Following a weaker-than-expected festive season, several retailers
entered the sale season early with more discounts to lure shoppers who have been holding off on spending. A weak economy, coupled with increasing competition among retailers, has led consumers to think they are likely to get a better deal during the frequent discount periods.
Retailers feel the caution is likely to continue through 2014 as shoppers resist the urge to splurge and adopt a wait-and-watch attitude. "It is going to be a very tough year," says consultancy firm Technopak Chairman Arvind Singhal.
Singhal adds that Private Final Consumption Expenditure (PFCE) - the expenditure on final consumption of goods and services by resident households and non-profit institutions serving households - has been flat over the last couple of quarters. And consumer spending is unlikely to change in the next three to four quarters. However, the long-term vision is a bit more optimistic: Technopak expects the $490-billion retail industry to touch $640 billion by 2018.
With consumers delaying their buying decisions, many retailers have reined in their expansion plans. 2014 is going to be a year of cautious expansion for many. "It is still a year of growth, but there will be a little slowness on the expansion spree," says Parag Dani, Retail Director at casual wear manufacturer Levi Strauss. The company is aiming to open 30 to 35 stores in 2014, and will enter only three to four new cities.
Women's ethnic wear retailer Biba is also planning to go slow this year. It expects to add 60 stores in 2014/15. The company's Managing Director, Siddharath Bindra, says he does not foresee an immediate change. "I am optimistic on the second half," he adds.
The retail sector is dogged by uncertainty because of the coming elections and political differences over foreign direct investment (FDI) in retail. Kishore Bhatija, Managing Director and CEO of Inorbit Malls, says FDI in retail will depend on the election results. "We do require more brands to come in," he says.
As economic uncertainties dampen sentiment, more and more retailers are resorting to massive discounting or promotions. Retailers do not see a change any time soon. "What started of as a way to liquidate inventory, is now a model of business," says Bhatija. Rakesh Biyani, Joint Managing Director, Future Retail Ltd, agrees. "Discounts are here to stay," he says.
Kulin Lalbhai, Executive Director of Arvind Ltd, says discounting is crucial for the retail business, but only if done intelligently. "Discounting is an asset, but where India is a little different is (that) our focus is at the two ends of the seasons," he said at the India Fashion Forum in Mumbai.
Both Biyani of Future Retail and Arvind's Lalbhai say discounts are important to introduce new customers to a brand. Some are, however, more positive. Fashion brand Kimaya is looking at seven more stores in the next fiscal; it currently has 12 stores. It is also looking at expanding its online shopping operations with 10 websites catering to different target audiences. "It cannot go worse from 2013," says Kimaya Chairman Pradeep Hirani.
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