Economy

Pandemic hit luggage industry teetering on the brink of collapse

Forum Gandhi Mumbai | Updated on June 30, 2021

Even smaller players are finding it difficult to sustain as second wave of Covid-19 wrecks havoc

With travel and tourism slowing down to a trickle, the luggage industry has been severely hit with many dealers with rented stores permanently shutting due to the impact of the Covid-19 second wave. According to industry estimates, luggage manufacturers and dealers have seen a 40-45 per cent dip in sales.

“The balance sheets of companies like VIP and Safari will show that their revenues are in deep red. VIP has shut close to 200 stores whereas Samsonite has shut over 100 stores too,” said Sanjeev Mehrotra, a luggage industry consultant and General Manager (Sales), Sonnet Luggage Private Limited. VIP and Samsonite did not respond to queries sent by BusinessLine.

Small players struggle

Even smaller players are finding it difficult to sustain. SMERGERS, a merger and acquisition portal for SMEs, has seen a rise of 40 per cent in listings by companies in this segment.

“Our three existing retail shops were closed for three months due to the coronavirus lockdown. The shopping malls have recently reopened and our shops have also reopened. Our sales have reduced due to the pandemic,” said one of the companies listed on SMERGERS, a portal for stressed SMEs to find an investor or buyer.

Also read: Health, tourism in focus of ₹1.1-lakh-cr relief package

Recently, luggage retail chain Witco shut its business after 65 years of operations. According to Mehrotra, the Indian luggage industry was close to ₹4,500 crore revenue as of FY20. However, there has been a sharp decline to ₹1,700 crore.

Mehrotra, said Sonnet Luggage had to use its working capital to keep the business afloat which was down to 50 per cent in the Q1 of CY21 compared to the same time last year.

“Unlike the last year’s lockdown where players were able to get a waiver on the rent, this time many rented stores were permanently shut due to impact of the second Covid wave – given there were no rental waivers provided this time,” said Karan Khanna, Research Analyst at Ambit Capital.

He explained that while the industry was seeing a swift recovery in the fourth quarter of last calendar year which continued in January/February this year, “The second wave has derailed the recovery for the luggage sector,” he added.

Low sales of school bags

Both Mehrotra and Khanna said that backpacks as a category continue to disappoint because of limited visibility on schools, colleges and offices reopening. Usually, the sales of backpacks go up during the first and second quarter of the financial year, however, since students are studying from home, this category has seen a sudden dip in sales.

The only respite, according to Pratik Furia of 369 Luggages, is the category of students travelling abroad. However, the supply chain is deeply impacted. He explained that a lot of products are either source or manufactured in China. Furia’s business was down to 40-45 per cent compared to the previous fiscal.

Also read: Free tourist visas to first 5-lakh, a morale booster

Ambit’s research showed that luggage imports from China have reduced by 70-75 per cent since the pandemic due to supply chain issues.

Adding to the woes is the freight cost, which has gone up by 300-400 per cent, pushing the overall cost to climb higher.

“That said with the pace of vaccination picking up, and travel showing encouraging signs now, the industry will see a swifter recovery only from 3QFY22 during the festive season, with better recovery in CY22,” Khanna added.

Published on June 30, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like