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Retail chains gear up to combat slowdown

Posted by retailigence on January 2, 2009

KOLKATA: The Year-end sales may have been good, but the country’s leading retail chains are now gearing up to fight for an overall slowdown in sales in the second half of the fiscal. The big retailers are looking at inventory optimisation, efficiencies in supply chain, better product assortment and reducing the number of stock keeping units (SKUs).

The retailers feel these strategies will ultimately help them tide over the fall in consumer demand, improve gross margins and safeguard their net profit. All such initiatives come at a time when the country’s apex retail trade body Retailers Association of India (RAI) feels the growth of the organised retail industry will fall down from 35% to 10-12% in 2008-09. The organised retail industry in India is valued at Rs 27,000 crore as against the total retail market of Rs 20 lakh crore.

“Despite of good year-end sales led by promotional offers, there has been a fall in overall sales in the October-December period. While value retailers are slightly better-off, the worst hit are those targeting the upper-middle class. Hence, almost all retailers have started taking initiatives to reduce cost and drive efficiencies,” RAI CEO Gibson Vedamani told ET.

India’s largest retailer Future Group is looking at customising product assortment in each of the stores to suit a particular locality and has taken several steps to improve processes. Future Retail CEO Rakesh Biyani said such initiatives should help better sales and margin realisation over the next 2-3 quarters.

Shopper’s Stop has decided to spruce up consumer experience to get the maximum share of the consumer’s wallet and is also tightening its supply chain. “We are scaling down our back-end infrastructure. For instance, if we had earlier planned a distribution centre for our hypermart Hypercity, keeping in mind the need for 20-30 upcoming stores, we are now building just half of the space to meet immediate requirements. This helps us save on our capital,” managing director BS Nagesh said.

Tata Group’s book-music-gifts retailer Landmark has started inventory optimisation to ensure better cash utilisation. “We are cutting down on our stock by lowering the number of units of a particular SKU. This will ultimately improve the efficiencies of suppliers,” said COO Himanshu Chakrawarti. Mr Vedamani said several retailers are even lowering operating costs such as re-negotiating rentals, electricity cost and are rationalising employee salaries. “If all such efforts even translate into 2-3% improvement in gross margins, it will ultimately secure their net profit,” he said.

Sources:-Economic Times


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