With restrictions on public spaces being lifted, retail outlets in the organised sector are witnessing a discernible shift in the way business is done.
Retailers point to an interesting trend over the last couple of weeks. They say only a quarter of pre-lockdown customers are contributing to more than half the revenues they earned earlier. Stores are not really offering discounts to boost demand or clear inventories given the fear of crowding, and the need to maintain social distance. This suggests only purposeful shoppers are visiting stores.
“Only 25-30 per cent customers (compared to pre-lockdown) are visiting us. Now these customers account for almost 60 per cent of the sales compared to last year. They are coming with a clear purpose; to buy. Window shopping is not a term to be used anymore,” says Kumar Rajagopalan, CEO, Retailers Association of India (RAI), a trade body representing more than 1,800 retailers across the country.
For a chunk of shop owners who operate from rented or leased spaces, poor demand and losses due to high operating expenses and almost nil revenues, have dealt a big blow. They have been forced to keep their stores shut in the early days. Retailer lobby groups are still negotiating pending rent payments with landlords.
“Some people have not been able to reach an agreement on rent negotiations and there are some international brands, which need clearance from their headquarters,” said Atul Bhargava, President, New Delhi Traders Association, a body representing about 1,200 shop establishments in Connaught Place in Delhi.
While exact and country-wide consolidated data is not available, retailers say around 60 per cent of shop establishments in some of the major organised markets in the country like Khan Market and Connaught Place in Delhi, and Colaba and Andheri in Mumbai, are occupied on rent. Here, high overheads hold back retailers from opening up.
According to Rajagopalan, the new normal is likely to be 40 per cent less business on an average compared with the previous year for at least the next few months. “In a sense, demand is finite and inelastic, and people do not have enough money in their hands. People are working at home and there are no social occasions for people to be spending their money,” he said.
While malls are opening up across the country, companies expect demand to be low given that multiplexes, the primary drivers of footfalls at malls, are still barred from operations.
“This will continue to put stress on branded retailers. They are trying to overcome the challenge in two ways: manpower reduction and renegotiation of rentals with the malls or landlords. If the sector has to see through this crisis, everyone will have to stand together and support each other so that brands live to fight for another day,” said Ravi Saxena, Managing Director, Wonderchef, a kitchen cookware and appliances company, which has over 8,000 outlets across the country.
Retailers, across sectors such as fashion and lifestyle, home appliances and consumer durables, have been sitting on inventory for over two months, but have opted against attracting customers through discounts. “If there is a discount sale and by chance there is a crowd, then the store will get shut. Everywhere in the country, crowding in stores is leading to a shut down. As far as RAI is concerned, our only advise to members is to not necessarily create discount wars during this period. The fact is anybody who indulges in deep discounting resulting in crowds will land in a bad situation,” Rajagopalan said.
He also argued against discounting as a strategy to drive sales given that the demand was inelastic in nature now and people are stepping out to buy only what is necessary. Snehal Choksey, Director of Mumbai-based gems and jewellery company Shobha Shringar Jewellers agrees. “It would take time for businesses to get back to normal after extremely low sentiments created by the global pandemic. Sales and discounts are not going to lure customers like before. One will have to be patient and at the same time realistic about the current scenario,” he said.
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