With shutters down, the retail industry is reeling under Covid-19

Largely it's the brick and mortar stores with non-essential commodities like apparel, jewelry, shoes, consumer electronics are the biggest hit of this lockdown as majority stores are shut following the mandate announced by PM Narendra Modi.

New Delhi:The 21 days nationwide lockdown has left the retail industry under immense stress as pointed out by several retailers and associations.

Future Group, one of the leading retailers of the country said they are focusing on keeping the stores running amidst the crisis with adequate supplies of essential items being in place and keeping the staff mobility intact. The company runs different retail formats including fashion, convenience stores, and grocery.

Among these, only Big Baazar stores are running, however, not all. With the lockdown going on, the company said it is not focusing on sales numbers as yet to evaluate the impact.

The Confederation of All India Traders (CAIT) said Covid-19 has caused as much as Rs 2.3 lakh croreto the retail industry in a span of 15 days starting from 17th March.

Largely it’s the brick and mortar stores with non-essential commodities like apparel, jewelry, shoes, consumer electronics are the biggest hit of this lockdown as majority stores are shut following the mandate announced by PM Narendra Modi.

J Suresh, CEO and Managing Director of Arvind Brands that owns and operates several luxury and bridge-to-luxury fashion brands said, the lockdown has brought total revenue loss for the company as the stores are shut.

"There are over 15 lakh modern retail stores in India generating a business of almost Rs 4.74 lakh crore and employing over 60 lakh people. Due to the Covid-19 pandemic, by the end of February, the business had dropped to as much as 20 to 25 percent. In the past one and a half months, it has further reduced to 15 percent. Stores selling essential goods that have been allowed to remain open during the lockdown are also suffering losses as they aren’t allowed to sell other general merchandise, which would otherwise bring them higher margins,” said Kumar Rajagopalan, CEO, Retailers Association of India (RAI).

Kumar stressed on the fact if the lockdown continues till June, then there might be a scenario where we will see 30 percent of the retail stores are shut for good, leading to 18 lakh people losing their jobs.

Paying rental, taxes, and salaries amidst lockdown

CAIT National President Mr. B.C.Bhartia & Secretary General Praveen Khandelwal said that even if global economies and other sectors of the Indian economy bounce back sooner than expected, Indian traders are likely to pay a higher price and the strenuous ramifications will reverberate for a much longer time than expected.

The reason is that a large percentage of the Indian traders are too small to have enough of a cushion to last through a pandemic like this one. The most important reason for this devastating situation is the fact that a majority of the Indian traders have had to down shutters or curtail operations for health reasons, while still paying employees' salaries and that's apart from meeting costs for rentals, taxes and other levies.

Here, a good section of the retail brands are seeking rental waive off till the end of May 2020 from their respective mall operators. As they fear even after the lifting of the lockdown, the demand from Indian consumers might also be subdued because the maximum section of the Indian consuming class will be cash strapped and hard-pressed for disposable income.

There are instances of retailers facing issues in replenishing products on shelves as well. As pointed out by METRO Cash & Carry spokesperson, the company is facing issues in replenishing essential items as a lot of trucks are stuck in inter-state borders carrying essential items along with non–essential items in the same vehicle. Otherwise, exclusive essential items trucks are on the move.

In some cases, the police are stopping the vehicles at the borders and in some places the drivers are not reporting on duty due to the scare of the outspread. Due to these, there are severe challenges in receiving stocks from the supplier partners.

Also, there is a lack of coordination between central and state governments. In some cities, the local authorities have their own set of guidelines to be followed like restrictive time of opening the stores, no permission to business customers to visit stores for stock fulfillment– not letting employees and customers enter the store or not allowing Kirana to open the store. This is hindering the stores’ stock replenishment and ultimately creating panic among citizens.

After effects of the lockdown

Additionally, with the withdrawal of the lockdown, many retailers who import goods from China, the USA, and Europe might face less supply of goods from these countries as the import cycle has been hit drastically.

The mentioned countries are under severe effects of Covid-19 and therefore will take more time to normalise and therefore the import cycle and supply chain might take much longer to get back on track, pointed out by CAIT’s Khandelwal.

One may well understand here Indian manufacturers that are dependent on imported raw material components will take a longer time to kick start their operations due to a shortage of raw materials. If the production by Indian manufacturers is not up to the mark, retailers will end up facing an acute shortage of finished products.

Another effect of the lockdown will be a shortage of labour. As the cities ran dry due to the pandemic, thousands of migrant workers have returned to their natives fearing the safety of their lives due to the severity of the health hazards in cities that are hard hit due to Covid-19.

Appeal to government

The government may have deferred the EMIs' but without waiving off the interest, this will have no real value opined several retailers.

Facing such hurdles, several retailers and associations have written to the government for appropriate action.

For example, RAI’s Rajagopalan said the association has written to the Government of India requesting a relief package for the retail industry in India similar to what the Governments of Singapore, United Kingdom and the United States of America have announced for retail industries in their respective countries.

CAIT’s Khandelwal said that they have appealed to the government for concrete action including tax concessions, smooth and easy access to credit, GST write-offs, relaxation and reimbursements for wages, waiver of interest costs, among other demands.

Ethnicity Retail’s Ameet Panchal sought financial support to ensure no job losses in the retail trade.

Towards this, he along with many retailers requested a 4 month (March 20 to June 20) job support subsidy at 50 percent cash support of the minimum wage to encourage retailers to continue the employment of staff during the lockdown and recovery period after the lockdown is lifted.

(Article by Delhi-based journalist Sharmila Das. Views are personal)