New Delhi: The Indian retail sector will feel the heat of the global financial crisis, though growth momentum may stay in some areas, experts feel.
“Because of the global crisis, there would be decline in disposable income, and sales of upper end goods as well as lifestyle items would get hampered somewhat, but utility items would not be hit hard,” KPMG Advisory Services Executive Director Narayanan Ramaswamy said.
Besides, i-mint Founding CEO and marketing strategist Vijay Bobba said “the overall growth rate is going to come down. On average there would be 20-30% cut in growth for retail players. But the decline of Indian retail players is significantly less than their multinational counterparts”.
Elaborating further Ramaswamy said the downtrend is more because of the credit crunch and scaled-down expansion projects and not because of declining spending by customers.
In the present scenario there would not be any major consolidation drives as companies would rather have liquid cash in hand than resort to a buyout, experts feel.
Companies are adopting cost-cutting measures and are looking at investing wisely, so that there is reasonable return in the long term.
Retail firms will resort to cost cutting such as delaying capex plans, and minor changes in portfolio. Even if there are any consolidations, they would be strategic and very few in number.
“There has been curtailment in expansion, and grand plans are being cut. Besides, companies are exiting the non-performing investments. Overall there is rationalisation,” Bobba added.
Regarding job cuts, industry experts feel the layoffs are basically a “cutting the flab” measure and the situation is not as bad in India as it is in other parts of the world. There would not be any new jobs for now and even if there are layoffs, they will not be drastic.
“As we are slowly moving from a supply-constrained environment to a demand-constrained one, retail players should adopt strategic advertising methods to attract customers,” Bobba said.
India’s retail sector is forecast to double from $350 million by 2015 and has attracted some leading retailers like Wal-Mart, Tesco to the country.