A

Project report on

Impact of COVID-19 on Retail Sector in India

Submitted in Partial Fulfillment for the degree of

Bachelor of Business Administration

S.S. JAIN SUBODH P.G.(Autonomous)COLLEGE JAIPUR

(2020-21)

SUBMITEDBY SUBMITEDTo
Prateek bagaria DR. GAURI DHINGRA

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CERTIFICATE BY GUIDE

This is to certify that the project work done on “Impact of COVID on the Retail Sector”is based on
an original study and is a bonafide work conducted by Prateek Bagaria under my supervision and
guidance. This project report is submitted towards the partial fulfillment of three years, full time
under-graduate program of Bachelors of Business Administration.

Dr. Gauri Dhingra

Assistant Professor
S.S. Jain Subodh P.G. ( Autonomous) College
Jaipur

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DECLARATION

I, hereby declare that this project entitled “Impact of COVID on the retail sector” is submitted
to S.S. Jain Subodh P.G.(Autonomous) college, Jaipur for the partial fulfillment of degree of
Bachelor of business administration. It is the original work done by me and the information
provided in the study is authentic to the best of my knowledge. The work has been carried out
under the supervision of B.B.A. Faculty GUIDE of S.S. Jain Subodh P.G.(AUTONOMOUS)
College.This study has not been presented or submitted anywhere else for the award of degree
or any other purpose.

Prateek Bagaria

S.S. Jain Subodh P.G.(Autonomous) college Jaipur

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 ACKNOWLEDGEMENT
It is not often in life that u get a chance of appreciating and expressing your feelings in black and
white to thank the people who have been a crucial part of your successes, your accomplishment,
and your being that you are today. I take this opportunity first to thank the faculty at S.S. Jain
Subodh P.G.(Autonomous) College,especiallyDr.Gauri Dhingra and Dr Chitra Rathore Head,
department of B.B.A. for inculcating and instilling in me the knowledge,learning, willpower,
value and the competitiveness and professionalism required inan management student.

I would like to give special thanks to Dr Gauri Dhingra for her timely support during the project.
Her enduring efforts, guidance, patience and enthusiasm have given a sense of direction and
purposefulness to this project and ultimately made it a success.

I express mysincere and heartiest thanks to everyone who has contributed towards the successful
completion of the project.Last but not the least, I would like to thank my family for supporting
me spiritually throughout my life. The errors and inconsistency remain myown.

Prateek Bagaria

Index
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Chapters Particular Page No

Chapter 1 Introduction

Chapter 2 Research methodology

Chapter 3 Initiatives of government

to increase Retail Sector

Chapter 4 Growth of Retail Shop

Chapter 5 Impact of Covid-19 on

Retail Sector in india

Chapter 6 Conclusions

Chapter 7 Bibliography

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Chapter 1
Introduction

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Retailing in India is a business activity which evolves from ancient and medieval period. Retail
sector has faced a significant revolution in the last three decades. Indian retailing is classified into
two categories: traditional retailing and organized retailing. Traditional retailing is the revolution
of the ancient retailing system, whereas organized retailing is the recent change faced by the sector
in the last three decades. The traditional retail stores include mom and pop stores or local kiranas,
general stores, drug shops, footwear shops, etc., which may occupy less than 500 sq. ft. space for
their business. The organized retailing has developed in the form of malls, hypermarkets, speciality
stores, etc., which were using the latest technology in attracting the customers and doing the
business. The organized sector has grown in the last decade in many folds whereas the growth in
traditional sector is meagre. Indian organised retail sector has developed its way of doing business
by changing the key factors such as supply chain, information system, usage of ethnic technology
which in turn gives more value to the customer. The change in demographic characteristics such
as lifestyle, occupation, income, education of the youngsters is also a reason for the growth of
organized sector. Indian retail sector has been identified as the fifth largest sector around the world
and it is trying to contribute 10 - 12% of the GDP of Indian economy. When compared with other
retail economies of the world, Indian retailing is acting as nerves for its economy as it creates
livelihood for about more than 50 million people. Large population of the country is an added
advantage for the growth of the retail sector in India. The retail density of India is 11 i.e., 11 outlets
for per 1000 people. About 58% of the retail sector contribution to annual GDP is done by private
(individual) consumption. Of this, 48% consumption is done in merchandise retail like grocery,
FMCG, Home improvements, Jewellery, etc., and 52% in service retail like education, wellness,
medical, etc., This 48% merchandise retail comes about Rs. 59 lakh crores of which 70% (40.95
lakh crore) sales is done by essential items and remaining 30% is non-essential items such as
fashion, apparels, jewellery, food service, etc., The essential items sales is expected to grow by
nearly 10% by the end of the FY 21and it may come up to Rs. 44.8 lakh crore. This shows the
intertwined relationship between the Indian retail growth and the consumption pattern of the
Indians. As per KPMG analysis, Indian retail report of 2018, the growth of this sector will be 12-
13% worth of 948 billion USD at the end of FY2019.

