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SHUTDOWN

India’s organised retailers were struggling with tepid demand—and then came coronavirus

Sangeeta Tanwar
By Sangeeta Tanwar

I write about all things retail

From our Obsession

Because China

Even small changes in China have global effects.

India’s $95 billion (pdf) organised retail sector is in hot water.

Yesterday (March 18), Gurugram, a key satellite town of Delhi, became the latest to shut down its malls after the city reported its second positive case of Covid-19—a 42-year-old businessman who had travelled to London. The first case was reported on March 17.

Weekly markets, spas, lounges, and gyms will also have to down their shutters and dine-in restaurants must restrict capacity to 50 seats till the month-end, Gurugram authorities said.

 

Over the past week, authorities in Chennai, Bengaluru, and Mumbai have ordered the closure of all shopping malls, till March 31. Delhi, meanwhile, has asked its cinema halls also to temporarily close, which is bound to impact footfall in the city’s malls further.

The impact

Gurugram-based real estate services company Anarock Retail estimates that there are 126 malls in India’s top eight cities.

The closure of even some of them will hit retail consumption in the next financial year, according to a March 17 ICICI Securities report. “With the Covid-19 issue likely to linger till at least Q1 FY21 (April-June 2020), mall operators stand to lose 20-25% of their revenue,” the report said.

This, however, seems to be a conservative estimate. Retailers and restaurants have already reported up to 40% fall in footfall and sales. Several restaurants have closed across cities with the National Restaurant Association of India (NRAI) advising its restaurant members to shut down dine-in operations till the end of March in the wake of Covid-19 outbreak. NRAI represents 500,000-plus restaurants pan-India.

And things can only go downhill from here, suggest experts.

“The Covid-19 threat could dampen household spending particularly on retail, eating out, recreation and leisure—which together account for 6% of the country’s GDP,” said Anshuman Magazine, chairman & CEO (India, southeast Asia, west Asia, Africa) at CBRE, a global real estate consultancy firm.

Even if the malls re-open in April, retail spending may not revive.

“(There will be) supply chain disruption in categories like mobiles, electronics, TV and fashion, and a slowdown in consumer spending due to the ongoing uncertainty. The shutdown of malls and stores is only going to aggravate matters,” said Satish Meena, senior forecast analyst at Forrester.

The Covid-19 scare couldn’t have hit at a worse time for India’s retail sector. The economy is facing headwinds and consumer spending, one of the key indicators of growth, is at an all-time low. It declined for the first time in four decades in 2017-18, National Statistical Office (NSO) data accessed by Business Standard newspaper showed. The government later decided not to release data officially citing quality issues.

With Covid-19 cases rising by the day, Indian retailers are in for a harsh summer.

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