Mumbai: From Indiranagar in Bangalore to Linking Road in Mumbai and high streets in cities across India, retailers had little to cheer during Diwali as high prices and the economic gloom forced consumers to keep their wallets closed.
“The stores were empty in key parts of Indiranagar...on the main days of Diwali,” said Shankar Suryanarayan, a senior retail executive with over 20 years’ experience in chains such as Lifestyle International Pvt. Ltd and Pantaloon Retail India Ltd.
“In fact, at a firecracker store I visited, I was the only consumer, and the owner was complaining that people are not buying at all,” said Suryanarayan, who now runs his own retail consultancy called QuickPro Services Pvt. Ltd.
The days before Diwali and after Dusshera failed to lift the mood among consumers or retailers. Slowing economic growth—which fell to a nine-year low of 5.3% in the quarter to March and rose slightly to 5.5% in the following three months—and obstinately high inflation have hurt consumer sentiment in Asia’s third largest economy.
“The mood wasn’t the greatest. There were a lot of empty stores on the street as retailers are also consolidating,” said Deven Mukhi, director at Solar Group, which leases and operates stores on Linking Road.
After the two annual discount sales, Diwali accounts for the largest part of yearly sales for Indian retailers. Typically, no discounts are offered on merchandise sold during the month-long Dusshera-Diwali festive period as retailers try to capitalize on the indulgent mood of shoppers.
Electronic retailers such as Vijay Sales typically double their usual monthly sales during the festive period. The company’s managing director, Nilesh Gupta, said he had no expectations of a sales boost this season. “We saw some (momentum) pickup in the last 10 days, but nothing extraordinary,” he said.
At Nilkamal Ltd, a home and furnishing retail chain, the experience was no different. “It’s the high prices,” said Manish Parekh, executive director, adding that the rupee’s depreciation against the dollar had increased import costs, making furniture more expensive by 12-15%.
For departmental store retailers such as Lifestyle, the festive quarter accounts for 30-32% of overall sales. “We have seen some trading in the last month, but remain cautiously optimistic and will see how sales fare in March,” said Kabir Lumba, managing director and executive director at Lifestyle.
For consumers, the festive season did not bring much cheer either.
“Household conditions continue to remain difficult—inflation remains high, increasing the cost of living, and add to this the reduction in subsidies, bonuses and incentives. All this impacts consumers, causing a deceleration in discretionary spends,” said Dhananjay Sinha, co-head of institutional research at Emkay Global Financial Services Ltd.
The slowdown in discretionary spending is also being felt by consumer packaged goods companies such as Hindustan Unilever Ltd, which saw volume growth of 7% in the September quarter compared with 9-10% growth in the year prior.
According to the Reserve Bank of India’s consumer confidence survey for September, consumers’ perception about their economic situation turned negative for the first time in four quarters as the cost of living kept increasing.