Poor Consumer Sentiment May Hit Festival Sales

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Muted growth has forced consumer goods retailers to scale down inventories anticipating poor sentiment hitting festive season sales. Fashion and lifestyle retailers said some companies have either cut down on inventories by 5-7% from last year or are being choosy about the brands they would stock.

“While production process for the festive season starts as early as March, there are some retailers who were in touch with their vendors and managed to cut inventories at the last minute as they sensed Diwali won’t be upbeat,” said one brand retailer.

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Indian consumers are shying away from spending amid negative sentiments of an economic slowdown, a volatile stock market and the GDP growth rate hitting a six-year low.

The October-December festive season contributes 35-40% of annual sales for most consumer goods companies which stock heavily for this period to make the best use of the biggest shopping opportunity of the year. The season starts with Ganesh Chaturthi, followed by Onam, Navratri-Durga Puja, and peaks in Diwali. According to one apparel retailer, when growth was in double digit, it made sense to stock more, but with a flat or low single-digit growth, most retailers would not want to sit on an inventory pile-up.

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