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Sales in stores drop as inflation hits shoppers, retailers

With customers slashing spending on apparel and other luxury good, most large format retail stores, such as Shoppers Stop, Pantaloons and Globus, have started offering 60% discounts.

Anuradha Shukla   New Delhi     Last Updated: July 30, 2011  | 00:00 IST

The deep hole being burnt into buyers' pockets by inflation is forcing retailers to offer early discounts to woo customers.

Buyers appear to be keeping branded apparel at a distance as price hikes curb their spending capacity. This, in turn, has left retailers scurrying to find ways to increase footfall.

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With customers slashing spending on apparel and other luxury good, most large format retail stores, such as Shoppers Stop, Pantaloons, Westside, Reliance Trend, Wills Lifestyle and Globus, have started offering discounts to the tune of up to 60 per cent.

"The sales (discounts) are early this year as the retailers are trying to beat the impact of higher price and inflation with prolonged discounts. And it is working, too," a senior marketing manager at Pantaloons, a part of the Future Group, told Mail Today.

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Most large retail chains are facing similar problems of falling sales, especially of expensive products.

"We have seen discriminatory behaviour of customers as the consumers defer their discretionary spends or are shifting to low-value brands to balance the impact of inflation. This has certainly some impact on sales," a marketing official at Shoppers Stop told MAIL TODAY.

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Most large format retail stores have started offering discounts up to 60%

>> Most large retail chains see fall in sales, especially of expensive products

>> Shoppers Stop has registered a 5% drop in sales volumes from a year earlier

>> Apparel sales have taken a hit after the govt imposed a 10% excise duty on branded garments

>> Inflation, rise in raw material prices and additional duty have adverse impact on discount-brand stores like Koutons, Cantabil, TNG and TQS

>> High prices have taken a toll on sales volumes forcing retailers to offer discounts to boost sales volumes
According to Shoppers Stop customer care associate and managing director Govind Shrikhande, the company saw a five per cent drop in sales volumes from a year earlier.

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Apparel sales have taken the biggest hit after the government imposed a 10 per cent excise duty on branded garments.

The compounded effect of inflation and rise in raw material prices as well as additional excise duty has had a bigger impact on the discount-brand stores, such as Koutons, Cantabil, TNG and TQS. According to Shrikhande, administrative costs and staff costs have gone up by about 89 per cent, which has hurt the margins.

Thus, in order to improve their margins most retailers have raised prices by about 12-15 per cent to offset high raw material costs and higher levy.

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However, even where margins have improved, high prices took a toll on the sales volume as is seen from the fact that most companies reported a drop in sales, forcing retailers to offer discounts in the hope of boosting sales.

Yet, most retailers lament that the discounts have not had the desirable effect and inventories are piling up.

Harkirat Singh, managing director, Woodland Shoes and Apparels, said, "This year, the impact of discount on sales was not up to market expectations, especially, in apparel where we are noticing inventory pile-up." However, some retailers say that discounts have boosted their sales and even cautious customers are coming back to their stores.

"Discount sales are very crucial to sales. About 25 per cent of our sales happen during the discount season, so it has an impact on sales," a senior marketing official at Westside said.

"This time we offered discounts up to 60 per cent, apart from other freebies. On the second day itself we saw our footfall increasing manifold. So, it is certainly working for us," he added.

Courtesy: Mail Today

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