The Shriram Sanjeevi column: View from India
Retail industry veteran (and former travel retail specialist) Shriram Sanjeevi assesses the impact of the COVID-19 crisis on Indian life, with a special focus on retail and travel retail, in this contributed column. Sanjeevi was recently appointed Vice President – Sales & Marketing for the Levista Coffee brand by Indian company SLN Coffee, and has long run his own retail consultancy, #Miles2Go Consulting Services.
At the time of writing, it is six days since I offered Martin Moodie a contributed column with a view of the COVID-19 crisis from India, writes Shriram Sanjeevi (pictured).
It has been difficult to put words to thoughts at this bleak and uncertain time. Even for someone who knows what it is to have occasional ‘writer’s block’, this is different. There is gloom, uncertainty, unhappiness and most worryingly, fear among the people around me.
The Prime Minister of India Shri. Narendra Modi has ordered a countrywide lockdown for 21 days from 25 March. From senior business leadership friends that I’ve known for years to doctors, industry experts and spiritual healers – none seem to have any idea where we are headed. Essential supplies are still available, yet many people are scared to come into contact with the outside world.
Until a few days ago, all forms of public transportation were open. Not any more. Flights, trains, buses and other private transportation have been shut down. Small and medium-sized enterprises are the worst hit with falling cashflow and limited access to funding through banks or private lenders.
The government has been fighting the crisis through various measures including extension of timelines for various statutory filings such as income tax, GST, etc, with a major relief package now expected.
Retail is among the most affected sectors, particularly in lifestyle categories such as apparel, accessories, footwear and jewellery, to name a few. While grocery stores and pharmacies are still open for business, leading retailers such as The Future Group, Reliance Retail, More Retail (co-owned by Amazon) and others have been forced to down their shutters.
Across all businesses, fixed business costs, salaries and interest payments on capital are not going to vanish or diminish. In fact every passing day without conducting business compounds those costs and over time, these will balloon.
Shri. Kumar Rajagopalan, Chief Executive of Retailers Association of India (RAI) said in a recent piece with The Economic Times that a shutdown will leave retailers highly exposed. That’s because 85% of their total costs – rent, employee salaries and interest outgoings – are fixed. “With a shut down of five to six days, all profit is wiped off from the books. Beyond six days, it depletes cash reserves,” he said.
“With a shut down of five to six days, all profit is wiped off from the books. Beyond six days, it depletes cash reserves”
Rajagopalan said retailers have to assess how to survive since there is still no clarity about how long this scenario will last. “As far as rentals [are concerned], we expect malls and retailers will [find] a win-win proposition since both need each other,” he said. “We also have to approach the government on the interest outgoing and tax component payouts.”
Meanwhile, employees are worried. The crisis comes against the background of an economic trough that saw the slowest trading during November’s Deepavali [the Hindu festival of lights and the biggest annual shopping spree each year] for several decades.
At least four CXOs of various retail brands in India – close friends of mine – said their respective companies would require a two-year window to recover and match the business they did in 2018. They also confirmed that trimming of staff and toning down of their presence in certain territories is imminent.
This picture is in sharp contrast to smaller neighbourhood retailers, especially those selling groceries and household items. They are so busy that they are even worried whether supply will meet demand during the 21-day lockdown.
There have been challenges for brands like ours (Levista Instant Coffee) and many other FMCG companies that are unable to move stock from warehouses to retailers. Ecommerce companies like Flipkart and Amazon have temporarily stopped deliveries since the authorities are not permitting door collections for fear of community spread.
Travel retail? Well, there is neither much travel nor retail happening in India right now. Some reports suggest that airlines worldwide could go bankrupt if this trend continues for a few more weeks. Airport operators that have been on wait-and-watch mode currently don’t have any answers for their beleaguered retailer partners.
Travel retailers both large and small are hopeful that once travel restrictions are removed, business will pick up. But many are unsure how the losses incurred during these tough times can be compensated for. Rent waivers are one solution and most tenants are confident that they will receive this mercy from landlords.
An industry shut down: Delhi Duty Free is among the Indian travel retailers whose shops are closed through government restrictions
Travel retailers in India as elsewhere are seeking deferred or reduced payment terms from airport partners (Mumbai Duty Free pictured)
Airport and F&B operators that I reached out to declined to comment at this time, though they may in future columns. I can sympathise: with almost no business happening, all are staring at an unknown future.
But one thing is for certain: travel is not going to be the same in future, nor is retailing in travel locations. People are more likely to think before touching surfaces at airports, onboard aircraft and even inside airport transfer buses.
We may seek more hygiene around the use of cutlery at airports. We might continue to stare when someone sneezes around us, especially in confined spaces such as planes and eating outlets. On a different note, consumers will seek higher levels of transparency with regards to food hygiene – from procurement of raw material, stock transit, food preparation and serving on the plate.
If we as consumers demand these and other more stringent regulations, the cost of operations will rise, perhaps pushing some retailers out of business altogether. And airport operational costs are already 1.5 to 2.5 times higher than in other environments. We will watch closely at how this all impacts consumer perception and how a future where so much is uncertain will play out.
The Moodie Davitt eZine
Issue 278 | 7 April 2020
The Moodie Davitt eZine is published 12 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit www.moodiedavittreport.com and to subscribe, please e-mail email@example.com