Second-wave uncertainties loom over India’s retail industry

Retailers have been urged to expand to smaller cities to ramp up their consumer bases.

Although India’s retail industry is expected to see a recovery in 2021, after witnessing a meager 4.4% growth rate in 2020 compared to the 12.5% reported during 2018-19, the outlook currently remains clouded as the second wave of COVID-19 continues to wreak havoc.

The downturn from the pandemic has caused job losses and pay cuts, which have exposed the Indian consumers to further financial uncertainties, leading to the derailment of the retail industry, said GlobalData’s retail analyst Ankita Roy.

Learning from the past, retailers have taken measures to protect their businesses from collapsing, including the launch of click and collect services, faster fulfilment options, enhanced inventory management, and better supply chain & logistics operations.

Amidst a dramatic shift towards online shopping, Roy advised retailers to continue taking advantage of this shift and expand to smaller cities to ramp up their consumer base. They must also consider offering products at reasonable prices as shoppers face a tight budget.

“As the e-commerce industry is not popular in India as other developed countries, retailers must increase the digital and technology investment to improve online capabilities and the ability to flex demand,” Roy said.

Apparel retail sales were estimated to jump 23.1% to $79.17b ((INR5.85t) in 2021, after registering a 8.9% decline during 2019-20. However, full/partial lockdowns in some states, curbs on social gatherings and restrictions on movements have dampened the demand for apparel much like other non-essential products.

Roy noted that apparel retailers were looking forward to a higher demand from the wedding season in 2021, but it clashed with the second wave of the pandemic. They also suffered from weekend lockdowns in some states, as most business happens over the weekends.

“However, the vaccination drive for all adults, which started from 1 May 2021, is expected to boost the consumer confidence, and provide relief to the retail industry in the latter half of 2021. Having said that, retailers should adopt safety protocols, advance their operations and be prepared for new challenges,” Roy said.