In the absence of major support, as many as 20-25 percent of retailers may be out of business or will need dire financial infusion to stay afloat.
Retailers risk losing about 50-60 percent of turnover, and it will take around three-six months for revival, feel experts.
“If somebody does a Rs 500 crore of turnover, the loss of sales is expected to be in the range of 50-60 percent, which could be around Rs 250-300 crore. This could be that deep,” said Kumar Rajagopalan, Chief Executive Officer - Retailers Association of India (RAI).
Indian Retail Industry has more than 15 million retailers, both small and big, traditional and modern trade.
Retail employs 40-50 million Indians directly of which Modern trade employs more than 6 million Indians equaling to almost 12% of the total Retail consumption of the country.
Retail contributes to approximately 40 percent of India’s Consumption and 10 percent to India’s GDP
The lockdown to prevent the spread of coronavirus in the country has crippled retail business.
Most stores, except those selling food and grocery, have been shut across the country.
Even retailers of essential items are facing losses as they aren’t allowed to sell non-essential items, which would bring them higher margins.
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The Retailers Association of India in partnership with the Trust for Retailers and Retail Associates of India (TRRAIN) had organised a webinar on 'The Impact of COVID-19 On Indian Retail'.
The webinar was moderated by BS Nagesh, Founder TRRAIN, Chairman-RAI and Non-Executive Chairman Shoppers Stop, joined by retail experts such as Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India; Anuj Puri, Chairman, Anarock Consultants Pvt. Ltd and Pinakiranjan Mishra, Partner & Sector Leader, Retail & Consumer Products, Ernst & Young India.
Moneycontrol collated the key takeaways from the webinar.
Impact on Businesses
Commercial Real Estate sector may get hit with tenants getting into rent negotiations, size negotiations, consolidation of office spaces to tide over cash flow concerns.
Retailers are likely to negotiate with mall owners/landlords on the revenue share model.
Mall owners/landlords wouldn’t want their existing occupants to leave and maybe more supportive.
Leadership will focus on cost efficiency than growth. Focus will be high on efficiency and achieving more with less. This means some functions may see consolidation, pilots will be put on hold and focus will be more on fundamentals.
Most leaders will take compassionate calls rather than a radical one. Hence, pay cuts rather than job cuts are more likely. Leaders need to be prudent and should not cut the necessary muscle else they will not be ready when the recession ends. Pay cuts will be most at the top-management levels, followed by middle management.
Discretionary spending like entertainment, travel, admin costs are more likely to be cut than people costs.
Organizations which are already highly leveraged are going to face the toughest challenges to get back on feet.
Collaboration will be key in recovery particularly in areas such as compliance within stores, collaboration for revenues e.g. for distribution and delivery and collaboration for costs—real estate.
Government support
Recovery will be dependent on the Government’s support to the sector.
It may take a minimum of three quarters to stabilize.
In the absence of major support, as many as 20-25 percent of retailers may be out of business or will need dire financial infusion to stay afloat.
Government will have to take a backseat on fiscal prudence & take bold steps to ensure that this sector as well as the economy, in general, is afloat.
Government should focus on giving more money in the hands of the consumer, which will automatically come back in the system as consumer spends increases.
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