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Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the
entry of several new players. Total consumption expenditure is expected to reach nearly US$ 3,600
billion by 2020 from US$ 1,824 billion in 2017. It accounts for over 10% of the country’s gross
domestic product (GDP) and around eight% of the employment. India is the world’s fifth-largest
global destination in the retail space.
India ranked 73 in the United Nations Conference on Trade and Development's Business-to-Consumer
(B2C) E-commerce Index 2019. India is the world’s fifth largest global destination in the retail space
and ranked 63 in World Bank’s Doing Business 2019.
India is the world’s fifth largest global destination in the retail space. In FDI Confidence Index, India
ranked 16 (after US, Canada, Germany, United Kingdom, China, Japan, France, Australia,
Switzerland, and Italy).

Market Size

Retail industry reached US$ 950 billion in 2018 at CAGR of 13% and is expected to reach US$ 1.1
trillion by 2020. Online retail sales were forecast to grow 31% y-o-y to reach US$ 32.70 billion in 2018.
Revenue generated from online retail is projected to reach US$ 60 billion by 2020.
Revenue of India’s offline retailers, also known as brick and mortar (B&M) retailers, is expected to
increase by Rs. 10,000-12,000 crore (US$ 1.39-2.77 billion) in FY20.
According to the Ground Zero Series findings of the consulting firm RedSeer, the retail sector is
expected to recover ~80% of pre-Covid revenue (amounting to US$ 780 billion) by end-2020.

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India is expected to become the world’s fastest growing E-commerce market, driven by robust
investment in the sector and rapid increase in the number of internet users. Various agencies have high
expectations about growth of India’s E-commerce market.
After an unprecedented decline of 19% in the January-March 2020 quarter, the FMCG industry
displayed signs of recovery in the July-September 2020 quarter with a y-o-y growth of 1.6%. The
growth witnessed in the fast-moving consumer goods (FMCG) sector was also a reflection of
positivity recorded in the overall macroeconomic scenario amid opening of the economy and easing of
lockdown restrictions.

Investment Scenario

The Indian retail trading has received Foreign Direct Investment (FDI) equity inflow totalling US$
2.17 billion during April 2000-June 2020, according to Department for Promotion of Industry and
Internal Trade (DPIIT).
With the rising need for consumer goods in different sectors including consumer electronics and home
appliances, many companies have invested in the Indian retail space in the past few months.
India’s retail sector attracted US$ 970 million from various private equity funds in 2019.
In September 2020, US private equity firm Silver Lake announced plan to invest Rs. 7,500 crore (US$
1.00 billion) in Reliance Retail, which marks the second billion-dollar investment by Silver Lake in a
Reliance Industries subsidiary after the US$ 1.35 billion investment in Jio Platforms earlier in 2020.
Walmart Investments Cooperative U.A invested Rs. 2.75 billion (US$ 37.68 million) in Wal-Mart
India Pvt Ltd.
Retail investors boosted their shareholdings in Indian companies to an 11-year high in September
2020, with first-time investors continuing to add more money into equities. According to Prime
Database, shareholding of retail investors in 1,605 listed companies hit an 11-year high of 7.01% and
witnessed ~3.4 million new ‘Demat’ accounts from July 2020 to September 2020.

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In November 2020, OnePlus, the Chinese smartphone maker, launched ‘OnePlus Nizam Palace’ in
Hyderabad, touted as its largest experience store worldwide that is spread across 16,000 sqft. The
company also announced plans to invest Rs. 100 crore (US$ 13.51 million) towards market
penetration across the omnichannel retail business, including extension of offline experience beyond
metro cities with new retail partnerships.

Government Initiatives

The Government of India has taken various initiatives to improve the retail industry in India. Some of
them are listed below:

• Government may change Foreign Direct Investment (FDI) rules in food processing in a bid to
permit E-commerce companies and foreign retailers to sell Made in India consumer products.
• Government of India has allowed 100% FDI in online retail of goods and services through the
automatic route, thereby providing clarity on the existing businesses of E-commerce
companies operating in India.

Road Ahead

E-commerce is expanding steadily in the country. Customers have the ever-increasing choice of
products at the lowest rates. E-commerce is probably creating the biggest revolution in retail industry,
and this trend is likely to continue in the years to come. Retailers should leverage digital retail
channels (E-commerce), which would enable them to spend less money on real estate while reaching
out to more customers in tier II and tier III cities.

It is projected that by 2021, traditional retail will hold a major share of 75%, organized retail share
will reach 18% and E-commerce retail share will reach 7% of the total retail market.

Nevertheless, long-term outlook for the industry looks positive, supported by rising income,
favourable demographics, entry of foreign players, and increasing urbanisation.

