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The great Indian retail meltdown: A KPMG study
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Saturday, 13 June, 2009, 08 : 00 AM [IST]
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Our Bureau, Mumbai
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After an upward growth for the last five years, India's retail sector has started to lose steam. In a survey by consultancy form KPMG, 70% of the respondents stated that the slowdown has adversely affected footfalls. Apart from this, poor conversion ratios have led to declining sales growth figures - 11% in December 2008 compared to 35% in December 2007.
The study, Indian Retail: Time to Change Lanes, looks at the changing contours of the retail industry and examines the drivers that are likely to have an impact across various categories of the sector. It focuses on how these drivers are affecting various players across the retail value chain and suggests strategies that could help the m cope with the situation.
The survey expects the current slowdown to last 12-18 months conditional on government incentives in increasing expenditure on infrastructure, development initiatives and other activities to stimulate the economy. "We believe that players who take immediate strategic measures will be the dark horses. Be it store rationalisation, change of supply chain management, consolidation of operations or improvement in IT infrastructure - retailers need to think quickly to protect their margins and become tougher for more challenging times," says Neil Austin, KPMG's global head of marketing.
It is expected that there will be an increased focus on value retail in the coming months and a shift away from lifestyle goods. Food retailing and FMCG products are likely to continue to grow since commodities here remain largely insulated from the slowdown. Closing unprofitable stores, the rationalization of capital expenditure and opting for low rent premises will be short-term focus areas for retailers.
The KPMG survey also revealed that while attracting customers was one of the top concerns for retailers, investment in consumer research was not amongst one of their top priorities. The market watchdog believes that companies that invest in customer relationship management and consumer research analysis would stand to gain against those who take customers for granted.
Comments: This may be a temporary phenomenon.As the Indian economy finds its way towards consistent growth, although with lower expectations, retail for India will start expanding.
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