Neighbourhood departmental stores and small shops could bounce back faster with higher sales and transactions in comparison to organised retail, as the country slowly opens up after months of lockdown due to COVID-19. Bengaluru-based digital payments player Innoviti Payments said smaller stores were doing three to four times of sales compared to larger organised retail as India entered into Unlock 1.0.
“Within two weeks of lockdown opening, the sales in small shops in these (consumer durables) categories jumped to 44 percent of January numbers, while organised merchants grew to about 21 percent in the same geographical area,” said Innoviti Payment Solutions in a report published in May on changing Indian consumer behaviour in the post-COVID world. The report was exclusively shared with Moneycontrol.
Speaking with Moneycontrol, Rajeev Agrawal, chief executive officer at Innoviti Payments said that this is mainly because of the fact that local stores have managed to work around the erratic supply chains better than organised retail.
“Large retailers have 80 percent of their decision making centralised, hence they cannot switch supply partners easily or make changes based on different cities, this has caused more shelves to be empty at such stores compared to the local grocer,” said Agrawal.
However, some early signs of recovery in merchant sales could be driven mainly by pent -up demand from the last few months, he added. Overall, these businesses will not be able to get back to their normal transaction volumes before January 2021, Agrawal noted.
Innoviti has based its research on data collected from 20,000 stores across more than 1,000 locations in the country. It has around 80,000 point-of-sale payment terminals deployed across organised and small retailers. Innoviti deploys these terminals on behalf of banks. The company is backed by Catamaran Ventures, Bessemer Venture Partners, SBI Venture Capital and others.
COVID has managed to give a push to digitisation of transactions and Agarwal said that there will be some gain of digital over cash which will show tangible results by the end of this year. Unified Payments Interface and contactless card payments will be driving this growth for digital.
As per data tracked by the payments platform, contactless payments have shown a sharp uptick across merchant segments, with a large jump coming from pharmacy where retailers tend to be more hygiene conscious than other merchant segments.
Retailers are also seeing their average transaction size being higher by more than 20 percent compared to January numbers, which shows that consumers still prefer to buy in bulk. Basket size of every purchase had fallen to Rs 1,000 in March and has climbed up to Rs 1,200 in May.
For fashion and apparel, the average ticket size has fallen below Rs 2,000, compared to nearly Rs 2,500 in March. In the case of jewellery it has fallen to less than Rs 25,000 from Rs 30,000 in January. For consumer durables, the report said that purchases of more than Rs 10,000 showed a 15 PERCENT jump compared to January.
“Many of our consumers are working from home, hence they are investing in powerful smartphones, laptops and also are ready to buy products on equated monthly instalments,” said Agrawal. This could have an effect on zero EMI offers from multiple brands and banks, since impulse purchases will be subdued for the next few months.