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Reimagining Retail Businesses in the New Normal: Survive, Revive, Reboot

This post is a part of YKA’s dedicated coverage of the novel coronavirus outbreak and aims to present factual, reliable information. Read more.

The retail sector in India has over 15 million traditional and modern traders, and it employs nearly 40 to 50 million people. Modern trade contributes to about 12% of the total retail consumption of the country, employing over 6 million people, states a recent survey conducted by Retailers Association of India.

Lockdown implemented by the government to prevent the spread of COVID-19 in the country has badly affected the retail business. Most stores, except those selling essential items of food and grocery, are shut down. Retailers of essential items are also facing losses as they are not allowed to sell non-essential items that could bring higher profits.

The current pandemic of COVID-19 has adversely impacted the retail sector to a great extent in terms of business and manpower. Following is an assessment of the pain points of retailers:

  • The cash inflow of the industry has come to a standstill, while the fixed operating costs remain intact. The shops of non-food retailers are closed during the lockdown, and they are not generating any revenue. The situation is likely to remain so till the lockdown is in place.
  • The retail industry is experiencing severe liquidity challenges that can lead to large-scale unemployment.
  • There still remains an ambiguity in classifying the essential and non-essential goods.
  • While almost all the retailers are in a ‘stocked in, locked in’ situation. Many retailers are facing inventory struggles of all kinds—from excess of one or more particular items to not enough products.
  • Managing demand fluctuations: While some retailers are seeing demand fall away and customers shift channels, others are facing unprecedented spikes in demand. Grocery retailers, in particular, are dealing with significant out-of-stock situations on many key products as consumers stock up supplies perceived to be essential.
  • Sustaining the employees and rationalising the manpower have become the main worries for the retailers. Managing migrant workers and payment of the wages of the present workers with absolutely no revenue inflow are other areas of concern for them.

Business Outlook Ahead

It is important to strategise the ways in which the retail business should survive with minimum casualties. Retailers and brand chains are currently facing several short-term challenges on health and safety, supply chain, manpower, cash flow, consumer demand and marketing. In order to ensure a future where businesses would not only survive but thrive, it is critical to foresee the nature of the post-pandemic world. Adaptation to the new realities of the immediate future can be successfully accomplished if a practical model is ready for the post lockdown period.

The constraining factors for such models should include the facts that around 20–25% of industry players may need a capital infusion to stay afloat and about 25% jobs in the industry may get impacted. Secondly, the expert opinion on a complete turnaround on the way businesses would function and consumers would behave after the pandemic and the lockdown should also be given a serious thought.

The Current Situation

Only 7–8% of the retail industry is operational at present and is engaged in the sale of only essential items. On an optimistic note, it will take 6–12 months to come back to normalcy after the pandemic graph flattens and the lockdown is lifted completely. Shopping malls, an intrinsic part of urban India, may take over a year to return to normalcy, and would have to undergo a complete changeover in accordance to the prevalent post-pandemic social norms.

Customers are observing lockdown, avoiding public places and staying at home, thus giving a boost to the online business. Online retail sites catering to essential goods are more in demand and showing an accelerated growth whereas those with non-essential items are losing traffic slowly. There is an apprehension that the short-term consumer behaviour which they have adopted during pandemic might become permanent.

In terms of fiscal conditioning, retailers are rethinking about their current cash positions and trying to assess how they will continue to pay the bills should the downturn in demand continues for a prolonged period. The high dependency on continuous revenue inflow for making payments towards the staff, stock and the rental makes the retail industry highly vulnerable to lockdowns. Discussions and representations are ongoing for extending the moratorium for payment of instalments and interest on loans, rental renegotiations and creation of hardship funds.

A Perception Of The Post-Pandemic Business

During the lockdown period, different players in the retail industry have joined hands and quickly changed their business models and work patterns to help people stay at home and implement the guidelines of physical distancing. This may ultimately lead to a significant consolidation, a different partnership pattern and a completely changed competitive scenario.

India Online Retail Market
India Online Retail Market is experiencing an upsurge.

Surge in the e-commerce business for groceries and other essentials has happened and is going to stay. Post-COVID world is going to see acceleration in the online shopping mode, and there in an urgent need to assess the requirements related to the issues on infrastructure related to the software, hardware and the bandwidth.

Social distancing habits would encourage procurement and consumption of locally-available goods, and thus small and efficient retailing outlets would get a boost. This trend of increasing number of smaller retail footprints would support production of locally-manufactured products to help the small entrepreneurs. Social enterprises working with artisans across the world may have to think and device ways to keep their businesses afloat for sustainable livelihoods of the people who hand-make their products.

