Ever since COVID-19 broke out in India, IMAGES Retail has been bringing out analysis, reports, webinars discussing impact, challenges, recommendations and opinions from the retail industry experts and stalwarts to fight the crisis.
In a recent survey conducted by the IMAGES Group, national and regional retailers revealed that the Indian Retail Industry went through a very challenging time at the peak of the COVID-19 crisis, when countries were under lockdown to curb the spread of the virus. Despite the lockdown being eased in phases across non-containment zones in the country after two months, and despite an upbeat consumer response, the recovery has been a slow and unsteady one.
According to a McKinsey study titled, ‘The Next Normal in Retail: Charting a Path Forward’, retailers must act now, not only to keep pace but also to thrive in new market conditions. Most will need to significantly rethink their strategies and business models in the next normal—for example, what kinds of goods and services do consumers want and need in this changed environment? What macroeconomic factors will inform their purchasing decisions? Which new consumer habits will stick, and for how long?
We approached the captains of the industry in a bid to understand what is the future course of action for retailers in the face of the COVID-19 black swan event – not only to keep pace with but also to thrive in new market conditions. These top leaders came from a variety of retail formats including EBOs, MBOs, online marketplaces and e-commerce portals. The idea behind approaching retailers from every possible format of retail was to get a correct reading of the situation at the ground level.
The survey assesses the change in shopping behaviour of Indian consumers and the conversion rate of shoppers. It also gives a business assessment of the past 4 months (March – June 2020) in terms of sales, revenue, loss and profit. The survey analyses the different categories of retail that witnessed a surge in demand, while outlining the sectors which have been derailed for a while and which will need to systematically assess their capabilities to succeed in the next normal. Retailers can use this survey to identify gaps and make moves to position themselves differently – and correctly – in the new normal.
Spending & Buying Patterns
A huge change in the shopping pattern has been witnessed since the pandemic swept across the globe. Consumers’ buying behavior has adapted to suit their needs. Groceries, household supplies, personal care products, health and wellness products and other essentials are witnessing great demand as consumers across the world brace up for an extended period of lockdown.
Consumer behaviour in India is radically changing due to COVID-19 with 60 percent of buyers in the country believing that the pandemic would alter the way they shop, according to an EY survey. According to the EY Future Consumer Index, five new segments may emerge as consumers move beyond the pandemic — back with a bang (constituting 38 percent of respondents), stay frugal (29 percent), keep cutting (19 percent), cautiously extravagant (11 percent) and get to normal (2 percent).
Given the anticipated changes in consumer behaviour and category dynamics, the report highlights that consumer product companies would need to take quick actions to respond to the ‘now’ phase, alter operating model to address the ‘next’ phase and then consider strategic transformations to build a resilient organisation for the ‘beyond’ phase.
“As consumer product companies move into the ‘next’ and ‘beyond’ phase, their ability to digitally transform faster, invest in relevant technologies such as artificial intelligence, optimise the use of big data and analytics and improving overall customer experience will be the key differentiators in the industry, which will in turn enhance their resilience to withstand any future disruption,” says Pinakiranjan Mishra, Partner and National Leader, Consumer Products and Retail, at EY India.
Manpower & Job Cuts
India went under lockdown on March 23, 2020, plunging its economy into darkness, the economic outlook very bleak owing to the COVID-19 virus. So far, over the last 4 months, the country has witnessed four phases of lockdown and two less restricted phases termed ‘Unlock 1.0’ and ‘Unlock 2.0’, which is
These 10 weeks have been nothing short of devastating for the retail and shopping centre industries in the country, which have registered losses, forced shutdowns and layoffs. With shopping malls, retail stores, factories and other small scale business ventures remaining closed, economic activity coming to a grinding halt, and revenues falling drastically, it has been a virtual job bloodbath.
Job cuts have been swift and brutal. Standalone stores have reduced the number of retail staff , delivery executives have been furloughed, and a large chunk of workers in the supply chain industry and at the backend level have been put on leave without pay. Salons and spas, which are by their very nature contact businesses, have also witnessed ruthless manpower slashing.
The worst hit perhaps has been the F&B industry which has cut many jobs and whose workers don’t hope to get their jobs back because even with the lockdown over, restaurants will only be allowed to work on half seating capacity. Less consumers allowed inside eateries, coupled with a low number of people who will turn up in any case fearing contagion will mean less revenue and a need for minimal manpower.
The remaining workforce has taken hefty pay cuts. Many are transitioning to roles that involve multitasking as retailers and brands themselves undergo rapid transition to make themselves more relevant and safe for customers.
