Retail majors' sales decline

Same-store sales at some of India’s biggest retail groups have slipped into negative territory for the first time in six years, forcing the fledgling organised retail sector used to heady growth rates of 35-40% to re-orient strategies to ride out the economic slowdown that is pinching customers’ wallets.

Future Group, the country’s largest retailer and the company behind brands such as Big Bazaar and Food Bazaar, reported a 9% year-on-year decline in its same-store sales for last quarter of 2008 against a 9% growth in the year-earlier period. Shopper’s Stop has reported a 3% decline for the October-December quarter against a 7% rise in the preceding quarter.

Similarly Vishal Retail, one of India’s top five retail groups, reported a decline in its sales growth for the quarter to December 08, which accompanied a decline in customers visiting its stores. This is alarming as the last quarter of the year is a festive season and traditionally a very busy period for retailers.

“The coming four quarters will be quite challenging for retailers and some recovery can only be seen in the next festive season,” said B S Nagesh, CEO and customer care associate of Shoppers Stop.

Same-store or like-for-like sales are sales generated by stores that have been open for a year and provide a more accurate picture of performance trends in the retail sector, unlike total sales which can be flattered by new store openings. Same-store sales are crucial since older stores bring in most of the business until the newer stores consolidate their position in new markets.

With the economic slowdown forcing customers to tighten their belts as the growth euphoria of the past five years fades, industry experts say retailers face increasing cannibalisation risks as several players vie to attract the same customer.