If the monsoon might dampen rural buying, the goods and services tax (GST) could hit brick and mortar retailers in the festive season. Having already offered hefty discounts before the GST rollout, retailers have little to offer consumers now. Moreover, most of them, especially single-brand retailers, have fresh stock on the aisles after getting rid of old inventory pre-GST, for which they are expecting to recover squeezed margins.
Industry watchers say growth in festive sales this year would merely top 5% of last year. Clearly, online players will make the most of their sale periods, which start from September 20. “Last year both Dussehra and Diwali were in the same month, but this year, Dussehra is in September and Diwali in October. With five weeks to Diwali, the aim is to maximise sales and drive standard growth in case of same-store sales,” said Rakesh Biyani, joint MD, Future Retail.
As per industry estimates, retailers posted close to a 20% drop in sales in the months of June, July and August compared to the same timeframe a year ago, and it is only towards the end of August, when new stocks arrived, that consumers returned to shop.
“At the time of pre-GST stock clearance, consumers were worried about a price hike after the rollout of GST and bought generously. Which is why we do not expect a huge increase in sales this festive season,” explained Vasanth Kumar, ED, Max Fashions, part of Landmark Group.
He pointed out that while the multibrand retail outlet posts a 30% growth in overall sales every festive season, this time, Max Fashion is expected to post only about 18% growth. Similarly, same-store sales growth is expected to be lesser, at 13%, compared with the previous festive season’s 17%.
And, as multi-brand retail outlets still plan to roll out offers and discounts soon, single-brand players hope to sell their products at full price. “We would be selling our products at full price this festive season. We expect new stock to drive sales, thereby clocking a 10-12% growth in same-store sales,” said Harkirat Singh, MD, Woodland. In the same vein, Rajesh Jain, MD and CEO, Lacoste India, said the company expects about 10-20% growth in same-store sales this festive season on the back of new stock, which will be sold at full price.
Industry observers point out this might not happen. “After two slow quarters in terms of sales, this festive season is expected to play a key role in driving sales. But given the fact that e-tailers will be offering very steep discounts, offline players will be forced to battle it out. While multi-brand retailers have already begun to advertise various discounts, single-brand players might be forced to follow suit once they see a dip in sales,” explained Rajat Wahi, partner and head, consumer, Deloitte Touche Tohmatsu India, a market research firm.