The slowdown in demand for clothing and lifestyle products like televisions and smartphones, which brands initially believed was a temporary blip, is persisting even after two years.
Companies now say predicting a revival timeline is difficult as aggressive discounting strategies, including early end-of-season and Republic Day sales, have failed to boost demand.
With business growth remaining flat this Republic Day sales compared to last year, several companies expect a demand recovery only in the second half of 2025.
“People had bought what they wanted to buy by early December due to weddings and winter. Hence, sales in January are flat,” said the CEO of a leading apparel brand company who requested not to be identified.
Sales of discretionary items such as apparel, footwear and beauty started slowing in 2023 after two years of pandemic-induced runway growth.
According to the Retailers Association of India (RAI), sales growth in the organised retail segments such as apparel, footwear, beauty and quick service restaurants (QSR) was in mid-single digit last calendar year, compared to 15% in 2022.
“It’s not that demand is not happening in the market but the growth rate of 7% is the new normal. So, the buoyancy of demand that we saw post pandemic is missing now,” said Kumar Rajagopalan, CEO of RAI.
While sales of electronics usually peak during the Republic Day sale due to robust discounts run by the brands, there has been no major bump this year.
Electronics retail chain Vijay Sales director Nilesh Gupta said volumes or number of units sold is flat as compared to last year and the challenges in smaller towns remain, with no pick-up in demand for entry to mid segment products. He said value sales went up by 5% due to premiumisation.
Brands said even online sales did not grow much in this year’s Republic Day sales.
Republic Day and Independence Day are among the largest consumption periods in India, even though the festive season led by Diwali is the biggest.
Retail chain Shoppers Stop chief executive officer Kavindra Mishra said while the festive setup for Diwali was exceptional, November was slow, and December has been mixed for most of its peers.
“Inflation continues to be higher, which has tapered down in the last week. Discretionary spending has been lower and consumer sentiment, though it’s better than last quarter…is nowhere near the pre-Covid or FY23 levels,” Mishra told analysts recently. “In informal discussion with other peer members, there was a unanimous view that the last quarter (October-December) was lower than expectations, particularly considering the slowness we had in the first two quarters,” he added.
Chief executives have flagged multiple reasons behind the consumption slowdown – high food inflation, low salary hikes, high debt by consumers, slowdown in new job creation, increase in housing rentals and home prices, and increased spending by a section of urban consumers on holidays.
Some companies are hopeful of a reduction in income tax rates in the upcoming budget to push consumption.
Electronic company Havells managing director Anil Rai Gupta told analysts last week that the first six months of the fiscal saw improvement in the consumer demand, but again, around Diwali season there was some weakness.
