The report asserts that the retail would go through a phase of consolidation. The current slowdown, according to the report, might last for 12-18 months depending on government incentives in increasing spends on infrastructure, development initiatives and other activities to stimulate the economy.
The analysts expect that there would be an increase in focus on value retail in the coming months and a shift away from lifestyle goods. An increasing action in food retailing and FMCG products is expected, as this segment is largely insulated from the slowdown. The categories such as home-furnishing are less favoured.
The retailers are likely to close unprofitable stores and rationalize capital expenditure, as a part of cost optimization. The frequency with which retailers liquidate slow-moving goods by offering discounts to reduce inventory is likely to increase. From the point of location, as tier-I cities become saturated, the retailer would prefer to move to tier-II and tier-III cities where profits are higher due to lower rentals and operating costs.
The report observes that there would be an increase in investments in shortening supply chain to avail the incentives offered by the government and improve profit margins. The churn in malls is likely to increase in the short term when some retailers opt for low-rent premises as a means of sustenance in the current economic situation.
