Retailers take on online biggies, eye consolidation in 2017
PTI December 29, 2016
Riding high on mergers and acquisitions, retail players made a strong comeback this year, taking online giants head-on in doling out deals and discounts, and the trend is likely to continue next year.
However, the government's surprise move to demonetise high denomination notes last month made a huge dent in retailers' earnings, with sales falling by up to 70 per cent in early days. Going forward, retailers expect impact of cash recall to continue for a few more months into 2017, but hope to lure customers with new brands and offerings. After being hit hard by online retail last year, debates on e-commerce eating into the retail pie somewhat subsided this year, with heavyweights like Reliance, Mahindra and Future Group expanding their own online ventures to take on players like Amazon, Flipkart and Snapdeal.
In May, Aditya Birla Fashion and Retail -- which had acquired Pantaloons a few years ago -- further expanded its kitty with addition of Forever 21. It bought the Indian operations from Diana Retail, promoted by DLF Brands for $26 million (around Rs 175.52 crore). In another interesting deal, Future Retail acquired online furniture seller FabFurnish.com from its owner, Bluerock eServices Private (BEPL).
Besides, Mahindra Retail merged operations of Babyoye, which had both online and offline presence, with that of FirstCry.com-one of the larger online players in the maternity and babycare space. The next couple of years will see more consolidation and a much greater maturity of omni-channel retail and sustainable retailing practices, Retailers Association of India (RAI) CEO Kumar Rajagopalan told PTI.
The Mukesh Ambani-led Reliance Industries, which is making a significant push in telecom with Reliance Jio, also forayed into online retail with its fashion portal Ajio.com. However, gains made by retailers during the year came under pressure due to demonetisation. Demonetisation of Rs 500 and Rs 1,000 notes had an immediate impact on retail, with sales of retailers seeing a plunge of up to 70 per cent in the first few days.
Sales of large discretionary items like electronics too plunged. However, essential consumable goods by stores that accept cards/digital money saw an uptake, Rajagopalan said. Giving outlook for the next year, Rajagopalan said impact of demonetisation will continue for the first few months of 2017. He, however, added that demonetisation served as a wake- up call for retailers that had not adopted modern retailing practices such as accounting every sale and accepting digital payments.
Demonetisation has opened up a host of opportunities for innovative partnerships between digital wallets and retailers to embrace digital technologies, he said. 2016 came as a delight for customers as foreign brands like Ted Baker, Scotch and Soda, Izabel London and Simon Carter announced their entry into the Indian market.