Among all the sectors suffering the brunt of COVID-19, the retail sector has suffered the most. The first wave of the pandemic enforced a nationwide lockdown which led to a massive downfall of the economy and the retail sector witnessed huge turmoil.
The retail industry has been swarmed with very tough choices, either downsizing to shutting down completely. In the process, a lot of retail companies could not find their feet on the ground and have been forced to quit the business.
The crisis has engulfed the organised and the unorganised sector under its effects. Organised sector companies still have better balance sheets and access to finance to manage for relatively more time but the unorganised segment which is bigger in size was holed badly.
A large percentage of the migrated workforce which moved back to their hometowns are often engaged in these small retail shops. Things had started coming back to usual during the last quarter of 2020 and early 2021, but the Second Wave hit again and this time in a more severe form. The lockdown and lockdown-like restrictions across the country have made a difficult case for the retail industry to survive owing to real estate costs, human resources and other overheads.
As the restrictions are being eased and markets have been allowed to open conditionally, there is still some life left in the retail to fight and recover even though slowly. But if the Third Wave of the same magnitude hits the country with below-average preparedness, we may witness a collapse of Indian retail leading to huge socio-economic disturbance. Those who were banking on their savings to survive till now or have managed to borrow from money lenders to get the game going would not find a way to escape the vicious circle which we better know as the debt trap. There will be a cascading effect of the same and many sectors including manufacturing, logistics, auto etc. would have a bearing of retail sector fallout.
Retail is one such thread that keeps the entire economy connected and moving. If we recall the 2008 financial crisis, it was the unorganised sector that provided a gateway for the country to bounce back. The consumption-led economy still had huge demand, no lockdowns and circulation of funds kept things under control and the heat of the global crisis was felt in limited magnitude. But the COVID-induced situation has not been the same. On the contrary, the last 15 months has posed a big question of survival for the retail sector.
According to the Confederation of All India Traders, around 8 crore traders in India have suffered a cumulative business loss to the tune of Rs 6.25 lakh crore during April. Of this, the retail businesses suffered an estimated business loss of about Rs 4.25 lakh crore. Although subsequent lockdowns and similar restrictions can be attributed for the loss, per capita spending has also taken a backseat.
Retail outlets selling non-essential goods have already seen a temporary closure. The spike in COVID cases during each wave has infused a sense of fear among customers, which will now keep them away from the market for a longer duration, therefore, hampering the demand further.
Companies are working on the revised blueprints to remain in the markets while most of the small scale businessmen and retailers are in a helpless situation. When a significant component of the economy malfunctions, the implications can be seen across all retail categories, be it apparel, auto, lifestyle, etc. The dots can easily be connected and the latest unemployment data further adds insult to the injury.
The lockdown has led to rise in digital sales channels and has made life tough for existing offline retailers. This has impacted commercial real estate with a lack of buyers.
As far as spending is concerned, the priorities of the customers have changed. As of now, health and safety of the family have become a priority and shopping has taken a backseat. The online and e-commerce sales which helped in the survival of the sector during the First Wave also couldn’t sustain those levels during the deadly Second wave, majorly because the consumer sentiment is at an all-time decline. Till the customers have a sense of health security, this priority is unlikely to change.
The two Waves have already hit the country badly and taken us backwards and there is no actual prediction as to how many more Waves may come. The bigger question is of what magnitude will be the next Wave that will hit the nation. The dent of the first two Waves would take a significant amount of time to fade and the retail backbone is not ready to take up a similar economic shock. Therefore, the need of the hour is to prepare a backup plan for the sectors which are reeling under the crisis.
The pace of vaccination needs to be further expedited so that even if there is a recurrence of COVID, a lockdown can be avoided and economic activities can go on. Also, there is a dire need for some kind of policy change that would allow retailers to cope up with the crisis. Apart from this, the government must also mull over providing a relief package for the retail sector so that it can sustain the Third Wave, else there will be a huge impact on the sector and consequently, a major impact on the overall economic development of the country.