The ability to adapt responsively to product, workforce, partner, and operations needs will separate the winners and losers during and after the COVID-19 crisis. Retail sector would invest in technology for digital transformation efforts. Following technology areas will be in high demand:

  1. Commerce and self-serve technologies—the future store—online and offline
  2. Distributed order management and fulfilment
  3. Supply chain collaboration and automation
  4. Cloud-based hiring and workforce enablement
  5. Network infrastructure, edge, and IoT for stores
  6. Contactless payments

In the future, mixing of retailing and services may come up to enhance customer experience. Retailers will collaborate with brands, influencers and experimenting companies to bring to life something that can be a called as a real retail experience. In this kind of clubbing, food always remains an important and bonding factor, but the operators may have to be extra cautious on hygiene to ensure food that is served is safe. It may entail reducing the menu items and going for those that can be served with minimum contact. In this context, the shopping malls are not confined to retail alone but have become a large social experience, where food and entertainment play a major part.

Restaurants would have to plan contactless dining experience in terms of space between the tables, digital menus to avoid touching the menu card besides sensor operated, contactless taps and flushes. Pre-sanitized, packaged cutlery has to be used in restaurants to reduce physical contact. Theatres and cinema halls may have to usher in several innovative methods in terms of sanitised digital entry modes, staggered timings to sanitise the hall between two shows and no crowding of lobby during the interval. This would also lead to a complete realignment of the supply chain.

Consumers are now seeing the importance of their local business community. Going forward, consumers may continue to trade locally and support their local food service and restaurant business more. A proliferation of smaller stores in the neighbourhoods is expected. Brand outlets may also open up in smaller versions catering to location-specific suitable range. People have also started appreciating the role of the essential service providers, and in the future they are going to remain at the top of the minds of the consumers and employers in a powerful way.

With the monetary crisis looming large for quite some time now, many large retailers have folded in the last two years. The current situation is going to further break the back of the business, and it would be difficult to survive. However, the situation of ‘no takers’ around might see a drop in the rental rates to benefit the small retailers.

Significance Of The Retail Industry

Retail industry had always been useful for the society in terms of the services it provides and the employment it generates. It has responded well to the call of the lockdown due to the pandemic and has been providing service to the people so that they can stay at home. During this disastrous period, the retail sector got together, found collaborators and quickly responded to the need of the hour.

The outbreak has created a new class of ‘essential workers’ who have been ensuring the health and continuity of the food supply chain. From store associates to truck drivers, the food workforce is now on the front-lines. As a result, supply chain security, vendor relationships, and workforce management have become even more critical, not only to retailers, but to the government and the society as well. Post pandemic, food retailers may become an essential component of the crisis communications.

Retail industry has a cascading effect. Closure of malls would see that multiplexes and food courts are not opened. If multiplexes do not open, the entertainment industry will not be able to function. The list goes on. If retail loses a million jobs, it will have a livelihood impact on 5–6 million jobs.

However, during this period the retail sector has suffered a lot due to low or no inflow of the revenue and mounting payments on several counts. It has had to struggle to keep its workforce together. The retail industry is currently facing the greatest disruption in recent memory with a massive economic impact. Certain aspects of consumerism would possibly change forever.

What Needs To Be Done

It is imperative that the consumer behaviour in the new economic reality post-COVID-19 recovery may change commerce behaviours in many profound ways. Building trust and confidence in consumers so that they feel encouraged to enter in the retail environments is going to be the new core objective of all retail companies. Innovation and thinking out the box to bring people into their spaces is going to define the success of a retail industry. Leaders will be defined by the ways they Respond, Recover, and Thrive.

There needs to be a sense of optimism that there will be a prosperous and active future for the retail industry. Collaborations are going to stay in the future business models. Rent-sharing, cost-sharing, staff-sharing and mix-product offerings and services can be planned.  The need for a crisis management plan in readiness to cater to unusual circumstances must have been the foremost in many minds under various scenarios.

The days immediately after the lifting of COVID-19 lockdown would be critical for businesses.

Retailers are experts in overcoming hurdles while managing to stay relevant and successful. Organisations that are prepared for the new reality with a complete SOP will reap the benefits. The days immediately after the lifting of COVID-19 lockdown would be critical for all retail business units, manufacturing units, warehouses, stores and corporate offices.

A difficult yet crucial task would be to ensure safety, maintain high standards of hygiene and to instil confidence in both internal and external customers in every possible way. The guidelines on social distancing, proper sanitisation, workplace norms are going to continue for long and need to be adapted in totality as good business practices. Digital payment modes that ensure contactless payment options to a greater extent would need greater encouragement. A thorough understanding of consumer behaviour and a makeover through innovative means would be of utmost importance.

However, a key theme that emerges out of the entire situation is not to lose focus on communication, which is the key to survival in current times. Survival of this industry and its cascading effect on the livelihood of millions of people who are depended on this sector, especially those who are working on the front-line or are seeking skilled-based opportunities to get placed in that sector calls for some confidence-building fiscal stimulus measures from the government and a little modulation in the current business policies.

The article is written by Ms Meghna Joshi, Founder, SWAN ( Skilled Workforce Advancing Nation).

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