Impact of COVID-19 on the Retail Industry

The situation will be weak even after the lockdown is lifted as the consumers will be in buying mode but only what is needed
Impact of COVID-19 on the Retail Industry

India’s retail industry would take at least 6-9 months to recover from the impact of the COVID-19 pandemic. 20-25% of industry players may need a capital infusion to stay afloat and about 20% of jobs in the industry may get impacted. At present, 7-8% working retailers are of essential commodities retailers.

The situation will be weak even after the lockdown is lifted as the consumers will be in buying mode but only what is needed. After that, we will have a recovery mode. The industry has more than 15 million retailers including big and small, traditional and modern trade. Retail employs 40-50 million Indians directly.

Fashion, furniture, electronics, luxury retailers and automobiles will be hit the hardest as consumers forego discretionary purchases in favour of stocking up on food and household supplies. Grocers win, will come at a higher cost of operations and need to be better prepared for the omnichannel shopper and responsiveness to demand shifts.

Retail technology investments will continue to reflect digital transformation efforts, as retailers reserve capital for technology investments by reducing spending on store openings and remodels.

Cash rotation would slow down for all categories retailers except food, grocery, pharma stores who would be less impacted as they have covered substantial sales target in March itself. Large retail and real estate can be impacted as they would expect recognition in rental contracts. Supply chain which has always been an important factor in retail shall be the biggest challenge and would require realignment. As retail engages high manpower, getting back manpower would also be a challenge post lockdown and hence it would also impact retail experience and customer service.

The online retailers would be highly active for essential goods and hence portal up-gradation would also be a challenge to consider due to the number of customers shopping online. Hence there could also be a hike by 5-7% in online purchase for a year. However, the e-commerce sector will also face the challenges and will see a dip in growth for other commodities. There will be high pressure on the supply chain for deliveries of products and another challenge would be to equip their employees with appropriate resources to manage the operations with no disruptions.

The extent of the outbreak and lockdown would directly impact the length of the recovery cycle.

The article has been authored by Kapil Pathare, Director, VIP Clothing Ltd.

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