Drawing people to the store is one thing, getting them to buy is quite another.
If recent surveys are any indication, this festive season will be hard on the retailers, for the consumer appears to have made up his mind on not buying anything that isn’t essential.
Consumer confidence is at its lowest level in 2012, according to a BluFin survey. At 36.7, the Consumer Confidence Index for September weighed in 2.9 points below the August level --- the biggest month-on-month decline since October 2011.
Blame it on economic uncertainty and inflation. Economic growth during the quarter ended June was 5.5%. On the other hand, soaring vegetable prices pushed up retail inflation to 10.03% in August, up from 9.86% in July.
A gloomy job market hasn’t helped either. A recent survey by recruitment firm Manpower said India’s employment scenario is the weakest in three years. A Ficci survey pointed out that the waiting period to find a job has increased from 2-3 months to 9-10 months, with many people settling for junior roles.
An Assocham survey appears to support the BluFin survey findings. According to it, consumers in Delhi will lead the pack in penny pinching.
Even Mumbaikars are in low spirits, according to the Assocham survey. Over 70% of respondents from middle and lower income families in Mumbai see a lacklustre festive season, given a steep rise in inflation, fewer job opportunities and shrinking salary packages.
Amitabh Mall, partner and director, Boston Consulting Group, said consumers are increasingly ticking off all discretionary items that don’t qualify as essentials from their list. “Big ticket purchases such as electronics and cars are the first to take a hit. This is followed by apparel and groceries. We had seen subdued demand even in the last festive season and this year doesn’t look any different,” he said.
Retailers were eagerly looking forward to this festive season after two subdued quarters, hoping it would help make up for lost sales and profits. But it looks like they will have to wait longer.
“We don’t expect sales to improve dramatically. It may be better than what it was last quarter but not what it generally used to be during festive seasons,” said Sanjay Vakharia, director at Spykar Lifestyles.
Consumer durables makers were also hoping for a sales boost.
“Generally October-December quarter accounts for 25-30% of sales. However, this festive season may not be the same. The demand has been subdued so far and it may improve around Diwali. However, we see only a marginal improvement,” said Shantanu Das Gupta, vice-president, corporate affairs & strategy - Asia South, Whirlpool.
Clearly, consumers have other ideas. Going by the surveys, shoppers are likely to go bargain hunting on necessary items and keep away from goods they do not immediately need.
As many as 51% of respondents in the Assocham survey said they plan to spend less this festive season as the prices have gone up; another 20% said they will cut down on spending as the value of savings has gone down; 17% said they are saving up for big purchases; and the rest said increased equated monthly installments were burning holes in their wallet.