Fashion Retail: Will 2012 turn out better...

Last year, apparel retailers were an unhappy lot with high inflation, rising interest rates and people tightening their purse strings, it negatively affected sales. And to add to it, the 10 per cent excise duty on branded apparel announced at the beginning

of the year, followed by high raw material costs further forced them to increase product prices. Consumers drifted away further from making unnecessary purchases. Sale, even during the festive season was lukewarm and customers showed little response to offers and freebies, unlike previous seasons.

Leaving behind 2011, apparel retailers are hoping for a positive change in the New Year. They are expecting Indian consumers to come out of their shell and start spending again. Despite the government’s bold step on FDI in retail, stake holders are still waiting for a political consensus. However, the retail industry is hoping to benefit from a bounce back of free-spending Indian consumers. As consulting firm PricewaterhouseCoopers has predicted the market will grow to $900 billion by 2014 from $500 billion currently and organised retail, which accounts for barely 5 per cent of the market, is also expected to ride on this spending boom.

Another reason, why apparel retailers are looking forward to a bullish 2012 is many smaller cities are showing an increase in demand for branded clothes with consumers in these areas increasing their spending and a rise in awareness of fashion and quality aspects boosting sales. Many brands including hi-end, luxury labels have already firmed up plans to venture into Tier I, II and III cities to cash-in on the growth opportunities.

However, some analysts say the year 2012, is expected to be the year of moderation in consumer spending across durable, consumer goods and apparel. But at the same time, companies need to be cautious in their growth projections since it could also be challenging on account of several factors such as economy, slowing industry growth, currency fluctuation, inflation that has gone up again. And today’s aware consumer has become smart in his approach when it comes to spending on both apparels as well as out of home consumption.

Analysts feel that along with the correction in consumer spending, the continuous impact of slowdown would be visible with consumers focussing more on savings. And restricted salary hikes would leave less disposable income in hands. According to a survey conducted by Emkay Global Financial Services analysts Pritesh Chheda and Jay Shroff, at modern retail stores in Mumbai recently, to gauge inventory of popular stock-keeping units (SKUs), average inventory of products in modern retail outlets was dated back to two-and-a-half months with relatively old inventory seen in categories like hair oils, shampoo and toothpaste, and relatively newer inventory in foods. A report last week by Latin Manharlal Securities said volume growth for FMCG companies will be lower in 2012 as consumers remain wary of spending too much.

While retailers hope for a revival in consumer buying, analysts are sceptical about any major change with correction in consumer spending showing no drastic positive change…