10 July 2023, Mumbai
Recently ICICI Securities analysed leading Indian retailers including Shoppers’ Stop, Pantaloons, Reliance Trends, V-Mart, Max, Lifestyle, and Westside for a report that doesn’t augur well for the retail sector.
Having experienced a 15 percent YOY decline in April 2023, brands are pushing on with their End of Season Sale (EOSS) two weeks in advance in the hope their stockpiles move out of the inventory to make way for the new season’s trends.
Lucrative deals to attract footfalls
However, much of the hope that was put on the month-long EOSS that started in mid-June seems to be fading out as customer response is lackluster. Whatever happened to the “shop until you drop” that played out during EOSS earlier? Have customers changed their attitude towards such sales or are they looking for more than just discounts?
Rains of discount
Rains discounts; Shoppers’ Stop is way ahead with as much as 62 per cent whereas competitors such as Reliance Trends, Lifestyle, and Pantaloons were on 41 per cent, 39 per cent and 25 per cent respectively.
It was surprising that Westside, Max, and V-Mart did not enter the early EOSS scenario, preferring to wait for the traditional timing instead.
Mall operators are not too pleased about this decision as they recommend all retailers to open their sales together so malls can attract more footfall during the period.
CEO of Bangalore-based Forum Malls, Muhammed Ali explains Indian retailers should follow the Dubai model which is meticulously planned well in advance and all brands and malls jump into EOSS together.
February 2023 showed signs of times to come
The first sign of customers buying retail fashion was in February as things started slowing down. Revenue performance in the March quarter had already been weak for most apparel retailers and by April-May, retailers were looking at a slide of 5 to 15 per cent YOY.
To salvage the situation, the EOSS usually slotted for the first half of July was pushed forward to start from mid-June. Satyen Momaya, CEO of French high-street brand Celio stated that last year there was a strong momentum leading to EOSS but this year momentum was being built from the second half of May due to the wedding season.
He felt that sales hasn't reached last-year level and during EOSS, it was hoped that it would at least match last year’s level as Celio was expecting a 40 per cent increase.
Not too optimistic situation; The high street isn’t the only one affected, as judging the Aditya Birla Fashion & Retail performance, the high-end sector of fashion isn’t playing out too well either. The consensus from 21 the Indian Luxury analysts is that Aditya Birla Fashion and Retail is on the verge of breakeven.
They expect the company to post a final loss in 2023, before turning a profit of Rs. 2.7b in 2024. The company is therefore projected to break even around a year from now or less.
Many reasons have popped up to explain the bad performance
Some say it’s the weather. Apparently, two major hubs, Delhi and Mumbai had rainy weekends keeping the crowds at bay.
The other reason being cited is the people’s reluctance to face traffic: The reluctance of customers to face the hassle of traffic has also played a role in the sluggish response. With congested roads and potential delays, customers have been more hesitant to visit physical stores, leading to decreased footfall. Online getting increasingly popular
Another favourite that has now been doing the rounds for well over two years is a shift to online shopping. The increasing popularity of online shopping platforms has diverted some customers from physical stores during EOSS, affecting foot traffic.
The state of the economy is a puzzling reason as the Indian economy is on steroids, as customers are concerned about whether the recession will affect India as well and that inflation, like the rest of the world, will go into a tailspin. should come to last-year level as we are expecting up to 40% increase." s business slowed from February onward, and brands had been expecting revenue to reach 2022 levels during EOSS, retailers said. Some started the sale early to improve revenue.
Losing stream
"Last year there was a strong momentum leading to EOSS but this year momentum was being built from the second half of May due to the wedding season," said Satyen Momaya, CEO of French apparel brand Celio.
"But sales haven't reached the last-year level. During EOSS, it should come to last-year level as we are expecting up to 40% increase."
"The growth has been slow in comparison to last year but the next two-three weeks are crucial," said Lifestyle CEO Devarajan Iyer. "The task is to liquidate the inventory. Currently, the majority of the brand is on sale, which might increase footfall and sales."
At the store level, Shoppers Stop is the most aggressive in offering discounts (up to 62%) against peers (25-40%). Discounts offered by Reliance Trends, Lifestyle, and Pantaloons were as much as 41%, 39%, and 25%, respectively.
Private label retailers such as Westside, Max, and VMART continue to follow a strict discounting-window policy and have not participated in the early EOSS.
According to mall operators, brands should go on sale together to push footfall and that will ultimately give a boost to their efforts.
Need to evolve with time
"Retailers in India need to plan the sale on the lines of Dubai--this will create momentum and will benefit everyone," said Muhammad Ali, CEO, of Forum Malls of the Bengaluru-based Prestige Group.
"When a customer looking for discounts comes to the mall, he would want every brand on sale. Similarly, there is a separate customer base for fresh stock and for them the sale should end on time."
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