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It was a tough year for most retailers as domestic chains such as Reliance Fresh, Bharti Retail and Aditya Birla retail made losses. The largest retailer, The Future Group, went for a massive restructuring exercise. It tried to reduce its debt and even sold stake in some of its group companies. Most retailers downsized and relocated stores with chains such as Spencer’s Retail moving out completely from saturated cities such as Pune.
The slowdown did impact sales across categories ranging from apparel to consumer durables. In apparel, prices have been increasing over the past two years and with weak consumer demand, most apparel retailers have been reeling under the impact of the slowdown.
“The first part of the year was not good, but the second half saw some demand picking up. But unless inflation comes down and consumer sentiment improves, there will be reduced demand and next year will be equally challenging,” said Vinay Nadkarni, Chief Executive Officer, Globus Stores.
ENTRIES AND EXITS
The year also saw the exit of Esprit ( after breaking ties with the Aditya Birla Group) while Arvind Lifestyle Brands decided to include some more international brands such as Debenhams, Nautica and Next (after buying out the business from Planet Retail) in spite of some of them making losses.
Durable retailers such as Next Retail (part of Videocon Industries) and Croma (belonging to Tata-owned Infiniti Retail) did feel the impact on margins and decided to focus more on private labels.
“There has been pressure in selling the low- and middle-end durable items, but some amount of demand for big-ticket items such as 40-inch LED TVs. Sales grew in value but not in volume,” said K.S. Raman, Director, Next Retail. Others such as Croma decided to expand its private labels with affordable tablets and also initiated e-commerce to increase its distribution across the country.
Giving an overall picture of the retail industry, Punit Agarwal, CEO, Promart (discount chain) said, “2012 has been a whirlwind for the retail industry with the FDI as a game-changer and the economic slump that India has seen in the last few years. We saw the consumer spend going down and many players tweaking their business model to remain viable. With the retail realty pricing going upwards, the non-metro cities have become retail magnets. The downsizing of stores by retailers and adoption of new strategies by big-ticket players has changed the retail scenario in the past year.”
Game-changer
Indeed FDI was the biggest game changer for the retail industry, as it gave hope of getting capital at a low cost and the scope of creating better job opportunities in the future. “Spread of modern retail through FDI would create unprecedented job opportunities. For every 100 sq ft of space that we add, we will create at least 2 direct and 3 indirect jobs. Cost of capital is nearly 13 per cent in India compared to 1 to 1.5 per cent elsewhere in the world which was a distinct disadvantage to Indian retailers. Hence, FDI in retail is needed to give us the competitive edge,” Kishore Biyani, Chairman, Future Group, said.
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