Coronavirus impact | Retail industry staring at nearly 20% layoffs

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The retail industry is staring at huge layoffs due to the coronavirus-induced lockdown and smaller retailers are likely to be affected the most, according to a survey conducted by the Retailers Association of India (RAI).

Small retailers may be forced to slash 30 percent of their manpower going forward while medium retailers may have to shed 12 percent and large retailers 5 percent. Overall, the industry is expected to face around 20 percent of manpower reduction, the survey noted.

The survey covered 768 respondents.

The 21-day lockdown to prevent the spread of coronavirus in the country has greatly affected retail business. Most stores, except those selling food & grocery, have been shut across the country.

The survey indicates that non-grocery/food retailers are expected to report 80-100 percent reduction in sales due to the lockdown.

Even retailers of essential items are facing losses as they are not allowed to sell non-essential items, which usually have higher margins.

Around 85 percent of the retail costs are fixed costs, which is putting retailers under severe financial stress.

The cash inflow of the industry has come to a standstill, while the fixed operating costs remains intact.

The Indian retail industry has more than 15 million retailers.

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The retail industry employs 40-50 million people, of which modern trade employs more than 6 million, equalling to almost 12 percent of the total retail consumption of the country.

Retail contributes to around 40 percent of India's consumption and 10 percent to India's Gross Domestic Product (GDP).

Impact on non-food retailers

The survey showed that more than 95 percent of non-food retailers have their shops closed in the lockdown and are looking at practically no revenues till the lockdown is in place.

In the next 6 months, non-food retailers expect to earn 40 percent as compared to last year’s revenues.

Impact on food retailers

Most food retailers also sell non-essential goods in the same or different stores.

The non-food business in the stores has come to a standstill in the lockdown leading to revenue loss.

Additionally 25 percent of these retailers have non-food stores which have been closed leading to further losses.

In the next six months, food retailers expect to earn 56 percent as compared to last year’s revenues.

Business Outlook

According to the survey, 70 percent of retailers expect business recovery to happen in more than 6 months, 20 percent expect it to take more than a year.

Less than 10 percent of medium and large retailers expect to earn any profits till August 2020, 26 percent of small retailers expect to earn profits during the same time.

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