Personal care, food & beverage, and home care are expected to recover faster as compared to other categories, primarily as these products are essential to survival and will be consumed irrespective of whether an individual stays at home or not, states EY’s latest report ‘Moving towards a resilient retail sector post Covid-19’. Furniture, electronics and appliances are expected to recover relatively slowly as Indian consumers are expected to postpone their spend on discretionary products in near term. The unorganized retail and local kirana stores have been resilient in the current situation, which paves the way for retailing to become even more localized in the future.
As per EY analysis, consumer behavior (how they consume, shop, live, use technology, work and move) will shift across three horizons, the ‘now’, ‘next’ and ‘beyond’ phase. In the ‘now’ phase, consumers are stockpiling essential goods and there is significant surge in e-commerce and digital payments, while kirana stores continue to host smaller crowds, in both urban and rural areas. In the ‘next’ phase, daily life will resume, but health and economic concerns will reduce consumer confidence. Brand loyalty will diminish as consumers trade down and consume cheaper/private label brands. The focus on health will gain more importance. New online shoppers such as old and rural consumers will continue to adopt digital. But, for rural consumers survival on essentials will continue. Online adoption will continue to accelerate ‘beyond’ the crisis. Consumers will be more conscious and purpose-led brands will win.
Pinakiranjan Mishra, Partner and National Leader, Consumer Products and Retail, EY India said, “The COVID-19 crisis will have a long-term impact on consumer behavior and retailers will need to devise transformation strategies for the ‘now’, ‘next’ and ‘beyond’ phase to better match this new reality. Three possible trends that will emerge after this pandemic, will be increased focus on health and wellbeing, higher demand for value brands, and accelerated adoption of online. Keeping these trends and behavioral changes in mind, retailers will need to re-evaluate the store portfolio, invest in service, experience, and omni-channel to serve new consumers, look at newer payment methods and most importantly, manage their costs through operational improvement measures.”
The EY analysis further states that to mitigate the disruption caused due to the COVID-19 crisis, Indian retailers will need to adopt a FASTER approach both to navigate the crisis ‘now’ and to plan for the ‘next’ and ‘beyond’.
– Frugal in finance: With dwindling revenues for most categories and pending rental, salary, and interest payments, retailers across the board in India will face the heat when it comes to financial management. At this juncture, it will become critical for retailers to focus on optimizing cost so that they can maintain enough cash and margin buffer to help them survive in the medium and long term.
– Agile in thinking: Given the uncertainty around the crisis, it becomes imperative for retailers to have a cross-functional swift response team to handle any event that may follow. They must be flexible and adaptable to alter operating models and product assortment to meet the requirement that is most critical at the given point in time.
– Spruced up in supply chain: Retailers will need to repurpose their supply chain to meet demand fluctuations within their categories amidst supply constraints. They must develop capability to plan inventory and logistics across stores in a highly dynamic way till business returns to normalcy. Digitization will help in reimagining company operations and meeting consumer demand for rapid fulfilment as market moves to more omnichannel and delivery-based models.
– Tactful in talent management: Continuous leadership connect with employees, especially frontline staff, around their health and financial well-being during this time will generate a sense of trust that the organization cares. Once the business is operational, they need to focus on repurposing staff skills and deployment to meet the demands of the new business reality.
– Effective in customer retention: Retailers need to ensure that they continue their communication with customers throughout the crisis period. They need to build trust in consumers’ mind that adequate steps will be taken to ensure their health and safety in the stores.
– Responsible in regulatory and legal compliance: The crisis has already brought a heightened level of regulatory scrutiny and passing of multiple directives by local, state and central government to ensure public health and safety. While this can be quite consuming for any retailer (in terms of resources) to follow all the directives, it will be essential for them to cooperate with the regulatory authorities all along when lockdown is lifted in stages.
“This pandemic should serve as a reminder to retailers to quickly build a flexible and agile business and operational model to take care of disruptions in the future. This will mean a significant focus on converting to a digital enterprise. Thus, it is the time for retail players to get control of the current crisis and invest in the build-out of a more resilient organization,” added Pinakiranjan Mishra.