As a consumption slowdown grips the economy, even festival season sales (September-October) have taken a massive hit this year, with sales down around 40 per cent compared to a year-ago period.
The Secretary General of the Confederation of All India Traders (CAIT), Praveen Khandelwal, says the major reasons for decline in sales are cash crunch of consumers and the mass shift to the online markets on the back of “deep” discounts. Speaking to IANS, he said that the footfall in the brick and mortar shops including malls has taken a hit by around 60 per cent in comparison to last year
He was however, of the view that sales may witness a spike on ‘Dhanteras’, October 25.
“So far in comparison to last year, sales are down 40 per cent (during the festival season). Although traders have lost every hope, the jewellery sector feels, may be ‘Dhanteras’ would help jewellery along with utensils and kitchen equipment sales,” Khandelwal told IANS.
He also noted that the overall sentiment in the market is marked by “slowdown”.
Further, as per Khandelwal, most of the retailers did not even fill their inventory ahead of the festival season, as done traditionally.
“People have not increased their inventory this year for the festival season. Generally, traders fill their inventory before two months, with a hope that the sales will rise, as prices then remain subdued,” he said.
Referring to the lack of sales, he mentioned that around 70 per cent investment by retailers on inventory for Diwali has become “dead” investment.
Consumption slowdown in the country has been witnessed over the last few quarters. Although the government off late has announced a slew of measures to enhance liquidity and boost demand, so far the steps have not born fruit.
Khandelwal also puts a significant part of the blame of decline in offline retail sales on the heavy discounts on the online platforms.
Although the offline market is going through a lean phase despite festivals, major online platforms claim significant rise in sales during their festival sales whereby they offer discounts and offers.
CAIT has been protesting against the “deep discounts” for long and has recently asked the government to check whether the online platforms violate the norms for foreign direct investment (FDI).
Following which the government has sought replies from the major platforms with FDI regarding the allegations.
Despite the gloomy situation, there are instances of market players reporting a rise in their offline sales.
Lalit Agarwal, Chairman and Managing Director, V-Mart Retail said: “We have seen decent growth in sales during the festive season. When we talk about online retailers, the majority of their sales come from mobile phones and it didn’t have an impact on our sales in small towns. We will continue to see growth in sales since marriages will start which means festive season will continue even after October.”
By and large, the economy which is going through a prolonged phase of low demand and consumption across sectors would take some more time to revive and the retail sector might have to be patient for the return of the consumers and sales in good numbers.
Conventional markets hit by e-commerce companies
E-commerce companies are buying and selling goods on the Internet and are expanding their footprints everyday. This has impacted the business of local markets in a big way. Even during the festival season, most of the local markets here continue to look deserted, said the traders association on Monday.
Business chambers and various market associations have been protesting against the expansion of online business platforms and e-commerce companies for several days, and have accused them of unfair practices.
Electronics and mobile dealers say they have been the worst affected. The business organisations have shot out memorandums and petitions to the Centre urging it to come to their rescue by restricting trade activities of e-commerce companies.
The construction workers, electricians and painters are without work. The interior decor shops have few customers, as a large number of real estate projects are in a limbo. The jewellery shops and automobiles dealers report a cold response from clients on the eve of festivals.
Every year from the first day of Navratri to the 14th of December, the first phase of the festive season, gives traders an opportunity to grab maximum sales. Thirty percent of the total value of business in a year happens during this festive season but this year traders are desperate and disappointed with the sales. With barely one week left for Diwali, commercial markets are facing a demand slump. They have lost hopes of recovering from accumulated losses.
According to the Confederation of All India Traders (CAIT), the apex organisation of traders across the country, the main reason for such a dismal scenario is “due to highly surging sales in e-commerce market which is offering huge discounts on various products and even indulging in predatory pricing and adopting all kinds of unfair business practices which have greatly attracted customers to online markets.
Recently, in the festival sale put up by Amazon and Flipkart, both companies have sold goods worth around Rs 19,000 crore in just four days, which makes it clear that a large part of the business of brick and mortar shops had already been shifted to the online portals.
CAIT National President B.C. Bhartia says that the retail trade in India generates an annual business of about Rs 45 lakh crore out of which during festive season alone business of about Rs 6 lakh crore is conducted.
CAIT Secretary General Praveen Khandelwal said, “due to unscrupulous business practices of online companies, there is a decline of about 60 per cent in the business of mobile sector only, 35 per cent in FMCG and consumer durables, 35 per cent in electronics goods, 30 per cent in electrical appliances, 25 per cent in apparel, 20 per cent in footwear, 35 per cent in gift items, 25 per cent in decorative items, 15 per cent in building hardware, 30 per cent in kitchen equipment, 30 per cent in computer and computer goods, 35 per cent in grocery, 20 per cent in watches, 30 per cent in beauty and cosmetics, decline of 35 per cent in luggage, 30 per cent in fitness and sports goods, 40 per cent in fashion clothing and about 30 per cent in toys and if the market goes on like this for another week, then on this Diwali festival, only due to unethical business model of e-commerce companies, there will be a drop of about 50 to 60 per cent in the total business of traders, which is quite alarming.”
The CAIT office bearers said that due to the great slump in the markets and absence of festive spirit, the trade leaders across the country have decided not to decorate the markets on this Diwali as a mark of protest against e commerce companies who are bent upon controlling and monopolising the country’s vast retail trade by flouting FDI policy and adopting unfair business practices.