Retailers plan to substitute some of imported goods with local products

Last Updated: Mon, Aug 26, 2013 10:23 hrs

With rupee showing no signs of settling down, retailers are looking at stop stocking imported products which have become too expensive or substituting them with local ones.

Rupee has depreciated 15% in the last three months, pushing up prices of imported products.

Retailers who deal with such products say that the actual price rise would be revealed when new stock of products arrive at their warehouses. So far, they had not seen around 5% hike in prices as they book in advance.

Consultants say those selling imported consumer durables, apparel, food products, furniture are the one who are impacted the most. Retailers have already taking hard look at their assortment and merchandise mix in the backdrop of economic slowdown and depreciating rupee.

"Out team is watching carefully how the new prices are moving. We have to potentially consider whether to bring all the products we used to stock earlier. We need to be competitive," said Mark Ashman, chief executive of Hypercity, the hypermarket chain of Shoppers Stop.

About 65% of Hypercity's sales come from food products including that of imported ones.

"In few cases, we may have to decide whether to stop bringing some products where prices are too high," Ahsman said.
K Venkataraman, managing director of Mahindra Retail which runs kids and maternity-wear chain 'Mom & Me' said that if the rupee depreciation continues, they have to review the value adds and embellishments to keep pricing effective and seek to negotiate better sourcing and increase localisation wherever feasible.

"However, we will not tweak beyond a limit if there is a threat of endangering quality and durability," Venkataraman said. About 40% of Mom & Me's merchandise is imported.

Mom & Me has seen five% increase in price of products as the goods where bought three to four months ago and if the rupee continues to slide, price could rise by 10% in the near future, he said.

Kishore Biyani's Future Group is thinking on similar lines. About 5% of its sales come from imported products.

"We are looking at how to substitute imported products with local ones. In Joint ventures, we are seeing how to source merchandise locally. But if new stock comes with price, there is no choice but to pass on the same," said Rakesh Biyani, joint managing director, Future Retail.

"With rupee depreciating about 15%, you will see new consignment coming with price rise of 20% including the duty," Biyani said.

Some chains such as gourmet food chain Godrej Nature's Basket, about 85% whose merchandise consists of imported products, have passed on the prices to cosumers. But the chain says that the price rise has not impacted its sales at all.

"Over the last quarter, the depreciating rupee has put immense pressure on the cost of imported foods. As earlier (lower priced) stocks run out and fresh stocks start coming in, we are seeing price increases over a large chunk of our range from our suppliers," said Mohit Khattar, managing director, Godrej Nature's Basket in a statement.

"As a retailer we have had no choice but to pass these increases to our consumers. Fortunately for us, our business both in the April-June quarter as well as after that has remained rock steady", Khattar said.

Pinakiranjan Mishra, partner & national leader, business and risk advisory services, EY believes electronics to see quicker impact than other consumer products. "The impact depends how retailers planned their orders and hedged their imports," he said.

Said Timmy Sarna, managing director, DLF Brands,:" It (rupee) will eventually have a an impact on bottomline given the slowdown in the economy."

"Next season, we will see new stock coming with five to ten% increase," Sarna said.

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