Examining retail recovery


May 11, 2020 | By Rupkatha B

Examining how retail recovery would look like or how long it will take remain uncertain, amidst the on-going COVID-19 pandemic. As phased reopening has started in most parts of the world, retail businesses are readjusting goals and forecasts, while adapting to new consumer behaviours and government guidelines.

From operating in limited capacity to ramping up doorstep delivery, curbside pickup and drive-thru. From accelerating digital transformation to engaging differently with consumers on social media. From putting together do-it-yourself kits to pivoting businesses altogether. From rethinking tenant-landlord relationship to forming new partnerships – case in point: joining hands with local kirana or mom-and-pop stores for expanded reach. Every recipe is being tried and tested to adapt to a ‘new normal’ – replete with new set of challenges.

Retail businesses, world-over, will recover at its own pace, some regions before others. In the GCC, a consumer sentiment study undertaken by retail conglomerate Lulu Group International indicated that most people surveyed in the UAE and KSA feel the crisis is a short-term situation and will tide over soon, within three-six months. They are expecting the situation to normalise within three and a half months, against a global benchmark of five months. Meanwhile, Colliers International also indicates that retail might be quicker to recover from the pandemic.

Also read: Post-COVID Gulf retailers realign goals

A quick look at China, where global coffee chain Starbucks reopened 95% of its stores towards end of March 2020. There are a few lessons from China, which rebounded fairly quickly, largely by placing omnichannel strategies high on the agenda. According to Deloitte, the retail industry “accelerated O2O integration and omni-channel strategies, as well as social media/social commerce connections.”

Moving over to India, 70% of retailers expect business recovery to happen over a period of six months or more, while 20% expect it to take more than a year, as shown by a Retailers Association of India (RAI) survey. In the next six months, non-food retailers expect to earn 40% as compared to last year’s revenues, while food retailers expect to earn 56% as compared to last year’s revenues.

In the US, Coresight Research estimated discretionary non-food retail sales to decline by over 60% during the shutdown phase. During the recovery phase, discretionary non-food sales could be down by between 5% and 20% year-over-year, impacted by weak store traffic and depressed disposable incomes. Retail sales might stand significantly below pre-crisis levels by end of 2020, as a Coresight survey indicates that 54% of all respondents plan to spend less on holiday this year than 2019. While 28% expect to spend a lot less on holiday 2020 than holiday 2019.

The scenario in the UK isn’t much different. A case in point is fashion retailer Next’s sales forecast, which is expected to be down even during the holiday period in the fourth quarter of 2020, by between 17% and 28% year-over-year.

 

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