The retail sector and its associated sectors – real estate and manufacturing – have got a sucker punch from Covid-19 crisis.
While previous pandemics and Covid-19 have several similarities, this time the retail sector has two parachutes for its survival, which were not present earlier. The first is the explosion of the online channel, which can rightly be termed as the sector’s artificial lungs. The second advantage is greater proliferation of technology, because of which some segments of retail have not been hit as hard as the others.
In an exclusive webinar organised by The Blue Circle on ‘Moving the Retail Cart Forward’, prominent leaders – Rajesh Jain (MD & CEO, Lacoste India), Anand Vijay Jha (Chief Public Officer, Walmart India), Asim Behera (Executive Board Member & COO, Daifuku India), Jayant Vaitha (Director and Head of Design Services, Colliers International), Aseem Soni (CEO and Board Member, Modern Foods), and Pavan Choudary (Author, CEO and Public Intellectual), discuss the impact of Covid-19 on the retail sector and the way forward.
Retailing, which comes last in the distribution channel of goods and services, is not only an integral part of our economic structure, but also shapes our way of life.
The Indian retail industry is the largest among all the industries, accounting for over 10% of the country’s GDP and around 8% of the employment, second largest after agriculture.
Given the widespread effect of Covid-19, business across sectors is looking gloomy. Shutting down of malls and shops has severely hurt business for all retailers and could lead to major job losses.
Making essential goods available
During the lockdown, suppliers and retailers of only essential goods are allowed to operate, to ensure easy and uninterrupted availability of their supplies.
With people staying home, for their essential needs, they are depending on their local kirana stores more than ever. These stores, said Aseem, have become much more agile and supple. “They supply an order within 60 minutes compared to bigger players who take 2-3 days.”
Echoing the observation, Jayant said that Kirana stores are an essential part of neighbourhood shopping and yes, repositioning them or reinventing them is happening in a lot of places.
The unprecedented demand on kirana stores has also led to a resurgence in Hyper-local delivery of food and groceries over the past few weeks. Many online players have tied up with local kirana stores to deliver essentials to Indian homes.
Anand of Walmart, a B2B platform for wholesalers and retailers including kirana stores, shared that the company is looking at a 20 billion dollars business in India and 31% growth from the e-commerce side, with 60% expected from the food and grocery segment alone.
With a sustained supply chain the kirana stores and supermarkets might register a growth. However, supermarkets in malls are not faring so well.
For non-food retail stores, like apparels, IT products and consumer durables, the sector might see the largest drop. While people might be eager to step out to purchase post the lockdown, the contact points in such locations might be a cause of worry. Also, these stores would have to deal with the problem of excess stocks and styles going out of fashion.
In such times, e-commerce, on a high growth trajectory, has received a further fillip due to Covid-19.
Rajesh concurred. “Online has given a channel to us retailers to reach out to customers, who would have been inaccessible otherwise.”
While Anand was in agreement, he said it requires solid structural support from the government to continue its pace.
Pavan hoped that this time will lead to the emergence of nuclei of supply chains, which will be the new centres of growth that will exploit online and offline.
A large chunk of suppliers to the retail industry comprise of MSMEs. These have been badly hit and are currently facing challenges on multiple fronts. There is the working capital challenge, of getting the manpower back and training them quickly, and understanding the changing customer demand, which is currently focused on essentials.
While the government has launched a slew of measures for MSMEs, the schemes laid out are, typically, so complex, it will be difficult for MSMEs to decode and make use of.
“At Walmart, we have launched a program called Vriddhi that has a help desk, a chat bot, and webinars. We have made clusters of all the MSMEs based on the areas and are breaking down these schemes to a more understandable format,” shared Anand, adding that Walmart has been able to help 199 MSMEs transform to the emerging demand of safety kits and other equipment.
Rajesh lamented that out of the three asks from the government of liquidity, participating in the cost and creating demand, only the first has been addressed so far and retail is still not allowed to be registered as MSME.
Embracing technology for sustenance
These last 2 months essential goods retailers and manufacturers have faced difficulties in meeting demand due to lack of labour and cracks in the supply chain.
Asim shared how a customer who embraced technology before the pandemic survived the challenges.
“One of our customers is a food manufacturer, who has been allowed to keep the factory open during lockdown. Even though their manpower dwindled to half because of migrant movement and blockades, they are able to manage because they invested in automation in both manufacturing and logistics much before the pandemic.”
Lifestyle retail could also see the need for technology adoption. People often want to try on the products before purchase and also be presented with an opportunity for a return. This might be a tricky situation to handle during these times.
This might lead to a surge of live streaming, an already popular way of shopping in China. Influencers live stream inside of boutiques, offering product closeups and even trying on clothes, shoes and jewelery for an online audience.
As we are growing more accustomed to online activities, livestream shopping might become the way to reach out to consumers in a post-COVID-19 world.
Comparing the impact of Covid-19 to World War II and The Great Depression, Rajesh said it might take 6-9 months to stabilise the business and reach the pre-Covid stage.
“There is a need for collaboration between the mall developers/owners and retailers so that both can survive this situation.”
Newer models might have to be designed, Pavan suggested, wherein rent is paid based on the sales. After all, an empty shop is worse than a low paying tenant.
Using the term ‘agoraphobia, which means fear of large open spaces, Jayant cautioned that large enclosed spaces are making people uncomfortable today. “In times to come, high street shopping centres will gain more ground.”
Rajesh countered that it isn’t easy to attract customers on the high street in India, especially due to climate and pollution issues, and parking problems.
Suggesting an alternative for malls, Asim shared the example of the US where, as modern trade is going down and e-commerce is going up, a lot of malls are not attracting footfalls and getting the revenue they want. So a lot of companies are making micro-fulfilment areas there, where they are small extended warehouses for e-commerce and retailers, where last mile delivery which is the most expensive piece of e-commerce delivery gets taken care of.
Getting customers back to stores
In the post-Covid world, Rajesh said it will be trust and focus on safety that will bring back customers. Brands and retailers are working harder than ever to create a safe space for people.
With the high number of job losses and pay cuts, Pavan said demand will slump. It is the responsibility of retailers to perk up this demand again. “People will gravitate towards more trustworthy vendors, and continued supply and evergreen brands.”
Anand added that consumers are going to have a conservative attitude in Q3, apart from maybe buying air conditioners or essential commodities. Giving an example of how things have changed, he added, “The US had deficit financing of 3 percent of GDP during WW2, this time it is 10%. The kind of understanding of challenges today; that’s a positive today.
Rajesh concluded, “Demand will go down for a while, but most retailers are calibrating this slide into their projections. There is a latent demand, which is still persisting. Aspirations of people are not going away. There is an added element of scare to go out and start shopping. Most retailers are taking de-growth in the physical store, online is instead going up. We as a company are taking orders on a couple of websites, where we are telling them we can deliver post lockdown. The sale is similar like last year, which is a positive.”
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