“The major job losses will be from non-essential retail starting from fashion, lifestyle, accessories, travel, and tourism product/ services retailers. Restaurants, entertainment centers, and cinemas will be adversely impacted, and their businesses will take longer to return to normal,” says BS Nagesh, Founder, Trust for Retailers and Retail Associates of India (TRRAIN).
The Retailers Association of India (RAI) has estimated about 6 million jobs losses in the retail sector in the coming months due to the Coronavirus impact. “About 40 percent of the 6 million employees working in India’s modern, rather than traditional, retail sector could likely lose their jobs in the next four months if the government does not intervene. As per recent RAI survey findings, retailers expect layoff of about 20 percent of their manpower. Small retailers are expecting to layoff 30 percent of their manpower; going forward, this number falls to 12 percent for medium retailers and 5 percent for large retailers,” says Kumar Rajagopalan, CEO, RAI.
As the entire world is scrambling to come back to normalcy under the COVID-19 pandemic-induced social distancing guidelines, brick-and-mortar retailers are shifting gears to rapidly embrace digital technologies to bridge the physical distance and navigate the crisis. According to GlobalData, a leading data and analytics company, with increased competition from e-commerce, reduced foot traffic and low consumer confidence, the need to build digital capabilities is now or never for physical retail stores.
Venkata Naveen, Disruptive Tech Analyst at GlobalData comments in a release: “As stores began to reopen doors, retailers are leveraging artificial intelligence (AI), Internet of Things (IoT) and virtual reality (VR) to offer hygiene-centric shopping experiences to customers with ‘contactless retail’ and increase their confidence to shop during the COVID-19 pandemic. Tech-enabled applications like virtual queuing, footfall analytics, contactless payments, selfcheckout and chatbots have suddenly seen an uptick at point-of-sale for retailers.”
The consumer psyche has undergone a permanent shift, the fear of exposure to the virus so high that all shoppers – the ones who are shopping from home and the ones who are bravely venturing out – are demanding safety and hygiene. Factor in supply chain uncertainty and brands and retailers themselves are working towards providing technology solutions towards contactless commerce.
“Industry executives have expressed the view that the pandemic has come as a wake-up call to embrace advanced technologies and CEOs are keen to digitise sales and customer experiences in both the business-to-consumer context and the business-to-business context,” explains Rajat Dhawan, Senior Partner, McKinsey & Company.
Small, medium and large scale businesses are all trying to integrate the ‘no contact commerce’ feature in their businesses, keeping their limitations and budgets in mind. Since mid-March, many major retailers have pushed mobile payments as a means to reduce contact. Even small and medium scale vendors who demanded cash are requesting customers to break the norm and use digital payment apps.
“The pandemic has forced us to embrace technology. It has literally drawn everyone out of their comfort zone and has forced them to accept technology in their day-to-day lives, in the form of ordering merchandise, grocery, household appliances, or satisfying their shopping cravings or retail therapy online to conducting business online. There are lots of apps which were unheard of and have now have become a part of our daily lives like a Zoom and Aarogya Setu. Both developers and retailers have opted for technology for COVID prevention to provide a safe shopping environment and promote social distancing. It’s a change, a stepping stone to how retail business will be conducted in the future as well. Booking a visit, fixing an appointment, booking a parking slot, ordering online, use of magic mirrors, health and hygiene etc. will take retail from here to the next level,” says Rehan Huck, Co-Founder & COO, Propel.
“With such a large proportion of COVID-19 cases being asymptomatic, no contact commerce is the only way forward. It is essential as it has social distancing built into the concept. No contact commerce, hence, minimizes the risk to the staff and the customer,” says Kabir Jeet Singh, CEO & Co-Founder, Burger Singh.
“We have introduced ‘Shopping on WhatsApp’ feature through our Bata Club and Bata website. The WhatsApp channel allows consumer to look at our portfolio, have a video chat with the store manager from a store close to their house and get products home delivered for trial and purchase on a very short turnaround time,” states Sandeep Kataria, CEO, Bata India.
“As a leading brand, it is very important that you understand your customer very well and ensure 100 percent satisfaction across various parameters: store operations, store hygiene, customer service levels, product feedback, billing experience, online buying experience, after sales service, social media interactions etc. Hence, use of technology to capture all these elements and have balance dashboards to take action are very important,” explains Kunal Mehta, Head IT – Lifestyle Business, Raymond.
“To reduce touchpoints and interactions within the stores will be important without hampering the customer experience. 3D technologies, virtual trial rooms, digital payments and Omnichannel commerce are the key to ensure that the customer experience, in-store sales and safety are taken care off ,” he adds.
