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Slowdown Facts + What is Worrying Retailers ?

April 6, 2009


modern retail mall indiaWhat are the facts about the Current Slowdown with respect to retailers ? Here is the outcome from a recently conducted survey by KPMG about Retail Sector’s Facts.

  • Confidence of 53% of the retailers is shaken with an additional 7% exhibiting low and uncertainty. However, 40% are confident to sail through the tide.
  • 70% of the store managers admitted to falling footfalls. They are trying their best to combat this slowdown through constant promotional offers and deep discounts, consumers are expected to cut down on their discretionary spending.
  • The slowing sales are resulting in lower inventory turnover and increasing working capital requirements for retailers. This in turn has resulted in liquidity pressures for many retailers. To free the cash that has been locked, a large number of companies have been trying to reduce the inventory on their books and shorten working capital cycles.
  • Margin contraction- Interest burden adversely impacts profits

What is Worrying the Retailers ?
Like I have said in the past, the foremost worry to any retailer is the Poor infrastructure – Underdeveloped supply chains, lack of strong cold chains, poor warehousing facilities, bad roads, etc. Additionally, The supply base is highly fragmented with a large number of intermediaries squeezing the margins of all involved, which also includes the retailer. This also impacts handling, theft and higher shrinkage.

And you can’t blame others for your own mistakes. Retailers were also caught on the wrong foot by crowding in unattractive locations by paying exuberant rentals. Inability to compete with traditional retail and over reliance on debt funding with an assumption that the trap will never dry has mounted the tide in difficult times.

In the next post we will discuss about Strategies highlighted by KPMG to Indian retailers to fight the slowdown.

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