- Approximately 25 percent of retailers would need a severe infusion of capital to help their business deal with the impact of the 21-day nationwide lockdown
Approximately 25 percent of retailers would need a severe infusion of capital to help their business deal with the impact of the 21-day nationwide lockdown to control the spread of coronavirus disease (COVID-19), otherwise, they would be out of business, the Indian Retailers Association (RAI) said, based on its estimates, Kumar Rajagopalan, Chief Executive Officer of the RAI, said: “This is a tough situation until the g is out of business. During the lockout, non-food retailers did not have any sales, and their fixed costs continue.
To add to the woes, retailers who are alliance members say they have to get rid of 20 percent of their employees to survive, with smaller retailers suggesting it would be as high as 30 percent after the lifting of the lockout. The sobering news is that retailers — including large corporations such as Reliance Retail — and exhibitors are considering issuing “force majeure” notices to shopping malls and property owners, and are in talks with them to devise an action plan to share the financial burden of the lockdown.
RAI, which conducted a dipstick survey of its 768 members from organized retail (including small, medium and large chains), says that 51% of respondents expect a recovery in 6-12 months only, while 24% believe it will take 3-6 months. However, 80 percent of respondents do not expect August to make any profit. Yet non-food retailers expect to earn just 40 percent of sales in the next 6 months relative to what they generated last year.
Around 18 percent of respondents were food retailers, who during the lockout did not shutter operations, the majority were non-food retailers, who were forced to shut down.
Retailers are seeking advantages in the field of goods and services tax (GST), the abolition of minimum energy charges (imposed even if the store is closed), renegotiation of rents on the basis of revenue sharing rather than being set, a moratorium on the payment of property tax by mall owners (around 5-10 percent depending on the state) to retailers. Mall owners have their challenges. Says Anuj Puri, founder of real estate consultants Anarock, which has many mall owners as clients: “Mall owners have taken lease rental discount from banks, so rent is going to the banks for payment of loans. If rents go down, they have to top up, but it would be difficult for them to do so in the current position of real estate across sectors, and hence they may default and the loan would become an NPA for leveraged mall owners.
Many retail experts, however, claim consumer habits could radically change after COVID-19 is regulated. For one, millennials might be more careful to buy sprays on clothes or food, as they say, the long stay at home has made them aware that you can live with less.