Economy

As shops remain shut, retail sector braces for huge layoffs

TE Raja Simhan Chennai | Updated on April 14, 2020 Published on April 13, 2020

The lockdown has affected retail business so much that there could be 20-25 per cent layoff in the sector   -  Bijoy Ghosh

Industry wants government support in working capital, interest subsidy and relaxation of statutory payments

The lockdown, with the accompanying fear of mass retrenchment, has left the retail sector in distress. The nation’s 15 million retailers — small, big, traditional and modern, and employing nearly 50 million people — are hoping the government will help bail them out of the crisis caused by the pandemic and the subsequent lockdown.

The lockdown has affected retail business so much that there could be a 20-25 per cent layoff in the sector, it is feared. The survival of the sector is critical as it contributes to nearly 40 per cent of India’s consumption and about 10 per cent of GDP. However, issues such as rents, salaries and the huge stock-in-hand during the lockdown are worrying retailers, said a survey by the Retailers Association of India (RAI).

BA Kodandarama Setty, Chairman, Viveks Pvt Ltd, which has 37 stores employing 650 employees, said: “This is very painful. A running business cannot be stalled like this. However, we have to go through it.”

The payment of salaries and rent, and clearing of stocks, are issues that need to be addressed one-by-one. Companies have paid March salaries but the challenge is to pay the April salaries, said Setty. The retailers are approaching their landlords to defer rent payment. “If companies are struggling to pay the rent while the shops are kept open, how can we pay the rent when the shops are closed?” he asked.

Some landlords have been rather generous, voluntarily relaxing the payment schedule. For instance, nearly 200 shops in Delhi’s Lodha Mall have been given more time to pay the rent, said Setty, adding that the LuLu group in Kerala has done the same.

Ritesh Ghosal, CMO, Croma- Infiniti Retail Ltd, a part of the Tata Group, said that in the first few days of work from home, the company sold a large number of laptops and smartphones. However, from the day of complete lockdown, everything came to a standstill.

“The entire industry has lost a critical period  of the year – the onset of summer. The lost sales of cooling products will depress the performance of the manufacturing brands and of retailers and ecosystem partners like NBFCs for the year,” he said. Croma has 161 stores and employs over 5,000.

In the immediate period post re-opening of stores, there is likely to be aggressive price competition between brands and retailers to offload inventories and free up resources for the rest of the year’s operation, he added.

On the payment of salary and rent, Ghosal said: “We are in touch with our property owners. This is a time of crisis for both. We are trying to navigate the financial nightmare of unsold inventory and unpaid rent on the one hand and salary and interest payments on the other. While our stores remain non-operational, we have ensured that all our employees are paid in full and on time to assist them in these unforeseen times."

Loss of productivity

Anuj Puri, Chairman, ANAROCK Property Consultants, said the lockdown spells loss of productivity of assets for mall owners; for retailers, it is the not opening of shops. Managing the loss of productivity for the next few quarters will be the most challenging for the sector, he said in a recent webinar discussing the impact of Covid-19 on retail.

According to BS Nagesh, founder, TRRAIN, Chairman-RAI and Non-Executive Chairman of Shoppers Stop, keeping the team together will help companies tide over the crisis. The companies that were honest and transparent with their customers, and shared their pain with them, together and connected with the their customers consumers and took them along in kept them as part of their journey have survived past crises, he said. This should be the strategy this time, too, he added.

In a RAI survey of nearly 800 retailers, about 70 per cent said they expect business recovery to happen in over six months while 20 per cent expect it to take more than a year. Less than 10 per cent of medium and large retailers, and 26 per cent of small retailers, expect to earn any profit till August.

Kumar Rajagopalan, CEO, RAI, said none of the retailers were prepared for the crisis. Retail is a people-intensive industry. Nearly 90 per cent of the employees work at the stores, earning minimum wages and living a hand-to-mouth existence. With extended closures, these employees are at risk of being retrenched, he added.

Job-support subsidy

The industry wants government support in working capital, interest subsidy and default relief, and relaxation in statutory payments/accounts and employment, he said. “We request a four-month (March to June 2020) job support subsidy at 50 per cent of the minimum wages as well as cash support to encourage retailers to continue with the employment of staff during the extended lockdown and recovery period after the lockdown is lifted,” the RAI said in a representation to Prime Minister Narendra Modi.

Lost critical period of the year

Ritesh Ghosal, CMO, Croma- Infiniti Retail Ltd, a part of the Tata Group, said that in the first few days of WFH, the company sold a large number of laptops and smartphones. However, from the day of complete lock-down, everything came to a standstill. “The entire industry has lost a critical period of the year – the onset of summer. The lost sales of cooling products will depress the performance of the manufacturing brands and retailers and eco-system partners like NBFCs for the year,” he said. Croma has 161 stores and employs over 5,000.

In the immediate period post-re-opening of stores, there is likely to be aggressive price competition between brands and retailers to off-load inventories and free up resources for the rest of the year’s operation, he added.

On payment of salary and rent, Ghosal said, “We are in touch with our property owners. This is a time of crisis for both. We are trying to navigate the financial nightmare of unsold inventory and unpaid rent on the one hand and salary and interest payments on the other. While our stores remain non-operational, we have ensured that all our employees are paid in full and on time to assist them in these unforeseen times,” he said.

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Published on April 13, 2020
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