Retail festive sales fall short amidst subdued demand

The retail sector witnessed a modest 7% growth in festive sales this year, falling short of expectations due to subdued consumer demand. While food and grocery outperformed other categories, challenges like inflation, rising costs, and limited consumer spending continue to weigh on the industry.

The festive season’s sales growth in the retail sector fell short of expectations, reflecting weak consumer demand, according to the Retailers Association of India (RAI). The sector achieved a 7% growth from October 7 to December 1 compared to the same period last year, below the projected 10%, as per RAI’s 56th Retail Business Survey.

“Consumption growth has been subdued throughout the year, prompting retailers to boost business through promotional offers and encouraging festive purchases,” noted Kumar Rajagopalan, CEO of RAI. Representing over 2,300 members operating 600,000 stores nationwide, RAI reported varied category performances. Food and grocery led with 14% year-on-year growth, followed by quick-service restaurants (QSR) at 10% and jewellery at 9%.

The broader demand slowdown has been a recurring issue across sectors. The Confederation of Indian Industry (CII) urged the government to address this in the upcoming Budget by suggesting measures such as income tax cuts for those earning up to Rs 20 lakh annually and consumption vouchers for low-income groups.

Margins, particularly in the FMCG sector, are under pressure, especially in urban markets. RAI expressed cautious optimism for the future. “We are hopeful for stronger growth in 2025, as rising operational costs require a sustained growth trajectory to maintain profitability,” Rajagopalan added. Key challenges highlighted include inflation, intense competition, and limited spending power among the lower middle-class population.

Analysts emphasized that these challenges make the retail sector reliant on both policy interventions and evolving consumer behavior in the coming year.