Santa Shoppers: Some retailers post higher sales than Diwali!

27 Dec,2013

By Writankar Mukherjee & Sagar Malviya

 

Guess what Santa got retailers this Christmas? Double-digit sales growth and plenty of middle-class consumers in stores, making it the best-ever revenue season for several of them this calendar year. Sales are up from the Diwali period and even the year earlier, reflecting a newfound confidence among consumers.

 

Retailers attributed this sudden surge in sales to several reasons – the return of middle-class consumers less worried about spending with vegetable prices cooling down, an improvement in consumer sentiment after assembly election results, a drop in temperatures in the north and east triggering sales of winter wear, and year-end festive spirits. Plus, banks have reduced interest rates on housing, consumer durables and personal loans in the last two months, adding to the seasonal bonhomie.

 

This is reflected in footfalls at chains such as Spencer’s Retail, Woodland and The Mobile Store, which say sales in the past week have surpassed even the Diwali period in absolute revenue. Shoes and apparel maker Woodland said revenue in the week to Christmas was 30% up from what it was in Diwali, while it’s been 16% more at Spencer’s.

 

Kishore Biyani

“Consumer demand in most segments was crazy and shot up drastically in the last three days compared to subdued sales numbers during the last two months,” said Kishore Biyani, CEO of India’s largest retailer Future Group. “This year’s Christmas sales were high compared to last year, which were low due to the Nirbhaya impact. Yet, demand remains inconsistent.”

 

Spencer’s Retail president and CEO Mohit Kampani said consumers are splurging on both fresh and processed food, staples, wine and beverages like never before.

 

The high sales growth comes after a subdued festive season in October-November when most consumers shied away from heavy spending as rising food inflation and interest rates took a bite out of disposable income. Economic growth may be in the process of picking up, having risen 4.8% in the three months ended September compared with 4.4% in the quarter to June. Finance minister P Chidambaram last month pegged FY14 growth at 5% to 5.5%, which means a stronger second half may be under way. Growth last year hit a decade-low 5%.

 

To be sure, it’s not clear if the year-end sales surge will translate into a sustained uptrend. “Sales fell into the negative territory post Diwali, but the last few days have been exceptional. The election results, too, seem to have boosted consumer sentiment,” said Mr Kampani. He said same-store sales at Spencer’s had jumped 20% nationally in the last 10 days compared to 7% to 8% during Diwali.

 

At Future Group’s Food Bazaar chain, sales rose 30-40% in most categories on Christmas Day over last year. Sales of categories such as chocolates and biscuits grew 50% while soft drinks went up by 30%, more than double the usual growth. Devendra Chawla, chief executive at Food Bazaar, said while most retailers run offers and promotions only around Diwali and other festivals, it ran a special ‘best of the year’ offer during Christmas, which led to many consumers upsizing or upgrading, which, in turn, increased the ticket size.

 

Middle-class consumers are back in the market, said Himanshu Chakrawarti, CEO of The Mobile Store, India’s largest cellphone retail chain. That has pushed up demand for mid-segment handsets in the Rs 6,000-15,000 range. “Be it Micromax or Samsung’s mid-range Galaxy series, the mid-segment handsets have triggered revenue, which is up by almost 30% over the same period last year. Without accounting for Dhanteras sales, revenue has been much higher now over the Diwali sales,” Mr Chakrawarti said.

 

The colder weather in parts of India has also led to higher numbers. While seasonal demand kicked in a bit late this time, the last few days have seen strong growth for winter wear, said Shoppers Stop managing director Govind Shrikhande. Woodland MD Harkirat Singh said jacket sales usually pick up around Diwali, but this year, they didn’t due to the festival of lights coming early and the late onset of winter. “Hence, the full impact of winter wear sales is felt now and has pushed up average billing sizes over Diwali since jackets have higher ticket prices,” Mr Singh said.

 

Even consumer durable and television sales have risen in the last few days. Sales have been buoyant in certain territories such as the south and the metros, which have boosted revenue in a year that the market was relatively weak, said Sanjeev Agarwal, sales head at India’s largest electronics company LG Electronics. “It’s like an unexpected, last-minute flip in sales for the industry,” he said.

 

Source:The Economic Times

Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

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