Fashion retail sector rebounds with surge in demand: Report

The fashion retail industry is seeing a surge in demand after remaining subdued for several months, said Systematix Institutional Equities after interacting with a senior retail official. Meanwhile, the e-commerce market continued to gain popularity globally.

Food and grocery, décor, beauty, essentials, home care, home essentials and pet care are also witnessing an increase in wallet share.

“Companies expect growth to be comparable to last year. The retail sector is expected to grow overall at 8-9% during FY24,” noted the analysts.

The fashion segment had shelved excess inventory due to muted festive sales in the past 4-5 months.

“These inventory issues, however, are expected to be remedied within the next 3-4 months,” noted Systematix Institutional Equities.

Companies faced inventory problems throughout the past year because they had expected a boom in demand that would eventually reach pre-Covid levels, but that did not happen as planned.

Since the Covid-19 pandemic, retail supply chains have experienced unprecedented disruption in supply and demand shifts.

Over the last few years, the industry has been seeing disruptions right from the manufacturing aspect, goods getting delivered to softening demand and a sudden shift in consumer spending.

Even as the fashion retail industry hoped the holiday season would get back on track in terms of spending, consumers remained pessimistic. With consumers globally indicating a strong preference for online channels, retailers were still left with a still-bloated inventory.

Retail sales rose in October aided by an early start to the festive season, albeit at a slower pace than last year due to high inflation.

Retail sales across the country had risen only by 15% in the fesival month of October last year compared to 34% in the same month in 2021, according to the Retailers Association of India.

However, in December 2022 things started to look up for the industry as it had registered a 16% increase as compared to the sales recorded in December 2019, according to the Retailer Association of India.

Consumers continue to be cautious in their spending, especially on discretionary products, said the Retailer Association of India.

E-commerce continues to thrive post-Covid

The Indian e-commerce market is on fire led by multiple market-place formats which are also pushing the brick-and-mortar to rejig its formats.

In the USD 920 billion retail market in India, traditional trade accounts for 79%, brick-and-mortar at 13% and online at 8%.

“Going ahead the penetration of brick-and-mortar is expected to grow to 16% and e-commerce to 12%,” said Systematix Equities.

“The leaders in the direct-to-customer segment are also getting into the brick-and-mortar segment with the use of superior artificial intelligence and machine learning, thus boosting the growth of brick-and-mortar,” it added.