Report says economic slowdown affecting organized retail in India

KPMGAccording to the 'Indian Retail: Time to change lanes' report by global consultancy KPMG, the ongoing recession has taken a major toll on the dissemination of India's organized retail - with the country's retail sales growth falling drastically to 11 percent in December 2008 from the 2007 figures of 34 percent.

The study also revealed that India's investment flow in organized retailing, which was expected to touch $25-billion over the next five-year period, is showing signs of a slowdown. No wonder then that in the present scenario, factors like store rationalization, regionalization, working capital management, cost optimization and manpower resizing are foremost among the "top of mind" concerns for the retailers.

The KPMG report also mentioned that about an unfavorable impact on Indian retailers in spheres such as availability of working capital; cost of finance; advertising expenditure; and store and headcount expansion. Nevertheless, the study also conceived the current scenario as an immense opportunity for the retailers to become cost competitive, take the maximum-possible benefit from the availability of real estate in bargain basement price; and spread out into tier II and III towns.

Acknowledging that the retail sector is suffering a blow from the liquidity crunch, KPMG national industry director Ramesh Srinivas, said: "Slowing sales resulting in lower inventory turnover and increasing working capital requirements to fuel growth have resulted in liquidity pressures for many domestic retailers."