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Yearning For Support

The Centre’s economic package to cushion the impact of the pandemic has done nothing to bailout the retail sector that employs millions. By Navneel Maji

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Recent Retailers Association of India survey assessed the impact of Covid-19 on the retail sector, unveiled horrifying but expected figures. More than 95 per cent of non-food retailers have closed their shops in the lockdown and expected to earn 40 per cent revenue as compared to last year. 

Food retailers, who suffered from the restriction to sell only non-essentials most of the lockdowns, faced severe revenue losses. They too expect a 56 per cent revenue as compared to last year. Consequently, the sector, which contributes 10 per cent of the country’s GDP and employs over 40-50 million people, needs severe attention, unarguably. 

Avenue Supermarts, the owner of the supermarket chain D-Mart, were making high profits, clocking a 23 per cent revenue growth in the March quarter. Then, during the lockdown, the company witnessed a gloomy 45 per cent decline in its April revenue since more than half of its stores remained closed. The company claimed the government regulations were a major barrier as they did not get permit to sell any apparel and general merchandise products. 

Similarly, Value fashion and lifestyle products retailer V-mart Retail had a stable performance throughout FY20, particularly well in the final quarter with a revenue growth of 29 per cent due to the late onset of winters. As the pandemic hit and the nationwide lockdown announced, the company reported a net loss of Rs 8.5 crore in the quarter ended March 2020. The impact of Covid-19 on the retail sector is undeniably huge. In contrast, the share of organised retail space was set to grow from a mere nine per cent in 2017 to 19 per cent by 2020 across the top seven cities (ANAROCK figures). Apparently, the figures are now expected to  change drastically, and all eyes rest on the government now,  to bring the industry back on track.

Self-Reliance India Mission 

The Rs 20-lakh crore economic stimulus package under the Atmanirbhar Bharat Abhiyan (Self-Reliant India Mission) — which is recognised as the third-largest economic stimulus packages announced after the US and Japan — missed out several distressed sectors from the direct benefits.

“The steps under the mission though will help the country in the long run but the emergent issues faced by the retail industry have not been addressed,” says Kumar Rajagopalan, CEO, Retailers Association of India 

Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal stated: “Seven crore traders of the country have been ignored, while announcing the economic package.” Similarly, Kumar Rajagopalan, CEO, Retailers Association of India (RAI), commented: “The steps under the Aatmanirbhar Bharat economic stimulus though will help the country in the long run but the emergent issues faced by the retail industry have not been addressed.”

What are the emergent issues the $790-billion sector, which was headed to double the size in the next five years, is facing and the economic stimulus failed to address?

Finance Minister Nirmala Sitharaman’s earlier measures under the economic package: reduction in the TDS rates for payments or 2 per cent reduction each in EPF contribution of both the employer and employee has been argued to be minor measures and failed to hit the nail on the problem the sector is facing. Working capital is the major demand. Wage support and a moratorium for payment of interests are absent as well. RAI stated with no income and no government support, the retailers are moving towards the closure of businesses that will jeopardise livelihoods of over 46 million direct employees. The relief measures that MSMEs received are also of no help to retailers since retail is not covered under the MSME sector.

Helping Hands 

In the first two phases of lockdown, with only the essentials being allowed to deliver through the online platforms, e-commerce was seen to be the saviour of the retail sector. Paytm Mall announced it is working to help 10,000 shops for hyperlocal deliveries and digitally enabling small businesses. Amazon India launched ‘Local Shops on Amazon’ facility for local shops and retailers of any size from across India allowing them to use Amazon’s existing delivery mechanisms. E-commerce platform Shopmatic opened ‘web-stores’ to help local Kirana stores to go online.

Despite such initiatives well received and appreciated among the retail circles, they could not do much to revive the aching sector. On one hand, e-commerce only has a three per cent share of the entire retail market, so it was already miles behind to provide any major help to the sector. Secondly, the e-commerce sector struggles with its own issues. Logistical hurdles and lack of manpower as many are scared to leave homes or have left for their hometowns are the major challenges that handicapped the e-commerce sector throughout.    

“Seven crore traders of the country have been ignored, while announcing the economic package," says Confederation of All India Traders Secretary General Praveen Khandelwal 

The unorganised retail sector, which accounts for around 88 per cent of the retail market, has been impacted severely due to liquidity crunch and owners returning to villages. Though the government has relaxed many restrictions and allowed essential and non-essential sales (as of lockdown 4.0, malls and shopping centres remained closed), the retail sector could not leverage much. Even after the sale of non-essentials are relaxed, All India Mobile Retailers Association estimated close to 60 per cent of the 150,000 stores selling smartphones haven’t still opened. Reportedly, as distributors are dealing in cash and not offering 7-21 days of credit as before, this has posed a challenge for the small outlets.

 Parle Products shared 10 per cent of the 5.8 million kirana stores that used to sell tea and paan was shut down in April and May. It is feared that most of them would never open, given they have left for their villages or are looking to/or already have set up their business there. However, spokespersons from Britannia Industries, Godrej Consumer Products, among others, think that the store closures may be temporary and may progressively be back with further lockdown eases. Since the retail sector is an aggregation of multiple industries: food, entertainment, textiles, electronics, etc., it has a high multiplier effect – any impact (further closing/shutting/etc.) on a particular store shall have ripple effects across multiple dimensions.

Currently, with malls and shopping centres being expected to open as per the latest government guidelines from the second week of June, it will give some relief to the sector.