Retail businesses must recalibrate


June 28, 2020 | By Rupkatha B

Retail businesses have to recalibrate to adapt to the new normal, as the definition of normalcy itself has changed since the outbreak of the COVID-19 pandemic. “What normal meant in the pre-COVID days is quite different now,” states Ashish Panjabi, COO of electronic retail brand Jacky’s Retail LLC & Jacky’s Business Solutions LLC. “Adapting to the new normal will require recalibration. The whole economics between revenue and cost will have to be relooked.”

“It will probably be around next year that we will fully understand the ‘new normal’ as people are more confident to step out and spend, tourists are back. Then we have to readjust the retail experience to the new normal,” he adds.

Rethinking retail experiences

Expecting businesses to bounce back to the pre-COVID levels seems unrealistic, at least as of now. “That’s why it’s crucial for all the stakeholders to align to make the economics of the business equation work. There is an oversupply issue in the retail real estate market. That must be addressed, because the biggest costs for retailers are rent and salaries. The latter is for retailers to manage, but for rent, we need support from the landlords to make the equation work,” Panjabi points out.

“Think about it – as shopping malls are encouraging services like click-and-collect and curbside pick-up and delivery, retailers are still paying rent for the entire store, but we are not seeing the customer in the physical space,” he adds. “We will incur additional fixed costs too in terms of frequent and heightened sanitisation and disinfection.”

As COVID-19 has severely impacted blow to brick-and-mortar, it comes as an additional blow to a format that already required rethinking. Now, the whole dynamics of brick-and-mortar as a revenue versus cost centre will have to be relooked and re-planned to ensure sustainable growth. An important question that keeps reappearing is as retail is struggling: are landlords being supportive?

“At this stage, the support from landlords has been minimal, with the exception of some mall owners that have announced rent relief,” Panjabi admits. “Besides, rent waiver during the lockdown period and deferred rent payment in some cases, not much more has been done. Post-lockdown, business will take a while to pick up. If landlords aren’t understanding, retailers will eventually have to exit. Having said that, landlords can’t fix all the problems for us, especially fundamental ones that existed even before COVID, such as brand presence in multiple and in some cases non-workable locations. Even retail assets have faced similar challenges. That’s why we must have an aligned approach to doing business. If Dubai loses the variety of brands and cuisines across all budgets, we might eventually lose the edge with tourists who come here to shop.

Reopening benefits businesses

According to Panjabi, the reopening of businesses has benefitted the sentiments. In the consumer electronics segment, Jacky’s Retail is now operating at 100% capacity in the UAE. “Our stores were shut for more than a month and our resources weren’t utilised, which caused a lot of negativity. And the vast majority of our investment in fixed cost is related to brick-and-mortar. Now that the stores are open, our staff are feeling far more positive about the reactivation.”

The level of business isn’t satisfactory; but when compared to a standstill and zero return from stores, anything is better. Even restarting at a small base of return is alright.

With brick-and-mortar allowed to function at 100% capacity, confidence is indeed rebuilding. “It takes time to rebuild confidence after a massive crisis like COVID-19,” Panjabi opines. As the age-related restrictions have been eased in Dubai, we are seeing more people visiting the shopping malls. Our foot traffic has also improved. But it will take a while for footfall to improve significantly. Today, people are visiting the malls out of necessity, not for entertainment.”

Lack of tourists is a damper

Importantly, Panjabi mentions that the lack of tourists is impacting business. “A lot of our stores otherwise see considerable tourist footfall – for instance, Mall of the Emirates, City Centre Deira and BurJuman Centre. In these stores, we are seeing a drop in sales. Even when tourists return, the numbers and their willingness to spend will have an impact on our business.”

However, Panjabi is optimistic. “The UAE is a resilient country. We have an airline that connects the world. If Dubai continues to be that safe haven, tourists will come back and so will the portion of the resident population that we have lost due to the COVID-19 pandemic.”

Brick-and-mortar is here to stay

Like several retail business having an omnichannel presence, online performed better for Jacky’s Retail compared to the same period last year. E-learning and work from home during the lockdown and partially even now, have boosted the growth of online buying in some product categories, such as tablets and laptops. “We clocked three-four-fold growth in these categories, compared to normal sales online,” shares Panjabi. “As the lockdown progressed, sale of the peripherals grew – including printers, scanners, monitors, mice, keyboards and multi-functional devices. Interestingly, we saw a dramatic growth in sales of televisions, which isn’t a category that sold well online for us. Another pleasant surprise was the rise in sales of men’s grooming products. Cooking and baking products are still selling quite well too.”

“But after the lockdown, we are seeing people are shopping in the stores,” he continues. “Online sales have slowed down compared to the lockdown period. We had launched a new range of Samsung television online during the lockdown period. Now, the range is selling in the stores too. Smartphones are also selling well in the stores after the lockdown.”

“Seeing a product before buying, especially if it is a high-priced item, is still very important. For instance, customers like to hold a smartphone in the hand to see how it feels before buying. Can that experience be replicated online through videos and visuals? And this experience is usually a clincher in a purchase decision. The challenge is to replicate the shopping experience in-store when buying online. That’s why brick-and-mortar has always existed across the world,” Panjabi concludes.

 

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