Tuesday, March 31, 2009

Slowdown bites retail sector, sales fall to 11 per cent

Hit by the economic slowdown, the country's retail sales growth sharply fell to 11 per cent in December 2008 from 34 per cent in the like period of 2007, according to a study by global consultancy KPMG.

"Falling footfalls and poor conversion ratio have led to a decline in sales growth to 11 per cent in December 2008 compared to 34 per cent in December 2007," said the KPMG report, 'Indian Retail: Time to change lanes', released on Tuesday.

Factors like store rationalisation, working capital management, regionalisation, cost optimisation and manpower resizing are some of the key "top of mind" issues for the retailers in the current context, KPMG said.

The study added that the the slowdown was likely to last 12-18 months, but dependent on the government policies.

It urged the government to increase spending on infrastructure and other development initiatives.

"We believe that players which take immediate strategic measures will be the dark horses. Be it store rationalisation, change of supply chain, consolidation of operations, improvement in IT infrastructure, retailers need to think quick to protect their margins,” KPMG global head of markets Neil Austin said.

The retail sector is also bearing the brunt of the liquidity crunch, the study said.

"Slowing sales resulting in lower inventory turnover and increasing working capital requirements to fuel growth have resulted in liquidity pressures for many domestic retailers,” KPMG (consumer markets) national industry director Ramesh Srinivas said.

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