India’s pandemic-hit $854-906 billion retail sector, which exited FY21 at $780 billion, is expected to suffer up to $30 billion in losses over the next exercise 22 as the second wave of Covid-19 continues to wreak havoc on lives and livelihoods. Unforeseen Covid-19 expenses, job losses, salary cuts and most importantly, negative consumer sentiment due to fear and grief issues are factors contributing to the decline of India’s retail sector. detail during this exercise.
“Unlike last year’s nationwide lockdown, after which the economy started to recover after the first quarter (April-June) despite layoffs, pay cuts and furloughs; this time around the situation is much darker,” said Arvind Singhal, CMD of Technopak.
“A large portion of consumer income has been spent on Covid healthcare, which is a totally unplanned expense. Last year people lost their wages, but this time people lost money they had already earned or saved due to Covid-related expenses. I estimate that this year around ₹80,000 crore to ₹100,000 crore is personal Covid expenses. In the last six weeks alone with the second wave of Covid we are talking about 20 million (2 crore people) new infections tested, the first wave only had 6 million infections. Add to that at least 20 million more people who are not tested but who would have had Covid-like symptoms, especially in rural India, and we are therefore talking about at least 4 million people. If they spent between ₹20,000 and ₹25,000 per person (on medicines, consultations, hospitalizations, ambulances, family attendants), that is up to ₹80,000 crore – ₹100,000 crore. So there’s a lot less money in the hands of consumers to spend this year,” Singhal said.
Recovery only in Q2
Retail industry veteran Gibson Vedamani told BusinessLine that India’s retail sector will be hit hard this year and suffer losses of $30 billion (₹2.25 lakh crore) and unlike last year, the recovery will not begin until after the second quarter.
“According to RedSeer Consulting, the Indian retail sector left CY2020 at $780 billion. I estimate that this year Indian Retail will drop to $750 billion for many reasons. First, people are seized with fear, which will negatively impact retail as consumers start saving money again for Covid-related medical requirements. Unless vaccination is accelerated and retailers are vaccinated, these fears will not go away. Retail businesses are facing a huge shortage of working capital as there are no sales due to lack of consumption as only food/grocery stores are only open for a few hours a day. The manufacturing supply chain is completely clogged and none of them are operating at full capacity as staff test positive for Covid. The free flow of money has been affected because many retail people have only received 50% of their salaries in Mumbai. We may see some green shoots of recovery this Diwali, but that will only represent 20% of business done in 2019,” said Vedamani, CEO of Retail Solutions and Learning Technologies and Retailvarsity.com.
Consumption has plummeted and no business is reporting that it is doing well, observed Kumar Rajagopalan, CEO of the Retailers Association of India. “If vaccinations are completed within the next 3-4 months for at least 50% of the population, we could see companies doing much better in September. We saw last year when things got under control retail rebounded strongly,” he said.
“While April 2021 started with positive consumer sentiment of +6%, compared to -15% last April and May; it saw a sharp drop of 13% (from +6 to -7) in May 2021 as people began to realize the seriousness of the tragedy caused by the second wave of Covid. However, people are mentally better prepared this time,” said Amarpreet Kalkat, CEO of Frrole AI, a consumer intelligence and digital insights platform.