As India settles into lockdown 4.0 implemented to mitigate the COVID-19 crisis in the country, the economic impact stands to be far and wide. Analysts have cut the GDP growth forecast for fiscal 2020-21 to as low as 1.5 to 2 percent while the RBI has refrained from providing any projections at all, as the situation continues to evolve constantly. While all businesses have been hit hard, consumer discretionary goods and services are among the worst affected. Though a few industries, especially those in the Green Zones have reopened partially or fully, as per directives of respective state governments, most malls, restaurants, retail stores and cinema remained completely closed during lockdown. With retail sales of “non-essential” categories such as electronics, home appliances, furnishings, and many others having taken a beating, for the last two months, it has drastically reduced discretionary spends by consumers. Food and household items categorized as “essentials” are the only products that have escaped this fate during the lockdown.
Change in Consumer behaviour
Amidst the global COVID-19 pandemic the buying behaviour of consumers will undergo a change. The ongoing economic downturn coupled with the emergence of social distancing, an almost alien concept that became an overnight reality could lessen consumer capacity and willingness for discretionary spends. With social distancing continuing to be a norm even after the pandemic dies out, people are likely to hesitate to visit crowded public places or to touch items that are put out for trial. Moreover, with several people in India’s employed workforce fearing job losses, consumption capacity could take a major hit and their willingness to buy non-essential goods and services could take a back seat.
Also, as witnessed in other countries, there is a worrisome possibility of the virus resurfacing, after the preventive measures and restrictions were relaxed after a return to normalcy. So, unless a vaccine for COVID-19 is discovered and made available to all, experts are mulling over the option of a “rolling shutdown” – an on-off strategy that would include geographical sectioning to keep the epidemic in check.
Benefits of adopting Phygital models
The above reasons present a strong case for brick-and-mortar businesses to adopt an omnichannel or brick-and-click model to provide for consumer needs while also ensuring social distancing for safety. Omnichannel does not necessarily mean that retailers should shut their on-ground operations. It merely suggests that they should seriously consider and evaluate the merits of having at least an online extension to their business, if not a complete version of it.
In fact, this model in which a business operates through both an online portal and a physical outlet, will help augment in-store retail business. It offers consumers three ways to interact with the brand – online, offline, or a combination of both. There are many who discover and select products online but prefer to complete the purchase at the store. This could include product categories such as apparel, fashion, furniture, and automobiles, to name a few. There will always be consumers who prefer to go about their purchases the old-fashioned way – by looking and feeling. But, whether for social distancing or for convenience, there will also be an increasing number of consumers who will prefer to largely shop online.
That e-commerce is a highly effective means of delivering essential goods and services during this crisis is already evident in India, where some e-commerce players have even tied up with kirana stores to augment their last-mile reach to consumers. An excellent example of how omnichannel model allows brands to provide for consumer needs while helping them observe social distancing is in how food delivery services have started delivering groceries at consumers’ doorsteps. With adequate manpower and some modifications to existing supply chain model, the convenience of such facilities can easily be extended to other product categories. Going online is a win-win for both businesses and consumers.
The Clothing Manufacturers Association of India (CMAI) is working with the government to try and come up with standard Indian sizes for consumers. Should this initiative be successful, consumers will know that the garment they choose online will fit them perfectly so long as they specify the size correctly. This will do away with the need for trials and reduce the number of returned orders.
Employment opportunities for millions more Indians
Whether through a partnership with an e-commerce company or through their own supply chain, offline retail businesses will create a huge number of jobs by taking the online route. The online element in a business model necessitates the establishment of warehousing, fulfilment, and delivery facilities and the hiring of a sizeable workforce to man them. Even if the business were to leverage the capabilities of an e-commerce player, the latter would have to increase its supply chain strength to accommodate the additional work.
Both these scenarios entail the creation of jobs. This is particularly important now because the retail, apparel and restaurant industries, which together provide direct employment to over 76 million Indians, could be staring at 20-25 percent job losses unless they receive financial and policy support to tide through the tricky 2-3 months that are to come. Against this backdrop, it is easy to appreciate the fact that even a single online business, depending on the size of its operations, can create employment for hundreds or thousands of people across various supply chain functions.
To traverse an unforeseen crisis like the COVID-19 pandemic, we will need equally unconventional means to see us through it. As retailers work toward reviving and rebuilding their stores, new partnerships and collaborations could be the way to do business, going ahead. Transitioning to or diversifying into a brick-and-click model could be among the most prudent things to do, not only in their own interests, but also in the interests of India’s people and its consumption economy.
The writer is CEO, Retailers Association of India (RAI).
