with up to 70% discounts, giving a peek into the state of affairs.
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