Fashion retail store closures mount amidst demand slump, measured expansion expected

Indian fashion retailers are grappling with a slowdown, a period of consolidation after a slowdown in demand that stretched over five quarters, leading to a wave of store closures and a cautious outlook for the coming quarters. Data from FY24 reveals a stark shift from the previous years' aggressive expansion. Major chains like Pantaloons (Aditya Birla Fashion and Retail), Spencer's Retail, and V-Mart Retail witnessed a net decline in store count due to closures exceeding new openings, reflecting a shift in strategy.

Empty storefronts

• Pantaloons, owned by Aditya Birla Fashion and Retail, saw its store count drop from 431 to 417. Closures targeted smaller stores in less populated areas, with a focus on larger towns moving forward.

• Spencer's Retail went from 151 to 133 stores, exiting "non-strategic geographies" in the South.

• V-Mart Retail opened just 9 stores while shutting down 19 underperforming ones.

• TCNS Clothing brands like W and Aurelia slashed their network by 15%, citing a focus on profitable channels as revenue dipped.

• Titan Eye+, a Tata-owned chain, also closed 8 stores in the last quarter.

Reasons for the closures

• Weak demand: The primary culprit is a prolonged slump in consumer spending. This has forced retailers to focus on profitability by trimming their network and exiting non-performing stores in smaller towns and less strategic locations.

• Optimizing networks: Retailers are consolidating their store presence by shutting down underperforming outlets, particularly in smaller towns and non-strategic locations. This strategy aims to reduce operational costs and improve profitability.

• Shifting consumer habits: The post-pandemic period saw retailers experiment with new formats and markets. However, with the slowdown, they're optimizing their presence and focusing on channels that deliver better returns.

Outlook for coming quarters

• Cautious expansion: While the large-scale closures are likely a one-time event, a return to aggressive expansion is not on the immediate horizon. Retailers are expected to adopt a measured approach, focusing on profitability and optimizing their existing networks.

• Focus on profitability: The emphasis will be on cost-cutting measures like network rationalization and improving operational efficiency. This might lead to a continued focus on larger stores in bigger towns.

Not all gloom

• E-commerce growth: While brick-and-mortar stores are consolidating, e-commerce is expected to maintain its growth trajectory. Retailers are likely to strengthen their online presence to tap into this demand.

• Selective expansion: Some retailers, like Meena Bazaar, are still bullish on physical stores and plan to continue measured expansion. However, success will hinge on factors like mall support and effective strategies to drive footfall.

Malls and retailers need collaboration

Experts highlight the need for collaboration between malls and retailers. Malls can support retailers through initiatives that boost sales and ultimately benefit both parties.

Indian fashion retail sector is at a crossroads

The coming quarters will likely see a cautious approach from fashion retailers in India. While store closures might stabilize, a significant rebound in expansion is unlikely until demand picks up consistently.