A year on, the company is talking of improving revenues per sq ft, pushing same-store sales andstore rationalisation. In fact, in the last one year, Spencers has shut down many under-performing stores, juggled product categories, altered shelf space allocation, and even right sized storesshrinking the store size or moving to a smaller location.
What Spencers is doing is not that different from Pantaloon Retail, the biggest retailer in the country, which has put on hold plans to add 30 new Big bazaars, that is, 1.5 million sq ft of fresh retail space. Its cash-and-carry business has been shelved and revenue projections for 2011 have been pushed back to 2013. Subhiksha has run out of cash. A dozen other retailers are taking a very hard look at their entire business.
Analysts say the ghost of 2008 will haunt retailers in 2009. Macro-level issues facing retailers such as shrinking margins, lower same-store sales and debt and financing problems will lower new store development.
A recent KPMG report, Indian Retail: Time to change lanes, paints a bleak picture. It says, Indias organised retail sector which saw a 11% decline in sales in December 2008 will continue to see a slowdown in 2009 with a sales growth of 8-12%, mainly on account of falling footfalls and poor conversion ratio. The report says the slowdown will last another 12-18 months depending on government incentivesincreasing spends on infrastructure, development initiatives and other activitiesto stimulate the economy.The good thing is, the retail sector is expected to be among the first to benefit when the economy improves. So while retailers grapple with tumbling sales and mall traffic, tight inventory controls and smaller price breaks could help cushion the fall.