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Demonetisation Blues for the Retail sector,brands offer incentives to fight drop in sales

23-November-2016
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Demonetisation Blues for the Retail sector,brands offer incentives to fight drop in sales

Prime Minister Narendra Modi took the entire nation by surprise when he announced the demonetisation of currencies around 10 days back. As a result, every industry is grappling with certain challenges, where more than 90 per cent of the transaction happens in cash. Multiple players in the supply chain have been seriously affected because of the paucity in cash.

Given the cash crunch, brands are giving extra incentives for people to use cards and e-wallets. Along with the other industries, the retail sector is also facing the heat of the demonetisation move. In the last two weeks, there has been a dip in the sales of a number of retail brands and to counter it they have been methods like out-of-season sales and also introducing benefits to lure customers.

Explaining the current situation in this sector, Naresh Gupta, CSO, BangInTheMiddle said, “Out of the total retail trade, only 3-4 per cent is modern trade in India and 90 per cent of the bulk trade happens in cash. However much you promote plastic cards and ask them to go cashless, but there are no terminals available to swipe cards. So what is the option left for the guy at the store- he will either sell his product based on trust, use cheque or he doesn’t sell at all. That is exactly what is happening. Trade cannot happen if there is no cash in the pocket and currently there is no money.”

Mrigank Gutgutia, Engagement Manager, RedSeer Consulting elaborated, “Both online and offline retail players have been affected with the current demonetisation of currencies. Talking about the online players, in the short term, businesses are getting hit because Cash-on-delivery which accounts for the bulk of the online business has stopped completely. However, in the long run, it will be good for the industry as a lot of people will be forced to come online and shop. For the offline players, the biggest affected are the tier ii and the unorganised stores, who have been forced to shut down their shutters because the electronic adoption rate among the traders and customers is very low there. So with this change in consumption pattern, there will be an impact on the GDP as well."

Incentives & cash-back offers to improve sales:

Denim brand, Pepe Jeans was hit badly with demonetisation and it is slowly recovering from its effect. On the first day, the brand saw around 50 per cent slump in sales and they believe it will take more two to three months for things to turn normal.

Commenting on this, Kavindra Mishra, Managing Director & CEO, Pepe Jeans said, “Currently, there is a 25 per cent drop in sales and in order to deal with this; we are offering added incentives, like extra 5 per cent off on use of credit cards and additional consumer promos to increase the basket size of the consumers. Post demonetisation, there has been a huge change in the consumer buying pattern. For e.g. around 40 per cent of the sales, used to happen in cash, whereas, it is now only 5 per cent.”

He further added, “This time because of demonetisation only, we have been running these offers, which otherwise is not the case. Usually post-Diwali we don’t offer discounts, because it is the wedding season and also the best time to get our business up and running. We sell our products in full price otherwise, it hits our margin.”

Future Group declined to comment because as a group policy, they are currently refraining to share their views on any demonetisation stories. Brands like Marks and Spencer is offering an extra 10 per cent cashback on card transactions. Also Tommy Hilfiger and Benetton are offering promotions to drive sales.

According to Sunil Shroff, CEO, Viviana Mall, footfalls have declined both for weekdays and weekends, but it is gradually picking up with more customers using cards and e-wallets for payments. For the first weekend after the announcement of demonetisation, the mall has seen an 8- 10 per cent dip in footfalls. They have also been having free parking facility so that customers can manage their change and footfalls to the stores also improve. The card transactions in general have increased from 70 to 90 percent in the mall post demonetisation.

Gupta from BangInTheMiddle feels that things are not going to get normalised anytime soon. “In the last two weeks, already we have seen businesses getting affected and I don’t see anything happening by December 30 either. Going by the date which has been given by our PM, it is still a long way to go. It means seven more weeks of losses and then what a year to get back to normalcy?” he added. 

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