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Fireworks continue in retail as tax cuts keep buyers in good spirits

Mumbai: Demand for fashion and electronics saw a 15-20% jump in sales over the weekend after the government slashed GST rates on consumer goods, triggering a surge in spending particularly in northern and southern regions although heavy rains dampened turnout in parts of the east and west. The GST that took effect on Monday in categories including clothing, electronics, footwear, and groceries were aimed at reviving household spending. The timing also coincided with the onset of the festive season, which typically drives the highest annual consumer spending in India. "It is a great start to the weekend with strong double-digit growth. It is driven by a combination of factors including end of Shraddh and start of festivities as well as GST reduction," said Devarajan Iyer, chief executive officer at Lifestyle International, India's biggest departmental chain. "There is surely a positive sentiment in the market and while it is too early, we hope the momentum continues." However, heavy rainfall across parts of Maharashtra, West Bengal and Odisha led to reduced store footfalls, especially in suburban and non-metro markets. V-Mart, which largely operates in small towns, said a lot of demand is impacted due to seasonality and is not entirely led by GST or festive season. "The sentiment is positive and consumption boost should reflect in the long term," said V-Mart chairman Lalit Agarwal. Electronic industry executives said while online sales are growing at over 30% year-on-year due to Amazon and Flipkart's largest sale of the year, even retail offtake have picked up in South and North this weekend though there is some impact in markets like West due to heavy rains. The GST revamp involved the scrapping of the 12% and 28% slabs, retaining the 5% and 18% levies. Most items of daily use are now at the lowest slab or at zero GST. Kamal Nandi, head of the appliances business at Godrej Enterprises, said sales trends had improved compared to last year. "Overall sentiments are much better than last year and end-consumer sales have picked up. We have grown in retail by 15-20% over last year, driven by premium products," said Kamal Nandi, head of appliance business at Godrej Enterprises. Despite the GST cuts, many retailers had seen subdued traffic earlier in the week during Navratri and to help bring higher footfalls, brick-and-mortar stores increased discounts to match aggressive online pricing. Retailers are facing pressure to recover volumes quickly after a weak start before the festive month and losses from the GST transition period. "In September, most retailers were in deep red due to negligible sales," said Pulkit Baid, director of Great Eastern Retail, a leading electronics chain in the east. "Now with a short window to recover, many are offering extra discounts to hit their numbers. Hence prices are abnormally low." Vijay Sales director Nilesh Gupta said there is 35-40% growth in sales during the weekend which has come as a big relief as business had declined by 50% across categories in the GST transition period. "However, we can gauge whether this is pent-up demand or real demand due to GST cut only after Dussehra," he said. For consumer goods firms selling household and personal care products, business was as usual. Most companies flagged supply chain disruptions which will affect their primary sales to distributors in September and October. For instance, Hindustan Unilever and Godrej Consumer Products have said there will be a transitory impact in the form of disruption at distributors and retailers across channels to clear existing inventories with old prices. GCPL MD Sudhir Sitapati said consumer goods firms operate under an MRP regime, and current inventory is priced at higher MRPs and lower price-tags will take time to reflect in the market. "By early or mid-next month, consumers will start seeing reduced prices on FMCG products. September may therefore be somewhat choppy, with pipeline changes and stock adjustments, but this is temporary. From Q3 onwards, we expect stronger growth momentum," he said.

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