Truth be told, with all the hoopla of Indian consumers thronging retail outlets to buy, buy and buy may not be entirely true. Despite analysts and retail pundits waxing about the great return to physical retail spaces, many brands are not experiencing the kind of footfalls they were hoping for. Then, what is the reality on the ground for India’s retail spaces that continue growing?
Insightful PwC report on slowing spends
A report published by PwC in the first week of April 2023 may hold the key to why discretionary spends are not as was expected in 2023. The report revealed amongst those surveyed, 74 per cent of respondents felt non-essential spending required curtailment as their financial situation was uncertain. Ravi Kapoor, Partner and Leader-Retail & Consumer, PwC India explains: “PwC’s latest Global Consumer Insights Survey for India drives home the key message of ongoing financial stress in the lives of the consumers, where 74 per cent of them are very concerned about their financial situation. This sentiment will have a potential restraining effect on spends in highly discretionary categories of electronics and luxury.”
Promise of heightened discretionary spends
Contrary to retailers clamping down on physical expansion to stabilise against the fall in consumer spending, retail leasing is expected to touch 5.5-6 million sq. ft. in 2023, the highest level after the 2019 peak of 6.8 million sq. ft, according to a CBRE report. It is expected that primary leasing in newly-completed malls will remain the key driver of retail space demand in 2023.
Economists have been predicting a far more financially stable consumer as India’s GDP growth is unstoppable and will solidify much more by the end of 2023, thus percolating down to stability for businesses and salaried workers. Apparently, the financial ambiguity felt by many Indians will be replaced with a confident approach in 2024. Whilst this is not definitive, it certainly is pushing retailers to be prepared for the return of discretionary spending in 2024.
Attractive discounts and deals
High-street commercial spaces continue to be the ‘it’ item for investors as well as for retail businesses. At a time when leasing contracts come with attractive discounts and malls offering multiple-benefit deals, particularly Quick Serve Restaurant (QSR) and fashion brands are seeing it as an opportunity to invest and be ready for the return of big spends next year. Additionally, the new tactic of malls is to provide new developed sections that allow brands to explore and implement more creative ways to attract new custom. Of all places in India, the Delhi-NCR region seems to be the most favoured by brands for expansion.
Who’s who on the expanded ground
Aditya Birla Fashion & Retail for example are showing all signs of bullish physical retail expansion with Shopper’s Stop and Trends. Jubilant Foodworks, the Indian franchise of Domino’s Pizza and Popeye, the KFC rival, Restaurant Brand Asia the local franchise for Burger King, and McDonald’s master franchisee Westlife Foodworld are not taking a breather and holding back, despite a weak Q4 result for FY2022-23. As per ratings agency ICRA, the big five QSR brands in India will expand footprint across India with the addition of 2,300 stores between FY 2023-24 and FY2024-25 at an estimated capital expenditure of Rs. 5,800 crores.
Fashion brands are behaving in an identical manner as their unabated expansions continue. Be it apparel, accessories, footwear or kids wear, it’s all growth of stores all around. For example, Tata’s Zudio could add another 130 outlets by end of FY 2023-24. Shopper’s Stop will be adding 24 of its department store model and more beauty stores during the same period, as will Westside total 214 outlets by then.