Bestseller has started working towards a ‘Phygital’ retail model which incorporates various retail technology concepts like VR, AR and AI to ensure a seamless brand experience for consumers.
“Concepts like virtual catalogs, AI enabled Smart Mirrors and Omnichannel retail ensure a smooth shopping experience for our consumers. While AIenabled smart mirrors offer contactless trials of products for consumers which will assist in a safer brand experience in the post pandemic era; virtual catalogs allow contactless scanning and selection of the product range, and depending on the availability the product can be delivered or picked up from the most convenient store by the consumer,” explains Vineet Gautam, CEO, Bestseller India.
“At Liberty, we have a digital catalogue in store in order to ease out the selection process for the customers and accordingly we deliver,” adds Anupam Bansal, Executive Director Retail, Liberty Shoes.
According to Prashant Bokil, Chief Technology Officer, Being Human Clothing, some technologies which will be absolutely imperative for retail stores post the pandemic include:
– Customer appointment solutions
– Extensive use of omni experience
– New biometric devices with face detection and temperature checking features
– Technologies that measure the number of people in a store and how long they stay there
– Contactless or robust self-checkout options
– Virtual assistance sessions with customers
– Leveraging data from online channel to drive personalised and relevant marketing
– Using AI to unveil new shopping needs
– Increase in the use of voicebots or chatbots
Tushar Ved, President, Major Brands, adds that with retail stores opening post the lifting of the lockdown, in-store technologies – which have until now have been used in various ways aggregate customer experience – can be a huge enabler in managing social measures. In pandemic times, these technologies can help increase convenience for shoppers, while mitigating the risk of physical contact.
Footfalls: A Concern
With Unlock 2.0, most businesses have reopened in the country in noncontainment zones – with the exception of cinema halls and entertainment zones. The Retail Industry has had the time to study footfall patterns and purchase behaviours over several weeks since the lifting of restrictions.
For brick-and-mortar stores, getting consumers back to the store has been a huge challenge. Consumer behaviors are settling into a new normal, as people everywhere learn to live with the reality of COVID-19 and as more countries reopen parts of their economies, according to a report by McKinsey titled ‘A Global View of How Consumer Behaviour Is Changing Amid COVID-19’.
Consumers globally are continuing to see their incomes fall. And even though consumers in China and India remain more optimistic than their counterparts in the rest of Asia, Europe, or the United States, they are largely hunkering down for a prolonged period of financial uncertainty, and intend to continue shifting their spending largely to essentials, such as grocery and household supplies, and cutting back on most discretionary categories, according to the report.
While some consumers have returned to shop and eat, they are doing so only for shorter periods of time and mostly for focused buying or takeaways in case of food. The average dwell shopping time has also reduced, with shoppers spending less than 15 minutes in store.
Among the businesses being hit due to the coronavirus outbreak in India is the multi-crore restaurant industry, as footfall dipped at most joints, and several others prepared to shut down.
According to the National Restaurant Association of India, in-restaurant dining has witnessed “an approximate business drop of 30-35 percent”. “There has been a definite impact of the epidemic in the overall food service business, with various segments being impacted in varying degrees. “In-restaurant dining is also seeing a big impact…with the restaurants located within mall premises recording a sharper drop,” Anurag Katriar, President of NRAI was quoted by news agency PTI as saying.
“There was zero traffic and demand. But the good thing is that, at least in China, the infrastructure with supply chain is sound, so you could still leverage the digital channel to deliver products. That’s where we also started taking stock of future demands, handling inventory situations and forecasting KPIs for the unknown. The digital channel has been our saving grace and for all retailers who had used it well. Now the market in China has resumed once again – we could see the consumers emerge slowly and demand is picking up,” says Gautham Rao, Sr. Director, Buying and Planning, Converse Asia.
While a small percentage of brands and retailers believe that there is no change in the conversion rate pre and post lockdown phase, almost 25 percent of the surveyed say there is an increase of more than 50 percent in the conversion rate.
Avenue Supermarts Ltd, which owns and operates retail chain D-Mart,said in July 2020 that it has recovered 80 percent of its business in the stores, wherever it has been allowed to operate unhindered. However, discretionary consumption continues to be under pressure, especially in the non-FMCG categories and impacting its margins, the company said.
According to the company, unlike developed countries where organised retailers had a surge of customers walking into their stores, it has not happened with the same intensity at its units. “This was because of the strong enforcement of store shutdowns, restrictive movement of people in general and strict social distancing rules inside stores. While the overall lockdown rules have softened in general, they continue with the same or more severe intensity in certain cities and local municipalities from time to time. Its negative impact on footfalls and sales were significant,” it said.
