After ‘sale’ rush, retailers seem back to the grind

Traditionally, end-of-season/mid-year sales used to start in the first week of July. But, this year, some retailers started them two weeks in advance, in mid-June. What gives?

As shoppers, beaten down by soaring fuel prices, stubborn inflation and economic slowdown, went into hibernation, many retailers’ inventories acquired dimensions of mountains by June.

Hence the decision to advance the end-of-season sales (even though a similar tactic in January came to seen by some as doing more harm than good to the industry). Hence the deep discounts between 50% and 70% on pretty much everything, including inveterate shoppers’ ‘must-have’ brands like French Connection, Zara, Levi’s, Nike...

Shoppers, it is said, now expect huge discounts at sales. “The discounts have increased a bit at some places because the last two quarters have been soft. And retailers need to make up on this,” said Anaggh Desai, CEO of the Bombay Store which sells premium goods at its outlets and online.

Effect? For one, there is cutthroat competition among retailers. For another, shoppers are back at malls in droves to eye and buy ‘the stuff’, including discretionary goods and clothing, amongst the worst-hit categories so far, according to analysts.

For instance, no sooner had Spanish fashion retailer Zara’s winter collection sale started on July 5 than shoppers thronged the Palladium in central Mumbai, queuing for hours at the trial rooms and billing counters. Shoes, handbags, t-shirts and such items lay in unruly heaps as eager consumers went through the motions of retail therapy.

Abhishek Ranganathan, retail sector analyst at MF Global, explained the frenzy. “A combination of slowdown in economy and higher apparel

prices had affected impulse purchases. So, discount sales attract more consumers as they are able to buy more or less the same product at lower prices.”

Agreed an official at a leading apparel retail chain who will start his own online venture soon. “Consumers are waiting for sales and bargains. And this trend is growing stronger by every year. With several e-commerce sites that offer discounts through the year, consumers are spoilt for choice.”

No wonder, where May was extremely difficult, June-July (so far) proved a cake walk, said Pinakiranjan Mishra, an Ernst & Young (E&Y) analyst.

There is no denying the excitement over the sudden rise in footfalls and spends at malls and food courts; but this could prove a short-lived phenomenon. An overall retail rebound is likely to take a while, cautioned retail experts.

For, once the discount sales end sometime in July-August, retailers fear cash registers will again begin to ring infrequently.

“Brands will have to be compelling as well competitive. The next two years look tough for retail,” said the apparel chain official.

Agreed Mishra of E&Y. “There are some positive signs, but uncertainties remain. Delayed monsoon and concerns about the economy can impact the market sentiment, earnings and the consumer’s willingness to spend.”

There are unmistakable signs of a developing gloom-and-doom story already. The BluFin Consumer Confidence Index (CCI) for June dipped to 40.3 (down 1.4 points from May’s 41.7), after rising for five straight months since January, suggesting that consumers have turned pessimistic not only about the future of the Indian economy but also the present.

BluFin’s CEO Rashid Bilimoria said, “The drop in the CCI score might be beginning of a negative trend. The decline in the employment sentiment, which has been flat for the past six months, denotes that pessimism is also rising regarding employment, while spending sentiment and inflation sentiment continue to remain extremely subdued. Overall, the downturn is a cause of concern.”