The Confederation of All India Traders (CAIT) had recently stated that the lockdown and slowdown due to the COVID-19 pandemic has already severely impacted the Indian retail segment, estimating that retail trade has already suffered a massive loss of around $30 billion in the last fortnight.
According to CAIT, the Indian retail sector comprises around 70 million small medium and big traders that employ around 450 million people and does a monthly business of approximately $70 billion. Similarly the logistics sector has also suffered in India due to the lockdown. Experts feel that the overall impact on retail sector in India is expected to be high.
“The import cycle of the retailers has been hit drastically due to which Indian traders may not have enough goods to sell even after the lockdown is lifted. Finished goods imports from China, the US and Europe which are reeling under the severe effects of COVID-19 will take more time to normalise. Therefore the import cycle and supply chain might take much longer to get back on track. Even Indian industries which are dependent on imported raw material components will take a longer time to kick start their operations due to shortage of raw materials. If the production by Indian industries is not up to the mark, retailers will end up facing acute shortage of finished products,” remarked Praveen Khandelwal, Secretary General of CAIT.
He further observed that the retail markets in urban centres will face acute labour shortage as they have migrated to their towns and villages fearing safety of their life due to the severity of the health hazards in cities which are hit due to COVID-19.
Experts believe that the condition may not improve immediately even post the lockdown and it will be a while before things normalise. “The level of discretionary spending is expected to fall steeply and remain low in the coming weeks. Hence even if stores reopen, a decline in store footfall and net sales is expected. However, not all segments of the retail sector will face similar level of revenue losses. While segments such as textile, footwear, fashion accessories, furniture and other household appliances will have revenue losses, segments that cater to essential services such as food and other fast-moving consumer goods will likely face a surge in sales driven by panic buying and hoarding behavior,” explained Dr. Arun Singh, chief economist at Dun and Bradstreet India
Retailers Association of India (RAI), a body of retailers that represents 13,667 large and small member establishments the country encompassing 500,000 stores says that as most stores are shut, retailers have zero revenues. Despite that, they still have to pay overheads such as salaries, electricity, and rentals. The cash inflow of the industry has come to a standstill, while the fixed operating costs remain intact.
“Nearly 60 to 70 percent of costs are fixed costs in the retail segment. This, along with low margins, leaves businesses with limited flexibility. Rents and salaries to employees make a large part of this cost. The current situation will lead to down scaling or shutting down operations widely and the closure of retail businesses will affect a large sections of society as it is a people intensive industry and 90 percent of retail employees work at the stores, earning minimum wages and living a hand-to-mouth existence. With extended closures, these employees are at risk of being retrenched. With close down and projected slow down of retail consumption, the entire supply chain will be under stress. Distributors, manufacturers, raw material suppliers and the entire value chain will have order cancellation and loss of income,” remarked Ameet Panchal, MD, Ethnicity is a member of the Retail Association of India.
Closely linked to the retail segment is the logistics segment that is also reeling under severe stress due to the lockdown. A recent report by the LogisticsNow, an intelligence platform for logistics says that the entire supply chain has been impacted. From raw materials and packaging material supply to manpower at manufacturing plants (to load or unload or operate) to logistics and transport to retail. The report further observes that the imbalance in the supply and demand networks is likely to reach alarming proportions unless emergency measures and strong public-private synchronisation is created immediately, on a regular basis. The report observes that the speed of response will be critical at every step or stage, especially once the curfew or the lock down is lifted and the number of cases rise significantly.
“One of the major challenges today is that truck drivers who have gone home are tough to trace and tougher to bring back on the job. This is likely to result in losses for the transporters and the nation at large. Creating a national registry of drivers will enable the government to request and arrange for safe passage of truck drivers in such times of need, to enable rapid mobilisation. For a vast and complex nation like India, there is a need to have digital supply chain and logistics that can power us to prosperity while multiplying our ability to react to situations like COVID-19 in near real time to avoid shortages and panic which grips the public when an emergency or pandemic strikes,” pointed out Raj Saxena, Founder and CEO LogisticsNow.
Despite the challenges, experts believe that the situation may improve in the coming weeks especially for essential items but may still remain grim for non essential items. “Most courier companies have started deliveries of essential goods in selected pincodes. By the starting of next week, we expect all courier companies to be operational for essential goods. Non-essential e commerce companies are facing huge business pressures, as costs have not reduced, but revenue is zero. On the other hand for online pharma daily deliveries have reached 70 percent of normal volumes and we expect this to increase further next week as all pending orders of customers get delivered.” said Pranshu Kacholia, Vice President Business, Clickpost.
On Friday, Uber announced that it was partnering with BigBasket to start a last-mile delivery service to make it easier to people to access essentials during the lockdown. “To save you the risk of stepping out to get your supplies, we have started a new last-mile delivery service to get your everyday essentials right to your doorstep. We have partnered with bigbasket and are deploying a mix of UberGo, UberXL and UberMoto, to help them ensure reliable delivery of essential supplies to as many homes as possible in Bengaluru, Hyderabad, Chandigarh and Noida,” Uber said in a blogpost.
