Recession is hitting the retail industry quite badly and Shubiksha has announced that it has closed 90 stores in the last 1 month.
“We were paying huge rentals for these stores, which was a huge drain on the company’s finances. This, coupled with less-than-expected footfalls, drove the operational costs to unsustainable levels.
High rental rates have always been the bone of contention for organized retail owners. The retailers had taken up space on rentals as high as Rs 250 per sq ft. “At one point of time, the retailers were paying close to 40 per cent of their operational cost as rent, leaving hardly any room for profits” – source
The retail industry has seen severe decline in consumption and it’s expected that there would be 20-30% cut in the growth rate.
Vicious circle of consumption!