blog post

Challenges Faced by Retail Sector During COVID-19

Ankur Tripathi
Apr 21, 2020·6 min


The spread of the COVID-19 novel coronavirus around the world has been fast and dramatic. More than 90 countries globally have ordained a partial/complete lockdown in the wake of the Covid-19 Pandemic, affecting around 3.9 billion people, a staggering 50% of the entire world population. The consequences of it are felt across every industry and a global recession looks imminent. Retailers are facing unprecedented issues across the globe, from closing of the stores, to the limited working hours, remote working and a change in consumer preferences and priority have led retailers to face unpredictable challenges during these tough times.

While it is expected that the lockdown will be extended further, let us look at the challenges faced by retailers:

Employee Safety

Almost all organizations are working remotely especially in the IT Sector, however for brick-and-mortar stores it is not practically possible to conduct all their operations online.

As a result, companies have started to lay-off certain employees, some are reporting to work sick, in the fear of losing their jobs.

Forced Closures

Across geographies, retailers are being forced to close. If not closed, they are seeing minimal traffic to their stores is extremely limited, as a result of the nation-wide government lockdown. These forced closures create financial, employment, and other regulatory challenges. E-commerce companies are finding it difficult to procure passes for their logistics and delivery staff separately for each state amidst the ongoing lockdown.

Supply Chain Disruptions

The entire retail sector is concerned about the disruptions in their supply-chain. With the virus spreading exponentially around the world, factories that produce the goods are often closed or working at reduced capacity. In addition to that, shortages of raw materials have created further disruptions. This will further lead to customer service concerns. Procol has identified the best risk-management practices that retails can follow to enable a robust supply chain in the wake of this virus.

Plunging Losses

According to a survey conducted by the Retailers Association of India (RAI), the Indian retail industry may take at least 9-12 months to recover from the aftermath of the Covid-19 pandemic. Around 20-25% of the industry players may require more funds to be pumped in, in order to stay afloat, and there will be around 25% impact on the jobs in the retail industry. The RAI chief executive, Kumar Rajgopalan estimated that about 40% of the six million employees working in India’s modern retail industry could likely lose their jobs in the next four months.

Procol estimates that financial growth in retail is not expected till this period ends. All retailers except grocery stores will be immensely affected. Needless to say, restaurant chains along with lifestyle and fashion retailers will be in the crosshairs of the plunging losses during the ongoing crisis because of the overall curtailment on the movement of people, resulting in demand pressures over the short-term. However, even the grocery sector will be slow in their operations and a minimal growth is expected.

What the retail sector can do

Retail companies should do a better analysis of their supplier and consumer habits, in order to get a better understanding and gain insightful data to future proof their risk management. Planning and communicating with the customer base using online tools should be a priority for the companies. The importance of partnerships are one of the factors online tools should be prioritized - Bain & Company for example, has partnered with an online retailer to link them with an offline chain of 300 stores in order to increase sales.

Retail companies utilise data in order to save costs as a practice beyond Covid-19. Deloitte Global CPO survey reports that analytics will have the greatest impact on the procurement process in the coming years. According to Deloitte, companies will use analytics for cost optimization (50%), process improvement (48%), and management reporting (45%). Predictive Analysis can help companies track their purchasing patterns over time to help them conduct effective cost-analysis. This will allow the teams to be proactive and take preventive measures, allowing them to stay ahead of the curve.

What the government can do

While the Indian government is doing everything in its power to battle the virus from their end, they have to ensure that employment is the key in order to mitigate this crisis.

Provisions should be made to make sure that there is a seamless transition when the blue-collar workers get back to work. As we are already seeing, the government is providing cash to the migrant workers in several states, however money should be infused across the worst-hit sectors in order to limit the lay-offs and make sure that the economy can bounce back swiftly.

Authorities should create a task force to ensure that patterns from China are studied to gain better insights on how to restructure the retail sector and the economy in general. As a result of the virus outbreak in Wuhan, there was a 15-20% drop in retail while offline essentials spiked up by 2-3%.

The future -

Procol estimates that retailers such as the kirana stores will benefit most with online transformation during Covid-19, as they are participating in heaps and bounds.

Least impacted retailers would be chemists, Food and Beverages, Personal care items, daily essentials and grocery while sectors such as Furniture, electronics accessories, fashion, consumer durables, and almost every retailer who has a supply chain base in China will be slow to get back up, although the Chinese manufacturing units are up and running, it will take some time for the these sectors to function the way they did before the pandemic. The online spike will continue to grow, the general market trend shows that people logged online to stock up on food and household products, and this trend is expected to increase in a post-Covid scenario, thus making it imperative for organisations to go digital. Purchase of work from home essentials like routers and cables due to the public movement restrictions that have now been enforced is also on the rise. We at Procol, have created our own guide for safely working from home and the tools that you can utilise in order to ensure that.

The retailers who are omnichannel will have it easier as compared to the rest. It is believed that those who will transform digitally will be ahead of the curve, and in future almost all retail companies should deploy an Online to Offline working strategy in order to mitigate risk - i.e., use online tools and processes to ensure that their offline work is optimised. The more digital they can make their operational ecosystem, the better it will be for them in the long run.

It is widely expected that even after retail stores and malls will be allowed to open and when normalcy will return, it would be difficult for the consumers to come back so soon. They are likely to stay away from crowded places as a precautionary measure and will spend their money with discretion.

The structural and functional overhaul needed by the retailers due to the current situation is monumental. The outbreak has underlined the importance of planning, preparation, continual learning, mitigation of risks, creating contingency plans, and adapting to every situation as it comes. When the crisis will be over and the dust clears, we will have a clear view of those who will emerge out as winners and those who have failed to transform themselves. Companies that have the necessary prowess to adapt with the changing circumstances will thrive in future.

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