Coronavirus: Retail industry faces financial crisis due to COVID-19 lockdown

The effect of the COVID-19 pandemic and the subsequent lockdown has resulted in an enormous setback to the retail industry.

While the industry is committed to ensure the safety of billions of people, some challenges faced in the current time are of large magnitude, says Ameet Panchal, CEO, Shree Balaji Ethnicity Retail Pvt Ltd.

For latest updates and live news on coronavirus, click here

Due to mandatory closure of retail stores across India, retailers face imminent financial crisis and insolvency with stores at risk of shutdown and millions of job losses, says Panchal, a member of the Retail Association of India.

The Indian retail industry is one of the largest employers in the country, with more than 15 million retailers, both big and big within traditional and modern trade.

The industry employs 40-50 million Indians directly, of which modern trade employs more than six million and its contribution being approximately 40% of India’s consumption.

Track state-wise confirmed coronavirus cases here

According to Panchal, nearly 60 to 70 percent of costs are fixed costs in the retail segment. Rents and salaries to employees make a large part of this cost.

This, along with low margins, leaves businesses with limited flexibility. With stores and ecommerce businesses being shut, we have seen a 100% fall in revenue.

Economists predict that consumption will further fall by 25-30% for the next six to nine months post the lockdown revision, which in turn will amount to insurmountable losses for this industry.

"Our industry which was already hit by the economic slowdown, is now at threat from COVID-19, with losses which are hard to ascertain," he said.

The current situation will lead to down scaling or shutting down operations widely and the closure of retail businesses will affect large sections of society.

The industry is people intensive, with over 90 percent of retail employees working at the stores, earning minimum wages and living a hand-to-mouth existence.

With extended closures, these employees are at risk of being retrenched. With the closedown, the entire value chain made up of distributors, manufacturers, raw material suppliers, etc. will have order cancellations and loss of income. This, along with projections of extended slowdown in retail consumption, will be a huge stress on the entire supply chain.