Arvind Fashions Ltd (AFL) also said that while 75 percent of its stores are operational now after the easing of lockdown relaxations, footfalls and revenue remain well below pre-COVID levels.
Increase in Operational Costs
Retailer cost considerations have also changed—among them, greater investments in interventions required to bolster or maintain supply chains, safeguard employees’ and customers’ health, and maintain staffing levels. Adhering to new safety norms and SOPs has added to retailer costs.
Higher costs of sanitisation and staggered store timings are increasing operational costs and a cut in rentals and employee and other costs may not be good enough to turn green in FY21. Slower store rollouts and even slower retail space developments are expected to hurt medium-term growth.
Getting Consumers Back
Consumer confidence index is at a decade low. Spending on grocery has increased the most while lifestyle/ apparel have been worst affected. In fact, consumer debt on credit cards
has grown at 29 percent CAGR over FY15-20. Between June and December 2020, as cities open gradually, there may be initial spike in consumption due to pent up demand, but this is expected to gradually subside as the number of COVID cases go up.
The consumer mood is gloomy for now as SMEs, businessmen and white collar professionals all continue to face risks to their earnings and even their jobs. Consumers expect to spend less on retail over the next few months as they seek to protect their finances and prioritise essentials and low levels of consumer confidence do not bode well for retailers. Aside from this, consumers are now looking for retailers with visible safety measures such as enhanced cleaning and physical barriers. Also, consumers prefer companies which have healthy and hygienic packaging and demonstrate care and concern for employees.
According to Hrishabh Kashyap, Retail Analyst at GlobalData, “In light of the heightened concerns over hygiene, retailers must maintain the required safety norms to assuage apprehensions among the consumers and stay relevant in the evolving retail environment.”
In India it has been observed that neighbourhood kirana strores and modern trade stores have seen higher footfalls and increased ticket sizes over stores in high streets and malls. In a bid to attract customers, retailers need to instill confidence among them, brands and retailers are working on different strategies to remain relevant in the next normal.
From exploiting social media for communication, mining data
to gauge consumer behavior and relying Product Data Management applications to utilising cutting edge Artificial Intelligence (AI), Augmented Reality (AR) and Virtual Reality (VR) technologies to enhance the customer experience, brands across the spectrum are making an effort to boost consumer confidence.
Partnerships: What We Can Do to Help
To support retailers and brands to come out of the current situation as unscathed as possible and help them understand how to instill confidence in the consumer, we asked the respondents to explain what they need from us. Industry captains and titans emphasized that as an intelligence and analysis agency, IMAGES Group must:
– Share and highlight outstanding leadership stories
– Showcase fit-for-purpose technology innovations
– Showcase out-of-the-box consumer marketing successes
– Create business networking opportunities
– Conduct online masterclasses with global experts
– Organize virtual B2B shows
IMAGES Group crafted a survey for retail leaders across verticals to assess the on ground impact of COVID-19 on the Indian Retail Industry, to help retailers identify what’s working, reevaluate strategies and adapt to changing customer demands. Here are the results.
1. Sectors Surveyed
2. What has been the percentage change in revenue from the same time last year?
3. What are consumers buying?
5. Describe the current consumer spending behaviour
6. Which segment of merchandise is being bought most?
7. What is the average footfall as a % of a pre-lockdown level?
8. Which categories are consumers most spending in on your store?
9. Has the average dwell time in the store changed as compared to pre-lockdown levels?
10. What is the current average dwell time in the store?
11. What is the change in conversion rate since reopening as compared to pre-lockdown levels?
12. By what percentage have your operation costs increased due to investment in sanitization of premises and products, PPE Kits?
13. Are you offering exchange or returns?
14. Are you recovering any % of this cost by charging extra money from the customers?
15. Are you allowing trials of products?
16. What are you doing to attract consumers?
17. Have you increased your advertising spends on social media in comparison to pre-lockdown time?
18. Do you have any big sale events planned for the next quarter?
19. What is the percentage of sales coming from online channels?
20. What is your current preferred medium for promotion & advertising?
21. Have you diversified your core business offerings to cater to pandemic related demands?
22. Have you increased your online offerings?
23. Have you closed down any stores due to the current crisis?
24. By when would you be ready to look at new real estate options (malls/ high-streets) to open stores?
25. What effect has the current crisis had on new technology adoption by your organisation?
26. Areas to Explore: New Technology Solutions
27. Have you laid off or furloughed any employees?
28. What % of the total workforce has been laid off or furloughed?
29. Have you reduced the salary of your workforce?