Customer worries hit New Year biz

Customers are holding back on festive purchases and celebrations, according to retail outlets and restaurants in the Central Business District

Restaurants and retail establishments across prime locations in Bengaluru are reporting a muted year-end season.

When it comes to year-end parties, restaurateurs say bookings have dropped by 50 per cent as compared to last year.

A few big brand outlets on Brigade Road have shut down in the recent past because of poor sales and high rents.

Suhail Yusuff, secretary, Brigades Shops and Establishments Association (BSEA), believes customers are not spending “because of instability at the workplace and the lack of job security.”

This means several commercial spaces on Brigade Road, regarded as the city’s high street, are vacant.

“Earlier, even to get 100 sq ft on Brigade Road was impossible. But this year, at least six establishments have shut down and a few more are expected to shut down by January 31,” he says.

The monthly rents, ranging from Rs 250 to Rs 400 a sq ft, are too high to sustain many businesses. A business has to set aside between Rs 4 lakh and Rs 16 lakh just for rent, he says.

Work on the Metro has resulted in the road link between Commercial Street and Brigade Road being cut, and this has affected business at both locations.

Few company parties

The owner of a big restaurant chain says New Year reservations have dropped by 50 per cent. He attributes it to the general economic slowdown. “As part of employee welfare, corporates would make bulk bookings and take them out around this time of the year. But this year, they have slashed their budgets,” he says. The food delivery services are also a factor. “Their offers are attractive. Why would someone want to get stuck in traffic when they can order in and spend time in the comfort of their home,” says the owner.

Music licensing row

Meghna Vakada, member of the National Restaurant Association of India (NRAI) and managing partner of Barley and Grapes concepts (Barley and Grapes Cafe, Andhra Kafe and Blytons), says people are choosier than before about where they eat out, and are wary about spending.

“The music licence problem has added to their woes. People go out for a wholesome experience. Who would want to go to a place where there is no music?” says Meghna.

Police are refusing music licences to restaurants with no occupancy certificates. Since most buildings violate municipal plans, they are denied occupancy certificates by the BBMP.

Meghna says many restaurants are staying afloat by borrowing from venture capitalists and taking loans. “You can’t suddenly tell your employees that you are slashing their salaries because business is affected,” she says.

Mukesh Tolani, co-founder of Toit and Permit Room, confirms year-end bookings have dipped by half.

“Some restaurants depend on music to run their businesses. People have stopped going there because there’s no music,” he says.

Economist’s view

Overall, business is poor because of the onset of a larger recession that is reducing demand, explains Dr Narendar Pani, professor and dean, National Institute of Advanced Studies (NIAS). “People are spending less... job insecurity has set in,” he says.

‘Postponing purchases’

Brand guru Harish Bijoor explains how the sentiment is affecting brands.

What has dampened spending?

In Bengaluru, the income in the hands of consumers is still strong. However, the sentiment on expenditure is dampened. This is because there is a dominant shadow of a deep economic slowdown hovering around. The real bite of lowered income has not hit Bengaluru as yet. What has actually hit is caution. People are saying, “Let us postpone this buy”. People are saying, “Let us not splurge”. People are also delaying replacement purchases.

What has triggered this?

The general economic slowdown is a function of many things. Jobs are scarce, production metrics are down, agricultural distress is a reality and subsidy-agriculture is a Band Aid solution.

Is brand loyalty affected?

Brands are in trouble for sure. Luxury brands remain insulated. Popular brands in the mid-segment are affected. Cautionary spends affect mid-tier brands the most. There is the brand-downgrade sentiment around as well.

50 per cent drop in year-end restaurant bookings and retail sales as compared to last year, according to trade bodies.

Trade body talking to officials

Manu Chandra, restaurateur and head of the Bangalore chapter of National Restaurant Association of India (NRAI), says the business is working with the authorities to resolve its problems. The last few months have been tough for the F&B industry, he told Metrolife. “Tourism has dropped and people aren’t spending as much as they used to. We are working with RWAs, courts and the authorities to amicably resolve the (music licensing) issue,” he says.

Rental range

Rs 250 to Rs 400 a sq ft
(per sq ft per month on Brigade Road)

Metro till 2 am

Namma Metro, which connects New Year’s Eve party hub (M G Road area) to many parts of the city, will run till 2 am on December 31. It will not bar entry to people who have consumed alcohol, but will not allow unruly revellers on board, according to officials. On regular days, the Metro plies only till 11 pm. Metro is selling only paper tickets at Rs 50. This allows you to travel to any destination. The smart cards also work.