With Unlock 2.0 on the cards in the next few days and several sectors opening up, retailers are hoping for a revival of consumption and signs of recovery at least in the second quarter of the year or around Diwali.
According to retailers, while there will be initial pent-up demand, complete revival will take time. Given the uncertainty created by the economic slowdown, consumers will be cautious and curb expenditure.
Unlock 1.0, which started on June 8, 2020, has brought relief to the dampened spirits in the retail sector. But it is far from what is cherished. Though 85 percent of retail space is now operational, customers are still skeptical to be out shopping.
Metros like New Delhi and Mumbai are the worst hit, and they are also the biggest fashion markets in India.
Madame, a premium clothing brand, said high-street stores in Tier-II Tier-III towns are doing almost 40 percent business compared to last year. Malls are hit hard, contributing to only 10 percent business compared to last year.
The lockdown which started from March 22 has been extended to July 31 to curb the spread of COVID-19. Flights and other transport services across the country remain restricted.
Presently, with nearly 6.5 lakh cases and average 20,000 new cases added per day, the peak is expected to be around the corner.
States believe that there is a need for a staggered withdrawal from the lockdown while maintaining a fine balance between opening up of economic activities and doing more tests.
Retailers suffer
The latest business survey conducted by the Retailers Association of India (RAI) with more than 100 big and small retailers revealed that there has been no significant growth in business for retailers even during the second half of June.
Retailers witnessed 67 percent degrowth from June 15 to June 30 compared to the corresponding period last year. During the same time frame, malls witnessed 77 percent degrowth year on year on account of not being allowed to open uniformly across the country. High street retail showed a degrowth of 62 percent year on year in business despite being allowed to open across India.
In June, large size retailers ( more than Rs 300 crore revenue) witnessed a degrowth of 59 percent (y-o-y) and small retailers (<Rs 300 crore sales) witnessed a degrowth of 69 percent (y-o-y). Region-wise findings indicate that West (-74 percent y-o-y) and North (-71 percent y-o-y) continue to suffer the most. East and South both signalled a 62 percent (y-o-y) fall in sales.
Kumar Rajagopalan, CEO, Retailers Association of India, said, “Although the quantum of degrowth marginally reduced in June 2020, the first quarter of FY21 continued to witness degrowth of -74 percent. The figures depict a grim situation for not just retailers but the entire economy as retail is the backbone of consumption. The need of the hour is concerted efforts by all stakeholders. While retailers are doing their bit by following stringent hygiene practices, the policymakers too need to ensure uniform opening of all kinds of retail across the country.”
An earlier consumer sentiment survey by RAI had revealed that more than 60 percent of the consumers will wait up to 90 days before shopping, keeping in mind expenditure and safety factors.
This resulted in slow growth for the retail sector throughout June. The sentiment got reflected in categories like beauty, wellness, and personal care (-69 percent) and apparel, clothing, jewellery, watches, and other personal accessories (-67 percent).
Brokerage firm Emkay expects a steep fall in revenues to the tune of 70-80 percent and net losses across fashion retailers due to the closure of stores during the lockdown period in April/May.
According to the brokerage's report on retailers, “the recovery for fashion retailers appears to be slow. Rent reduction can provide some relief going ahead, in our view. The pace of recovery and ability to reduce cost will be key monitorables.”
Ray of hope
Sanjay Mohanty, Managing Director – South Asia, Middle East and North Africa, Levi’s Strauss & Co said business is getting back to normal and footfalls are there, but not as much as pre-COVID levels.
He was speaking at a webinar on the future of shopping and cinema held on July 10.Owing to the lockdown, people were confined behind closed doors and have not really had a real-time shopping experience.
Therefore, a pent-up desire to go out and shop is definitely at a high in people, and if these desires convert into transactions, it definitely will result in a rise. As things are beginning to settle down and markets opening up, people will be taking swifter choices in life, according to retailers.Retail has undergone radical transformation, and no one could have possibly been prepared for the disruption caused over the last few months.
“Unless there is a cure or prevention of the disease available, the pandemic remains a matter of concern. Therefore, even as things unlock, the concerns for health and financial stability remain. Things may get slightly better by next quarter or around the festive season. However, recovery will take a few quarters more. By the end of FY21 we can hope for getting close to normalcy,” said Sanjay Vakharia, CEO, Spykar.
There will definitely be a revival of consumption but slowly as we usher in what is known as the 'celebratory months' of the Indian market, situations will start improving gradually.
“Although the consumer is hesitant in stepping out and visiting a market or a mall, a section of loyal consumers are frequenting the store with prior appointments to shop. Besides, online sales and purchase have seen a massive pickup,” said Sabby Saluja, CEO, Sahiba Ltd and Saundh.
“We are hoping to see a revival of luxury brands by the second quarter of the year. While the festive months ahead look promising, online sales have emerged as a promising platform for our brand and we are hopeful for it to grow many folds in the coming quarters,” Saluja added.
Sahiba Ltd is a textile manufacturing unit based in Surat in Gujarat. Saundh is an apparel brand that retails affordable women's wear and has its retail footprint in Delhi, Mumbai, Ahmedabad and Jaipur.
Rishabh Tongya, Creative Director, DIACOLOR, a luxury jewellery brand with retail footprints in New Delhi, Mumbai and Jaipur, said that generally, the luxury sector sees the first money out and the last money in, in terms of consumer spending.
“So we aren't sure if things will pick up in this quarter (July-September). However, we are quite certain the festive and the wedding month ie. the next quarter, should be promising and look up for brands like ours,” said Tongya.
For Puma, a sportswear brand, around 90 percent of stores are currently operational. In several markets, the business is getting back to about 70-80 percent of last year's levels.
Online the demand too has grown manifold and business is up 60 percent post Unlock 1.0.
Abhishek Ganguly, General Manager, PUMA India and Southeast Asia said, “It’ll be naïve to predict a timeline for recovery at this point. The revival will be a staged process. Right now, more than ever, it’s crucial to have a short- term goal in order to stay afloat, survive as a business, conserve cash and ensure all our team members are safe. In the future when we come out of this crisis, I believe retail will become even more critical because people will want to go out and experience life outside. I expect people to play sports more and fitness will be a big priority. This offers a big potential for this category to grow exponentially.”
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
