Retailers selling both essential and non-essential items have reported a 40% and 100% drop, respectively, in their sales due to the COVID-19 pandemic. The government should step in and provide a package that will help them survive, says Kumar Rajagopalan, CEO, Retailers Association of India in an interview. Excerpts:
What has been the impact of COVID-19 on the retail sector?
Business [retailers selling essentials] had dropped by as much as 20% to 25% by the end of February 2020. In the past one and a half months, it has reduced by a further 15%. For non-essential items, business has reduced by 100%. These include apparel, jewellery, shoes, consumer electronics, durables and IT, among others.
Apparel sector could face revenue losses of up to 40%, and many small and medium players in the apparel industry are contemplating closure of businesses. In the absence of any major support from the government, as many as 20-25% of the retailers may be out of business or will need financial infusion to stay afloat.
Which sections of the retail sector are the most affected due to the lockdown?
Modern food retail has de-grown by 30-40% due to supply chain problems, shortage of manpower with attendance below 30% and lower customer entry due to social distancing.
Almost all stores dealing in garments, sarees, electronics, mobile phones, furniture, hardware are closed. Non-grocery/food retailers have reported an 80 to 100% reduction in sales. Even retailers of essential items are facing losses as they aren’t allowed to sell non-essential items, which would bring them higher margins.
A recent Retailers Association of India survey pointed out that the industry is experiencing severe liquidity challenges which can lead to large scale unemployment. The cash inflow of the industry has come to a standstill, while fixed operating costs remain intact. Only 10% of non-food retailers have money to pay salaries.
What has been the banking sector’s response?
Banks are not giving any kind of finance to retailers although the Reserve Bank of India (RBI) has stepped in.
Many retailers enjoy credit facilities for capital expenditure from scheduled banks, co-operative banks and non-banking finance companies. The moratorium that the RBI has announced does not cover these alternative finance instruments as yet. Also, working capital enhancements are not being provided by banks for reasons such as payment of salaries and rental, which are the key fixed expenses that retailers have to pay during these times of nil-revenue.
What are your expectations from the government?
We have requested the government and financial institutions to come together to help retailers retain jobs through wage subsidies of up to 50% for blue-collared workers drawing wages of up to ₹25,000 or minimum wages, whichever is higher;
The government must also provide 25% of additional working capital credit lines to pay salaries and wages on time. It must also provide working capital loans to the extent of 2-3 months of sales at low interest rates and under a moratorium of 6-9 months for repayment.
All earlier loans also should get a similar moratorium.
The government must also reduce GST across the board to boost consumption and revive consumption by opening all forms of retail units, including malls, in a safe environment.
What is the size of the retail market ?
Over 15 million retailers nationally generate a business of almost ₹4.74 lakh crore and employ more than 46 million people. The sector contributes approximately 40% of India’s consumption and 10% of the country’s Gross Domestic Product.