Muted demand for consumer goods items – from daily essentials like toothpaste and shampoo to discretionary items like smartphones – has been weighing on manufacturers of these goods for quite some time. But manufacturers aren't the only ones at the receiving end of the country's poor consumer sentiment. Retailers are also feeling the pain.
Despite entering the festive season with high hopes of a revival in demand, retailers in the country are left high and dry. As demand in urban centers continues to decline, retailers are left with less-than-expected growth in their festive sales this year – spoiling their end-of-year party.
According to a recent survey by the Retailers Association of India (RAI), sales growth during the festive season remained weak. As consumers tightened their wallets, sales growth fell well short of the expected 10% level – down to 7% from the same period last year. Sales of discretionary goods such as furniture and sporting goods suffered the most – growing 2% and 3% year-on-year respectively, the data showed.
According to Kumar Rajagopalan, CEO, RAI, the survey shows moderate growth of 7% during the October-November festive season, lower than the expected 10%. “Consumption growth has been subdued throughout the year, prompting retailers to boost business through promotional offers and festive buying incentives. Inflation, intensified competition and limited spending, especially among the lower middle class population, remain significant challenges,” he says.
Among the four major regions of India, West recorded the highest sales growth of 8%, while North, South and East India recorded growth of 7% each year. By category, food and grocery recorded the highest growth at 14%. However, rising food prices played a role in the double-digit rise in sales, market experts said. Quick service restaurant business (10%) in 2024 and jewelery (9%) recorded healthy growth during the 2023 festive period.
With 2024 ending in a subdued environment, retailers are pinning their hopes on a revival in demand next year. Demand for consumer goods is expected to recover by mid-2025, according to top executives at leading fast-moving consumer goods companies. “We expect strong growth in 2025, as operational costs rise and we need a sustainable growth trajectory to maintain profitability,” says Rajagopalan.