Reliance Retail, the country’s biggest retailer, said sales at its fashion store chain Trends grew more than twofold in the July-September quarter from a year earlier. According to an investor presentation, the company expects overall business to reach pre-Covid-19 levels in the October-December quarter.
More than half a dozen firms including Samsung, LG and Aditya Birla Fashion and Retail said sales growth in the smaller towns exceeded that in the cities, even in higher-priced discretionary categories, with footfalls back to normal at stores. In the metros, shoppers are shying away from malls due to high Covid-19 infection rates or are cutting back on spending.
LG, India’s largest appliance maker, gets half of its revenue from tier II and III towns now compared with a third before the lockdown. LG India vice president Vijay Babu said a low infection rate and better agriculture output due to a good monsoon boosted consumer sentiment in these markets.
“Also, a lot of the white-collar workforce who migrated from large cities to their native places in the smaller towns are still there due to continuing work from home, whereby consumption is buoyant,” said Babu.
Samsung India senior vice president (consumer electronics business) Raju Pullan said the sales growth rate for all products, including premium, is much higher in the smaller towns than in the cities. While the company’s overall sales grew 32% in October from a year ago and premium products by 50%, in the smaller towns, these rates were 36% and 68%, respectively.
“Even premium products like 4K televisions have grown in these distribution-led smaller markets by 72% while QLED TVs grew by 46%. Many are even skipping one level – from a single-door, lower-capacity refrigerator to directly buying frost-free 300 litres and above,” added Pullan.
The slowdown in cities was largely due to people being confined to their homes, while in the smaller markets there were fewer restrictions and economic activities were not significantly affected.
“In smaller towns, especially high-street stores, footfalls are much closer to their previous sales numbers. It’s only as we come to bigger towns, larger stores that the numbers start to come down,” Aditya Birla Fashion and Retail managing director Ashish Dikshit said on a call with investors.
Westside Development, which operates McDonald’s in west and south India, said stores in some smaller towns are clocking growth of 90-110% of pre-Covid-19 levels and the burger chain even faces capacity constraints during the weekends.
In towns that saw low or anaemic growth until last year, there was a recovery on the strength of good monsoon rain and government-led initiatives. This reflected in the performance of the fast-moving consumer goods sector, which grew on the back of rural demand across categories.
Marico’s managing director Saugata Gupta said companies with more direct rural distribution will have a competitive advantage in the new normal.
“Disposable income is being challenged in urban areas,” he added.