From Food To Fashion, Retailers Struggle To Lure Couch-Potato Shoppers Back To Stores

Retailers are grappling with an enduring shift in consumer habits, as many shoppers cling to their couch-potato habits that emerged during the Covid-19 pandemic. The prolonged slowdown in consumer spending is further making it tough to entice shoppers back into the brick-and-mortar stores, prompting several companies to shut down unprofitable locations.India's largest retailer, Reliance Retail Ventures Ltd., closed 249 stores between April and June. With an eye on profitability, the company is also taking a more measured approach to expansion. The net store addition in the first quarter of the current financial year stood at 82 — the slowest growth rate in the last four years. Reliance Retail's Chief Financial Officer Dinesh Taluja told analysts that its fashion and lifestyle business suffered from a decline in discretionary spending, dragging overall revenue growth. The company has beefed up efforts to streamline operations by closing underperforming stores to improve profitability. This was reflected in its year-on-year operating margin improvement by 30 basis points to 8.5%, even as the margins dipped from 8.7% over the previous quarter. "But our digital stores continue to deliver steady growth," Taluja said, implying that consumers still prioritise the convenience of online shopping.Similarly, Spencer's Retail Ltd. plans to close about 49 stores in the National Capital Region, Andhra Pradesh and Telangana. This decision marks the company's complete exit from southern India, with operations now focused solely on the eastern region and Uttar Pradesh. The affected stores have faced increased competition and weak consumer spending, resulting in Ebitda losses of Rs 56 crore, said Chief Executive Officer and Managing Director Anuj Singh. While the closures will lead to a 22% reduction in annual revenue totalling Rs 490 crore, the management of the Kolkata-based retailer is hopeful about improving profitability moving forward.Fast-food chains, too, are struggling to revive their same-store sales growth, a key metric for assessing the performance of existing outlets, as financially strained consumers are opting to dine out less frequently. This slowdown is also partly due to fierce competition from hyperlocal boutique eateries and a harsh summer that kept many customers indoors..KFC and Pizza Hut-operator Sapphire Foods India Ltd. added only 14 stores in the first quarter, compared to an average of 35 over the previous eight quarters. The management remains cautious about further expansion, especially for Pizza Hut, until three conditions are met—positive SSSG, an average daily spend exceeding Rs 50,000 and a brand contribution of 8–10%. Devyani International Ltd., the other operator of Pizza Hut in the country, also said that it has been increasing marketing spends to boost sales. But its performance has been underwhelming amid sustained slowdown in discretionary spending. The company now plans to go slow on expansion. McDonald's, KFC and other chains have rolled out value meals starting as low as Rs 99 in a bid to improve dine-in traffic. They are even focusing on increasing customer attachment through café items like coffee and snacks. Restaurant Brands Asia, which operates Burger King in India, launched two crispy chicken burgers for Rs 99 to drive incremental traffic. Further, in the northern market, it launched pizza puffs for two for Rs 59. Similarly, Sapphire Foods has introduced chicken rolls to expand its snacking options. It is also testing the addition of coffee to their KFC menu.But the value offerings are yet to translate into sales.A Fashionable DilemmaIn a striking contrast to the struggles of fast-food chains in attracting diners with value-driven individual meals or group offerings, the value fashion industry is thriving even in an otherwise subdued demand environment. "We managed to sell 237 apparel items per minute during the June quarter," said Akash Agarwal, whole-time director at V2 Retail Ltd. "This breaks down to 66 ladies' apparel, 85 men's apparel and 86 kids' apparel each minute." The retailer, which operates in tier-2 cities and beyond, with an average selling price of Rs 260, reported a 37% increase in same store sales growth in the first quarter of the current financial year. The company plans to open 50 new stores this fiscal, having already launched 10 in the June quarter taking the total count to 127.Echoing a similar sentiment, Kavindra Mishra, CEO of Shoppers Stop Ltd., said that demand remains subdued due to several reasons, such as fewer wedding dates, a long election season and a strong heatwave coupled with high levels of cumulative inflation. "This influenced our growth and volume recovery remained negative, except in value fashion and beauty. We are reasonably optimistic about our value segment Intune and beauty vertical."He expects the newly opened stores to take some time to turn to profitability as demand remains muted. The company will need to borrow Rs 100 crore for expansion amid continued weak demand, said Mishra.Value retailer V-Mart Retail Ltd. reported a 12% growth in same-store sales for its core format in Q1 and 10% growth in terms of same-store volume. According to Chief Executive Officer Lalit Agarwal, the premium segment seems to be under pressure and value retailers operating slightly on a higher price point also seem to be struggling. For V-Mart, customer footfalls rose 36% year-on-year to 1.8 crore — highest since Q4 FY20."Sales at V-Mart’s legacy portfolio touched Rs 745 per sq. ft. per month mark for the first time in the past four years, implying the price cuts are beginning to draw the customer, as transaction size and conversion have not changed materially," Nuvama Institutional Equities wrote in a note.Most apparel and footwear retailers have advanced their end-of-season sales, offering hefty discounts, to clear out inventory. They are hopeful the upcoming festive season will spur consumption and revive their fortunes. .FMCG Stocks Defy Market Rout As Investors Eye Safe Themes Amid Global Uncertainty

From Food To Fashion, Retailers Struggle To Lure Couch-Potato Shoppers Back To Stores

Many shoppers prefer to shop online, which is a habit that they embraced during the Covid-19 pandemic.

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