While sales of homes may be subdued this Diwali, small-ticket items are selling well. Indeed, not too many have bought an apartment in the last couple of years and because there’s no EMI to take care of, consumers seem to be up for binge shopping.
Moreover, thanks to savings from purchases made online, brick and mortar retailers too could end up doing decent business. Arvind Singhal, chairman and managing director of Delhi- based retail consulting firm Technopak, estimates e-commerce discounts have resulted in households saving some Rs 15,000-20,000 crore.
As a result, some retailers have seen same-store sales grow a healthy 18-20% in October. Govind Shrikhande, managing director of Shoppers Stop, believes consumption is being driven by savings from lower inflation and lower fuel costs. “Salaries have increased by an average 10%-12% whereas inflation and fuel costs have dropped, leaving more in the hands of consumers,” Shrikhande explained. Shoppers Stop reported a rise in same-store sales of 20% in east India during Durga Puja and expects to do as well during Diwali. So far, November sales indicate that the bigger brick-and-mortar outlets will generate high double-digit growth in sales.
Retailers are making the most of the festive spirit since it’s unlikely the mood will last long enough to make a big difference to their profits for the year. J Suresh, managing director and CEO of Arvind Lifestyle, which has the licensing deal for American apparel major GAP, confirmed that sentiment has definitely improved compared to the past three quarters but he was not sure whether that would result in any astronomical surge in sales. “Hopefully, the momentum will last beyond the festive season and we’ll see a good start to the new year,” Suresh said.
Suresh’s caution is warranted. The brisk business by e-retailers notwithstanding — Flipkart, for instance, claimed its gross merchandise value or GMV rose three times during its ‘Big Billion Days’ sale in October, while Snapdeal said its GMV came in 15 times more than on regular days — no one’s convinced consumer demand is reviving just yet. Mukesh Kumar, vice-president of the K Raheja Constructions-owned Infiniti Mall in Mumbai observed that customers shying away from premium purchases like housing has resulted in higher disposable income.
“While for most of the year people have not spent, festivals do have some sentiment attached to them,” Kumar pointed out. There’s truth in that. Pavan Soni, a Kolkata-based, 32-year-old relationship manager with a large conglomerate, told FE she can’t afford big-ticket purchases at the moment.
“If I was to take a loan to buy an apartment costing Rs 50 lakh, the EMI would be 35% of my salary. How can I afford this, if my salary is rising by just 10%,” Soni asked. However, she’s not about to skimp on gifts for the family. Which is probably why nearly all brick-and-mortar outlets are reporting higher conversions of footfalls into purchases. While these stores are not in a position to lure buyers with the kind of discounts that e-retailers do, they’ve been better prepared this year with campaigns and exclusive brands. They’ve also used data analytics to target customers better. Sadashiv Nayak, CEO, Big Bazaar, confirmed strong celebrity associations and personalised reach through loyalty platforms helped some new fashion categories fly off the shelves.
As for e-retailers, while categories such as electronics and footwear (mainly sports shoes) found lots of takers, options to gift wrap items and deliver it to far flung locations were particularly popular this time around.