STALE SALE!

Sales in retail stores in India peaked on 26^th January. Newspapers carried full-page advertisements announcing even an unbalanced offer of ‘Buy 4 Get 7 Free!’. Reputed companies advertised their offers in their supermarkets and hypermarts, competing with each other! It was as though the world was coming to an end and there could be no other opportunity for these stores to clinch sales! A few years ago the Future Group hit upon its most popular annual Republic Day Sale. The maiden event was scheduled only for one day - on the Republic Day (sabse sasta din) - and it may yet remain green in our memory that there was a big scramble to gain entry into the Big Bazaar stores, almost resulting in a stampede. Later the event was planned to span over a period of a few days (sabse saste 5 din). 

Competing organizations I felt have run out of ideas and opportunities that they had to respond immediately too, to counter competitive moves! I often think that competing organizations like Reliance are so big and rich with retail talents that they do not have to toe the line with competition but could create many innovatively differentiated events to achieve greater sales in various time frames. Now the Republic Day has come to be more associated with SALE than with parades and celebrations. Gone are the days when people gathered in public places to celebrate the Republic Day but now they gather in queues in front of retail stores and malls expectantly waiting for their doors to open! This 26^th January, newspapers carried full-page advertisements that were very similar to each other in body copy and one could hardly remember or recall to memory which store carried the sale items and in what prices!

I walked into a few malls in the last two days to check out offers. The bargains were great! A couple of reputed apparel brands sported signage at the entrance like this: ‘FLAT 50% OFF’. In my humble understanding, everything that was sold in the stores was at 50% off. But when I was browsing I was disappointed to know that majority of the items were sold at 20% off and 30% off! Only a kids’ brand lived up to its claim of selling all the merchandise at a flat 50% off! Some genuinely made an announcement that the items on sale were ‘up to 50% off’ and some others said that ‘a lot of stuff were at 50% off’. I left the malls with a sad feeling failing to understand why reputed brands needed to con customers into entering their stores!

There were a very few other stores who stood out from competition, having either gone on sale earlier or waiting to go on sale later. M&S is one such store that did not go on sale during this period of heavy clearance of merchandise but was quietly cashing on the footfalls the malls were bringing to the store as a result of price promotions in other stores.

Quality accidents, shop-soiled merchandise, line close-outs and wrongly bought and accumulated unsold merchandise were always the reasons for organizing SALE in retail stores, but now it has become a strategy to pump up the topline a couple of times in the financial year to achieve budgets and so careful merchandise planning is done to organize merchandise for sale.

Has SALE overtly become a gimmick and a strategic move to increase sales more than being an attempt to clear unsold merchandise or overcome merchandising and operating failures?

- Dr. Gibson G. Vedamani

Leasing Troubles!

I had the opportunity to walk the high streets of select Mumbai suburbs throughout the last fortnight, seeking to assess retail spaces for a proposed small format retail store chain. The format is a concept that needs only around 250 square feet of carpet space. It has been a new experience for me to study the suitability of retail spaces of such 'petite' size! Examining market potential, understanding catchment profiles and their purchase behaviour, studying store adjacencies, visibility, signage significance and bill-board value, traffic patterns and footfall flows, and applying parameters to ensure easy accessibility, etc. - all being carried out as a routine practice during the process of store premises selection that brings in a good deal of excitement.

Every high street market is visibly punctuated with a few vacant shop premises here and there. On looking into the reasons why store premises are available in such busy high streets, it was a revelation that small store lease agreements are made usually for just a one year period with no option to renew the lease! Premises are available for fresh occupancy mainly for two reasons - either the landlord becomes greedy  and demands an unaffordable increase in monthly rentals that the store owner decides to call it 'quits' or the store is unable to do adequate business to sustain the rental amount agreed and decides to vacate. In very rare cases the reason attributed to vacating the premises is the fact that the store has outgrown its space by doing thumping business resulting in moving to larger spaces to operate from! However  the crevice in the location consistency created so soon as within a one year period, sets the store back in time in its business leaving a lot on the part of the store owner as burden to shoulder in order to bounce back! Many successful small retail stores in high streets like Andheri, Lokhandwala, Seven Bungalows, Oshiwara, Thakur Village, etc. operate from their own premises and others do struggle considerably to make both ends meet as rentals in these markets are in the range of Rs.300 to Rs.400 per square foot depending upon the significance of the store location. 'Solus' positions demand even more rentals! So, the rentals when mapped on the proposed store P&L along with the humongous deposit equivalent to six months' rental value render many premises unviable, which brings in challenges in a large measure.

They call themselves 'retail consultants' and show vacant retail premises to prospective lessees. They are real estate brokers who say that the rentals are often 'lump sum figures' and cannot be calculated on a per square foot basis! They often keep hiking the rent as their remuneration/commission is based on a fixed rate of one month's rental from both sides - the lessor and the lessee. The more the rent, the more the earnings! Further, as the vacant premises to be fixed are many nowadays and the 'consultants' too are many, the income from the deals, though within practised norms, are shared by more than one 'consultant'! There are 'cross-area consultants' who specialize in specific high street markets and they refer clients to their 'partner consultants'! In many cases one does not get to see the owner of the premises until the final leg of negotiations (sometimes one does not get to meet the owner at all) and such rental negotiations often happen for long, through such middle-men alone and that brings in a frustrating experience!

Finally the writing on the wall is quite clear: There are more reasons in the sector for fearing small retailers to vanish into thin air, than just FDI !

- Dr. Gibson G. Vedamani