The Retail market in India has undergone a major transformation. In fact, it has witnessed tremendous growth in the last 10 years. India is largely an unorganized retail market, contributing 88% to the total
retail sector in India.
The Indian Government has permitted 100% FDI in the single-brand retail and 51% in multi-brand retail. This move will further accelerate the Retail Industry. Due to the entry of several new players, the Indian retail industry has emerged as a dynamic and fast-paced industry.
Growth Drivers
- Retail is India’s largest industry, currently accounting for over 10% of the country’s GDP. It accounts for 8% of total employment.
- Revenue generated from online retail is projected to grow to US$ 60 billion by 2020.
- Recent policy changes allow 100% FDI under the automatic route for single-brand retail trading.
- Factors that make India so attractive include the second largest population in the world, increasing urbanization, rising household incomes, connected rural consumers and increasing consumer spending
COVID-19 Impact analysis on the Retail Sector
Major loss of earnings, jobs
The outbreak of coronavirus is having a severe impact on people, economy and business. As responsible corporates, all retail players are adopting necessary preventive actions to ensure safety of their employees and customers.
Major earnings cuts ahead
Emkay Global says the fall in crude prices and moderating agri-input prices should drive margin gains for most staples. But it cut earnings estimates by 3-15% due to the impact of the disruption and a slow recovery.
Guidelines for Retailers:
- Employees need to be reskilled to work in the post-COVID world.
- Fashion must move away from the usual season cycle and look at a 12-months 12- seasons model.
- Brand is most important right now for survival of businesses.
- F&B stores must explore adding new product lines to improve sales..
- Collaboration within the industry will be key. Particularly between grocery retailers and other retailers who are currently craving foot traffic.
- Businesses must have proper SOPs in place.
- Safe Shopping experience will be the new normal. Retailers must make it mandatory for all customers and staff to wear masks and get tested with thermal guns.
- Other safe shopping methods to explore going cashless to avoid interaction; the invoice too should preferably be digitally sent to customers.
Impact of Covid-19 on Indian Retail Sector
Impact on Non-Food Retailers
More than 95% of Non-Food Retailers has their shops closed in the lockdown and are looking at practically no revenues till the lockdown is in place. In the next 6 months, Non-Food Retailers expect to earn 40% as compared to last year’s revenues.
Impact on Food Retailers
Most of Food Retailers also sell non-essential goods in the same and / or different stores. The non-food business in the stores has come to a standstill in the lockdown leading to revenue loss.
Overall Business Outlook
70% of retailers expect the business recovery to happen in more than 6 months, 20% expect it to take more than a year.· <10% of Medium and Large Retailers expect to earn any profits till Aug’20, 26% of Small Retailers expect to earn profits in the same time period.
Manpower rationalization
Small Retailers are expecting to lay-off 30% of their manpower going forward, this number falls to 12% for Medium Retailers and 5% for Large Retailers. On the whole, retailers who responded to the survey expect a layoff of about 20% of their manpower.
Ramping up the supply chain post COVID-19
- Day-zero and-beyond planning
- Sourcing
- Supplier risk assessment
- Monitoring inventory and flow of goods
- Delivering to the last mile
- Assess cash/liquidity position
- Shift to ‘safe retailing’
Resilience strategies for Indian retailers – Now, Next & Beyond
- With dwindling revenues for most categories and pending rental, salary, and interest payments, retailers across the board in India will face the heat when it comes to financial management.
- Given the uncertainty around the crisis it becomes imperative for retailers to have a cross-functional swift response team to handle any event that may follow.
- Retailers will need to repurpose their supply chain to meet demand fluctuations within their categories amidst supply constraints.
- Continuous leadership connect with employees, especially frontline staff, around their health and financial well-being during this time will generate a sense of trust that the organization cares.
- Retailers need to ensure that they continue their communication with customers throughout the crisis period.
- The crisis has already brought a heightened level of regulatory scrutiny and passing of multiple directives by local, state and central government to ensure public health and safety