Retail sales recovery could resume this May

As the Covid-19 pandemic forces retail stores to down their shutters, signalling an unprecedented disruption of commerce, a new study has suggested India's retail sales recovery might kick into gear from the first week of May, if the current lockdown is not extended further.

Taking cognisance of what transpired in China when the epidemic unfolded, and its impact on retailers, the study by SaaS company Capillary Technologies notes the most resilient retailers to survive the epidemic in China were omnichannel retailers. It predicts that Indian brands that invest in enabling a personalised omnichannel shopping experience would be able to experience the fruits of their labour once the lockdown situation eases.

Capillary Technologies conducted the survey to analyse the impact of Covid-19 in the retail industry across India, China, Singapore and the Middle East. Around 10,000 stores in these geographies were surveyed before and during the lockdown.

Speaking to BusinessLine about the India-specific findings, Aneesh Reddy, CEO of Capillary Technologies said: “We have noticed a larger drop in sales for Single Brand Outlets compared to Multi Brand Outlets (MBOs) in India since the outbreak. This is possibly due to customers preferring to minimise travel by shopping at a single shop for multiple products or brands.”

Recording the recovery period in China, the study showed that after just eight weeks into the initial lockdown, the retail market in China was back in the early stages of recovery. The retail sector in China witnessed an uptick in sales and customers after March 6.

The ‘probable recovery period’ in China, as envisaged by the study, recorded a 22 per cent increase in sales and 43 per cent increase in customers, which was termed almost at par with last year’s figures.

The India picture

In India, until March 16, consumer retail sales and walk-ins did not see much of a dip as compared to last year, with the study noting it could be due to festive shopping for Ugadi, Gudi Padwa, Navratri, etc.

However, the consumer retail sector in India witnessed a huge slump in sales by 46-55 per cent in the number of customers per store from March 17-25, according to the study, adding that this is expected to drop further in the coming weeks due to the ongoing nationwide lockdown.

Terming it a very trying period for retailers across the globe, Reddy said: “Reports suggest that it will take five or six months for the world to recover completely from the impact of this pandemic. In the meantime, China has set remarkable precedence in not just battling the spread of the virus, but also supporting the economy.”

In India, the CEO added, “We are still in the critical phase of a national lockdown. While the Indian government is doing everything to battle the virus, retailers can also look up to their peers in China and Singapore to save their businesses and chart a quick road to recovery."

The CEO noted that Indian retailers would better understand the power of omnichannel digital transformation after the pandemic. “In the long run, consumer brands particularly should increase the percentage of their ecommerce business and deploy O2O strategy of reaching consumers across touchpoints to prevent businesses from closing down,” he added, in a statement.

The O2O strategy concerns bringing physical store customers to online stores, and is considered a necessary ingredient to omnichannel retail, which is about creating a consistent experience for customers in retail stores and different online channels.

In India, the study notes, lifestyle and fashion retailers are likely to be impacted most due to the restrictions and lockdowns, resulting in a demand squeeze. However, the combination of young demographics, rising disposable income and the positive headroom growth for organised retail in India could mitigate many of the challenges in the long term.

China lessons

Roughly 50 days after the initial lockdown, China not only witnessed the recovery of economic fundamentals, but showed signs of upward momentum. China’s economic scale, strong resilience, digital penetration and flexible macro policies were among the major factors that led to the rapid recovery, notes the study, and adds there are some important lessons to be learned from China on how to successfully deal with the epidemic and chart out a road to recovery in India.

From January to February, China recorded an over 65 per cent drop in average sales per store and a 79 per cent decrease in customers per store. However, there was an increase in retail sales starting from March 6, with the study suggesting it has taken around 1.5 months for a recovery to start after the Wuhan lockdown.

Being omnichannel also helped retailers in China to be resilient. The study cited Chinese apparel brands like Peacebird, Gloria and Youngor, who had undertaken omnichannel digital transformation journeys (through the integration of online and offline channels), experiencing a consistent increase in online sales despite the uncertain in-store sales.

China has also become the epicentre for livestream commerce, with Chinese e-commerce platforms such as Taobao and JD.com leading the live commerce world by enabling live stream, wherein viewers can purchase items while they watch. The study adds live commerce has become an emerging trend to bank upon amidst the Covid-19 sales slump, a lesson that needs to be learnt by Indian retailers.