How Is The Indian Retail Sector Surviving The Covid-19 Pandemic?
India's retail industry is one of the founding pillars of the economy. The industry has more than 15 million retailers, dealing in both traditional and modern trade. The industry also employs more than 50 million people directly. Retail contributes a massive 40% to country's total consumption and 10% to the country's GDP. There-fore, the damage done to the industry because of the Covid-19 pandemic and the subsequent two-month lockdown could have far-reaching consequences.
The lockdown that was put in place to contain the infection and prevent massive outbreaks has been detrimental to the entire economy and retail sector is no different. All retail stores, except the ones that were selling essential goods and groceries, were shut down for whole two months, which affected the business very negatively. The major problems that the store owners faced were that even though the sales were down, they still had to spend on the fixed costs like rent and salaries. Non-essential retail store owners have re-ported that they've seen a dip of 80% to 100% in sales during these months.
At such a time, the retailers need to come up with a plan of action that would help them navigate through this storm of negativity and destruction. Let us take a look at how the retail sector is being impacted and what can be done to prevent it from going under the bus.
Exodus to online shopping platforms
Ever since the pandemic made its presence felt in the country, there has been a sudden shift in the consumer behavior. The store owners have seen an exodus of consumers from offline to online shop-ping platforms. Not only is online shopping more convenient for the customers, it is also relatively safer. Even the people who were averse to online shopping have began frequenting the online shopping website to explore better options.
Retail companies would fare much better by cutting down on discretionary spending like entertainment, and travel, rather than cutting down on people costs
This means that going omnichannel is perhaps the best bet for retailers. Those business owners who establish an online presence early would have a competitive edge over the others and it will also help them retain their customers.
Change in consumer behaviour
Another major shift that is being observed is that the millennials, who were impulsive shoppers, have become financially conscious. They are only buying essential items and are becoming more interested towards saving and investing. This does, however, provide a window of opportunity to the retailers as they can adapt their business to the new type of demand that has emerged out of the pandemic. For instance, many FMCG retailers have started dealing in products like hand sanitizers, vegetable wash, health supplements and immunity boosters, whose demands have suddenly skyrocketed.
Impact on Businesses
Even though the entire retail sector has been impacted pretty severely, the recovery would depend upon the nature of segments within the sector.
For instance, since the liquidity crisis is plaguing the entire economy, the commercial realty sector may witness rent negotiations, size negotiations, and consolidation of office spaces. It is quite likely that the retailers would try to negotiate with mall owners/landlords on the revenue share model.
Since plenty of rented accommodations were evacuated during the lock-down, and new tenants are hard to come by, the landlords would be more supportive of their tenants and may consider reducing the rent.
We may see stunted growth in the retail sector for the coming two to three quarters but that wouldn't be the worst thing. These are tough times, and survival should be the priority; there would always be room for growth later. The company executives will focus more on running the already functional operations smoothly rather than engaging in pilots.
Now that the lockdown has been lifted and economy is beginning to get back to its feet, we may see less and less mass layoffs. Even the companies that are dealing with liquidity issues would focus more on trying to retain their employees, albeit at reduced salaries for the time being.
Mutual trust, com-passion and cooperation would play a major part in the recovery process. What has been lost during the pandemic can be regained once things start to get better and measures like pay-cuts, that were taken to prevent the business from stalling, could be reversed.
Retail companies would fare much better by cutting down on discretionary spending like entertainment, and travel, rather than cutting down on people costs.
One of the most important things to keep in mind during this time is to ensure that your workforce isn't overly stressed or anxious. The leaders should address the concerns of their employees and reassure them if needed. Given how uncertain the situation currently is, it would be hard to make any promises, but just reassuring your teammates that you're standing with them could make a huge difference in their mindset and productivity.
Customer retention is also an important thing to keep in mind. Retailers should create a social media presence and engage with their customers to let them know that the products and services would be delivered in the safest manner possible.
The normal that is going to emerge out of this crisis would be a new normal and the lessons learnt during this crisis would pave the way for a new kind of economy and a new kind of retail sector.