Retailers gear-up for slowdown

Retailers gear-up for slowdown

New Delhi: What over heated real estate prices did not do, double-digit inflation and global slowdown has. Retailers in India say expansion plans will be hit and they are looking at measures to combat a possible slowdown in some sectors.

One of the first causalities will be large format stores. After experimenting with multiple store-formats like Hyper, Super, Daily and many others are now looking at settling on smaller shop floors.

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da021e62-a11d-11dd-b906-000b5dabf613.flvRoopa Purushothaman, the chief strategist at Future Group says, “I think there is a lot of space for smaller formats. We have seen that within Future Group as well. I don’t think one is going to cannibalize the other. But I think we are going to see smaller formats taking a bigger presence."

Ashish Kapur, the managing director of Yo! China, the largest Indian Chinese fast food chain agrees with this. Yo! China has three formats — restaurants, take-aways and carts. Out of all of these, the carts give the highest return on investment. “In the cart model, if a particular location doesn’t work we take the cart out and we can re-use a 100% of asset and we park the cart somewhere else."

Though the revenue from a cart is less in comparison to a restaurant but it is a safer investment than opening a restaurant in a wrong location. Retailers say they are observing a tempering in consumer spending in big-ticket items like white goods, food and furniture. And many have begun price sensitive stocking rather than providing a larger variety to consumers. Many stores are replacing higher priced goods with cheaper items.

"You are seeing a lot of strategies towards looking at price sensitivity. I think the whole price sensitivity question is happening and its happening particularly in low margin sort of categories like food and that’s going to continue," says Roopa.

On the whole, retailers are putting up a brave front and insist that even with double digit inflation and a conservative GDP estimate of 6%, they expect the market to grow to $200 billion in the next five years.