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Price pressure rises, impacting the performance of Indian fashion retailers.

TraderKnows
TraderKnows
05-08

Affected by fiscal tightening, soaring food prices, and inflationary pressures, the Indian apparel and footwear retail industry is increasingly suffering.

In various shopping malls and commercial streets across India, the atmosphere in fashion stores is gloomy with a decrease in foot traffic and sluggish sales. Despite many brands offering bigger discounts than usual and for longer periods, the actual sales performance has been dismal.

Unstable monsoon rains have destroyed crops, leading to skyrocketing food prices, forcing consumers to cut back on non-essential spending. Since June, tomato prices have soared nearly fivefold, while onion prices in areas like New Delhi have increased by 80%. Data shows that India's food inflation in July reached an astonishing 11.5%, far higher than June's 4.6% and the highest level in three years.

India Inflation

Affected by fiscal tightening, soaring food prices, and inflationary pressures, India's apparel and footwear retail industry is suffering increasingly. Euromonitor International estimated that consumer spending in India had already slowed down before the dramatic rise in food prices.

According to a store manager at Zink London in a Mumbai shopping center, who preferred to remain anonymous, employees of this domestic women's fashion chain store call 10 customers daily and send product images via WhatsApp to boost sales. Reuters interviewed managers of 25 fashion stores in four Indian cities, all painting a similar bleak picture.

Several store managers mentioned that both Indian local brands and well-known foreign brands, including Japanese footwear retailer Asics and American Skechers USA, have been offering substantial discounts, some as high as 70%, to drive sales. As fashion consumption declines, consumption at chain restaurants like Domino's is also decreasing.

However, the decline in Indian consumer spending is not all-encompassing. Data shows that PVR Inox, India's largest movie operator, recently set a record for the highest single-day box office revenue at 5 million USD; the spending of India's wealthy class has not been affected, with sales of high-end SUVs continuing to reach new historical highs.

The World Bank predicts that India's economic growth rate for this fiscal year will slow down to 6%, lower than last year's 7.2%. Deutsche Bank economist Kaushik Das wrote in a report this month that private consumption, which accounts for around 60% of GDP, is the biggest threat to India's current economic growth due to the deterioration of personal consumption.

At present, although there are signs of a decline in food prices such as tomatoes, and the upcoming festivals may support retail sales, the high food prices and persistent inflationary pressure still restrict Indian consumers' spending on non-essential goods. Madan Sabnavis, chief economist at Bank of Baroda, said that considering the rise in food bills, Indian consumers are likely to continue cutting back on the demand for non-essentials.

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The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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Wiki

Inflation

Inflation refers to the phenomenon where the purchasing power of a country's (or region's) currency decreases, leading to a general rise in the prices of goods and services. It is reflected in the fact that, over a certain period, the same amount of money can only buy fewer goods and services.

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