Despite more than 50 per cent retail stores across the country resuming operations, recovery has differed across various categories. Retail companies have focused on greater operational efficiency (cost structure optimisation) during the ongoing Unlock 2.0.
However, the extent to which this can be managed will need to be watched. As per a report by Anand Rathi Research for the fourth quarter (January-March), most of the retail companies had reported a steep 28 per cent decline in the innerwear category and a decline of 12.7 per cent in the branded apparel segment.
The mid-March shutdown had thrown up challenges to companies across the board. The report notes that companies are now focusing on reducing costs in rentals (through negotiations), capex, employee expenses (deferred payments, freeze on hiring, pay cuts), shutting stores and cutting overheads (marketing, conveyance, etc). On the other hand, working capital cycle stress, inventory pile-ups (no sales) and stretched receivables are squeezing working capital of retail companies.
“As the bulk of innerwear sales dropped towards the end of fourth quarter, revenues were more severely hit. Post reopening, demand for innerwear is expected to revive the fastest. Revenue of apparel companies declined 12.7 per cent, with a steeper fall in ethnic wear. While footwear declined 12 per cent, retail grew 9.8 per cent (DMart grew 23 per cent, while V-Mart slipped 3.4 per cent). Despite Covid-19 triggered developments hampering some store openings toward the end-March, store additions were healthy. Managements have said that store openings will be on hold till the second half of FY21 or further clarity,” observed Vaishnavi Mandhaniya, Research Analyst at Anand Rathi.
Interestingly, in a recent webinar organised by the Retailers Association of India (RAI) focused on dine-out businesses in recent times, it was mentioned that the food industry was operational even during the world wars and had never faced such a shut down ever. It highlighted that the impact on businesses has been colossal. In the restaurant industry alone, 40 per cent businesses that shut in March might not ever open again.
However, as India moves through Unlock 2.0, technology is what can help businesses not just recover from the impact, but also to grow. “The Covid-19 pandemic has brought enormous personal, economic and social damage to many and all. It has upended countless lives and has exasperated the many disruption efforts, laying bare the viability of many business models. Beyond that, it has provided a new set of acute shocks to seemingly sturdy businesses and principles that have guided our thinking as retailers for decades," remarked Kunal Mehta, GM – IT, Raymond Ltd.
It was pointed out that restaurants or retail by nature is a social business, but ironically, the requirement of the new normal is social-distancing. Retail businesses need to learn to get the two together—getting people to go out and at the same time ensuring social-distancing norms are followed. It was observed that technology is going to play an important role in the entire process across all industries.
“Research for customers had already moved online, but because of the sum of money involved in our category, most customers also wanted to do a physical verification of the products. And that’s why it has always been very important to be omni-channel and this will retain its importance for retail going forward,” said Ritesh Ghosal, CMO, Infiniti Retail Ltd- Croma—a TATA enterprise.
The webinar also highlighted that the restaurant industry is anticipated to be the first industry to bounce back and customers will want to see safety measures adopted, not just in front of the dining room but also in the kitchen. At the same time, barcodes and QR codes are going to lead the way forward for purchases in physical stores. Also, it was observed that going forward, the restaurants will scale down on the number of items on their menu. It was also pointed out that contactless dining is going to be the key going forward and paper menus will be replaced by digital and QR codes. Consumers will be able to order from their phones. The concept of drive-through will also gain momentum.
