NEW DELHI: Caught between essential and non-essential items, the retail industry is facing increasing pressure as the coronavirus pandemic wreaks havoc across supply chains and shoppers desert markets and malls. While the crisis is set to have a marked impact on almost every sector in retail – grocery, e-commerce, fashion, luxury and more – some may be faring better than others. Especially, food retail.
For non-food retailers, however, which includes the likes of electronics, apparel, or home furnishing, it could mean ‘survival of the fittest’ post the forced social isolation period.
According to a survey conducted by Retailers Association of India (RAI) among 768 food and non-food retailers across the country, more than 95 per cent of the non-food retailers have closed their outlets and are looking at practically no revenue during the period and they expect to earn only about 40 per cent of last year's revenue in the next six months.
For instance, for a business having a turnover of Rs 500 crore, the loss in sales is expected to be in the range of 50-60 per cent, which could be around Rs 250-300 crore. For small retailers, the loss could lead to a potential fallout: forced closures.
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'The coronavirus has triggered a collapse in non-food demand with most retailers reporting 80-100 per cent drop in sales. As a result, small retailers who employ less than 100 people, are also expecting to layoff 30 per cent of their manpower going forward while about 10-15 per cent for larger retailers. Many small businesses may even not survive this apocalypse,' said Kumar Rajagopalan, CEO RAI.
Indian retail industry has more than 15 million retailers -- both small and big, traditional and modern trade -- employing 40-50 million directly, of which modern trade employs more than six million equaling to almost 12 per cent of the total retail consumption in the country.
With little to no revenue coming in for non-essential retailers through at least the end of April, other than sales from online channels, businesses will continue to suffer throughout this year or even till early next.
Meanwhile, retailers are also pitching for adding more items to the key list of essential goods arguing that for most households, the list of essentials during the second week of the lockdown is different from what it was during the initial days when consumers were mostly stocking up on packaged food, milk, fruits and vegetables.
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'Product-wise appliances such as an induction cooker or electricals such as bulbs and services like repairs may be essential for some people now,' an industry executive, who was present at a retailers’ meeting with secretaries last week, told this publication.
Kamal Nandi, Business head and executive vice-president, Godrej Appliances and President – CEAMA said, 'The ongoing summer season is a crucial period for the appliances industry. The period between February and June contributes to around 60 per cent of the total turnover. In fact, March and April contribute to 12 per cent each in sales turnover to the industry. Due to the current lockdown and dampened consumer sentiments, the industry has seen a drop of up to 55 per cent in sales in March with sales likely to be similar or worse in April if lockdown persists.'
Fashion, in fact, is most vulnerable to disruption since it relies so heavily on discretionary spending and is also among the first things that consumers cut back on in hard times.
Seeking support from the government to ease fund flow and to compensate for essential expenses like vendor payments, rents and salaries, the industry said it is facing an imminent financial crisis and insolvency.
'With the ongoing COVID-19 pandemic, the entire retail industry is witnessing uncertain and challenging times more than ever. Getting back on track will be a long and arduous task as the way forward looks fluid with millions of jobs at risk, Benetton India Managing Director and CEO Sundeep Chugh said.
Spykar Lifestyles CEO Sanjay Vakharia said the losses for the retail industry alone have crossed $30 billion during the fortnight and are rising.
A study by the All India Manufacturers Organisation (AIMO) estimates that about a quarter of over 75 million MSMEs in India will face closure if the lockdown goes beyond four weeks and this figure is estimated to touch a whopping 43 per cent if the situation extends beyond eight weeks.
To cut a long story short, it would be the consumers who will determine the winners and losers. Industry executives expect big-ticket purchases to remain muted till end of this year while housewares and countertop cooking items to see a growth in demand, albeit at a slow pace.
On the other hand, retailers including apparel and footwear, particularly those relying on brick-and-mortar sales, would like to review their online marketing efforts and may also shutter some of their physical outlets in the days to come.