Physical stores record growth as discount schemes vanish from e-tailing

Brick and mortar retail stores are witnessing record growth as discount schemes seem to vanish from the online fashion portals. With the lure of discount offers fading away from the online fashion portals, the sales growth is back in the physical stores. Future Group’s Central and Brand Factory, Aditya Birla backed Pantaloons and Trent’s West side, recorded same store sales growth during the last few quarters. Same store sales growth (SSG) being a critical parameter record a retail stores’ performance, the performance of the big format retailer’s same store growth indicate a positive outlook for brick & mortar stores. While Pantaloons has recorded 16 percent same store growth in the first quarter of FY 2016-2017, Central, Brand Factory and Westside recorded 10, 10.01 and 8 percent respectively.

Large format fashion stores see growth

The market showed a clear shift with shoppers flocking back to large format brick and mortar fashion stores as online marketplaces ended the gimmick of discount offers. Central, owned by Future Lifestyle Fashions (FLF), posted a 10 percent growth in Q1 FY17, one of its best in the recent past, while FLF’s other retail formats such as Brand Factory, posted SSG of 10.1 percent in Q1 FY17, almost double of corresponding quarter in FY16. Trent’s Westside posted an eight percent SSG in FY16, one of its best in recent years and Raheja-owned Shoppers Stop posted over 8 percent SSG in FY16 and around five percent SSG in Q1 FY17.

The growth is clearly a result of increased spending power among consumers, rising momentum for development which is creating a positive sentiment coupled with the ecommerce portals reducing government scheme, as mandated by recent policies. According to Wazir Advisors, government’s policy initiative played a crucial role in bringing back customers to brick and mortar stores. Deep discounts are almost gone and the key lure for customers to buy online is much diluted. Brands have actively worked to reduce the channel conflict between e-commerce and physical stores and have worked to curb predatory discounting by e-tailers. They have understood that physical stores will be the key to their brand building efforts and they cannot let them suffer.

Increased walk-ins boosts charts

Experts believe the enormous budget spent by online giants for aggressive promotion of fashion and lifestyle brands have resulted in increasing fashion awareness in customers. Future Group’s CEO Kishore Biyani states their fashion business grew rapidly over the past two years as more customers came to experience and buy brands within retail environments. Tata-owned Trent in its latest annual report said that besides improving look and feel of stores, launching newer in-house brands such as Wunderlove (lingerie), Sassy Soda (fashion for young curvier woman) and StudioWest (cosmetics) has encouraged customer offtake and helped in posting a healthy like-for-like growth. In a recent presentation, Aditya Birla Fashion & Retail said successful execution of the value fashion strategy led to 16 percent SSG, 65 percent volume growth across categories and 63 percent increase in own brands mix. Pantaloons opened 12 stores during this quarter, taking the total number of stores to 168 with 2.7 million square feet retail space.