Addressing on the effect and impact of coronavirus pandemic at a forum, Kulin Lalbhai, Executive Director, Arvind Ltd., shared that the crisis has divided retail in to essential and non-essential businesses very unlike the business model it was following. Lalbhai was speaking in the capacity of a panelist on a reputed television channel.
He emphasised on the fact that even after the lockdown is lifted, consumers will not be swarming back to stores to buy products.
“Looking at the case studies from China, two months after their lockdown they are still looking at businesses which are 30 to 40 percent less than pre-Covid. It is very clear that this is not going to be a quick bounce back. It will take 4 to 6 months to come back to a certain level of business. And, even then businesses would not be right up to pre-Covid level,” Lalbhai told the channel.
And considering the nature of the contagion, safe manufacturing, safe consumption and safe shopping will be inevitable, where both the businesses and the government will have to work very strongly on it.
“Because only when consumers feel things are safe will they come back to stores and purchase,” he said. “And every type of retail can be made safe.”
He also emphasised on the fact that e-commerce is a safe channel, while standalone stores on high-streets which have fewer footfalls can be made very safe.
“Though it is kind of misunderstood, malls can be incredibly safe,” he said. “The industry will have to work very hard to become safe in its practices and to convince the customer that safe shopping is possible.”
Survival & Recovery
Retail is a people intensive sector, the number of people involved is very large, where blue-collar workers could be as high as 55 percent of the total cost; and equally challenging is the fact that this sector is highly capital intensive.
Therefore, to mitigate the effect of the looming crisis, the attention should be on short-term measures. “The short-term should first be on survival and later on recovery,” he reasoned.
For the survival of businesses, the most important thing it requires is liquidity. Companies will need most help upfront, if they have access to liquidity and longer moratoriums that will play a very large role in allowing more companies to survive and thereby the job losses being less. As for recovery of the businesses, some sort of demand stimulus by the government would help, for example reducing GST. Till demands comes in especially domestic demand, it will be challenging for businesses to scale up because the cash flow would come from the end consumers.
Furthermore, each business model will have to innovate so that even in the worst period of the crisis there could be some revenue coming in. For example, in retail, stores will need to augment in-store revenue with omnichannel revenue.
“In Europe, when stores are reopening almost half of their revenue is coming from servicing online orders, I see this as the future in India for the next couple of months. I don’t think for certain sector it will be possible to just survive through the cost side of the equation. Businesses will have to pivot the business model and innovate to survive,” he was quoted as saying.
Embracing E-Commerce & Omnichannel Practices
According to Lalbhai, the future of the world is omnichannel, anyone staying with the older model and believing that physical retail and omnichannel will clash is outdated.
“I think inventory has to be seamless between both channels and so do customers. As the industry evolves and becomes more sophisticated, everyone will embrace omnichannel commerce and that’s the way to survive in the post Covid world,” he concluded.