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Indian Retail: Analysing the SWOT Matrix

The Indian retail sector is growing rapidly. The relaxation in FDI norms is bound to generate even
more interest in the Indian retail market. To provide a bird’s-eye view of the market dynamics, we
have given below the SWOT analysis of the sector. This will help investors approach the market with
a well-formed strategy.

Strength

The inherent strength of the Indian economy provides a boost to retail. Following are some of the
factors that strengthen the economy:

➢ Purchasing Power

An increasing number of Indian consumers are ascending the economic pyramid to form an emerging
middle class. Though they still earn modest income between 1.70 and 5 USD per capita, per day, in
the coming decade, these consumers will collectively have around 6 trillion USD worth of purchasing
power annually.

In 2010, there were about 470 million people in the emerging middle class. As per PwC estimate, this
segment will grow to 570 million by 2021. This segment, existing between the lowest-income group
and the middle class, will constitute about 42% of India’s total population.

➢ Population Demographics

India’s working population is expected to be 117 million over the next decade as compared to China’s
four million. In the following decade, from 2020, the former will add 98 million to its workforce,
while China will contract 51 million. This is a big positive for India.

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 ➢ Low Retail Penetration

The penetration of organised retail in India is still very low at 6 to 8%, especially when compared to
developed nations such as the US and the UK which have retail penetration of 85% and 80%,
respectively. With new policy reforms, increasing purchasing power, and changing spending pattern,
we are bound to see a difference in the coming years. As per the Images Retail research, FY15 will
witness a jump in the share of organised retail.

➢ Aspiring Middle Class

With a population of 100 million, the tier II and III cities in India are larger than countries such as
Germany and the UK. Besides, the untapped rural population holds immense potential for retailers. It
is estimated that by 2021, approximately 67% of Indians will still live in rural areas.

Weakness

Despite the positives, there are certain facets of the sector that may dampen growth. Following are the
key areas to consider:

➢ Political Uncertainty and Regulatory Requirements

The announcement of FDI in retail has stirred the political pot. The government faces stiff opposition
with its allies threatening to withdraw support. In case, this policy is finally implemented, there is
another important aspect for the companies to overcome. The way the policy is currently drafted, a
retailer can set up stores only in those states which have agreed or will agree in the future to allow FDI
in multi-brand retail.

➢ Poor Infrastructure and Supply Chain Management

Apart from the political and regulatory scenario, infrastructure will play an important role in deciding
how this sector will evolve and retailers will manage the supply chain. While the FDI regulation states
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that the retailer will have to invest a substantial amount in building the infrastructure, this will take
time. Meanwhile, due to poor infrastructure, multiplicity of taxes, high cost of fuel, dependence
largely on the road transportation, etc. logistics still remains a high percentage of the cost of a product,
in certain cases going beyond 15 to 20%.

Opportunity

Retailers in India have been experimenting to arrive at a successful formula, but there is no ‘one size
fits all’ strategy. The market is still undergoing a lot of changes, both from the regulatory as well as
demand side. Following are some of the winning factors that players could focus on:

➢ Innovation

During PwC’s 15th Annual Global CEO Survey, one of the questions posed to the CEOs in the R&C
sector was as follows: To what extent do you anticipate changes at your company in any of the
following areas over the next 12 months? Nearly 73% indicated that the following two areas will
change in the near-term:

• R&D and innovation capacity •

Technology investments

➢ Digital Strategy

Going digital is not only about e-commerce but the way interaction will change in a few major areas
including changing business models (e-commerce, e-payments and mobile transactions), employee
and customer engagement and investment in technology.

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Customers are demanding an improved experience in terms of how to search, browse products and
conduct transactions online. R&C organisations need to engage with customers differently, in terms of
using a range of channels. However, the overall customer experience should be the same-smooth and
seamless.

Social media is also becoming a popular tool for consumers to educate themselves about offerings,
seek advice about products and compare brands. For retail companies it is important to define how
social media can support sales activities throughout the various channels, especially e-commerce.
Social media analytics is the focus area for retailers.

➢ Customer-centric Approach

The retailer is no longer looking at product innovation at the merchandising level only but the entire
store today is a product that needs to appeal to the customer. The following are factors that will make a
difference:

• Experience design

• Digital change

• Analytical insights

➢ Changing the Regulatory Scenario

Recently, the Indian government made the following two significant announcements that will go a
long way in developing the Indian retail sector:

• Permitting foreign investment in multi-brand retail trading

• Simplifying the rules for single brand retail trading to make it more business-friendly

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Threat

The retail sector is marred with many issues. The two most important threats are as follows:

➢ Availability of land and real estate

Retail space and rentals are key considerations in multi-brand retail and getting a feasible rate in the
desired location is important. There are retailers who have exited cities because of the high rentals that
put more pressure on profitability.

➢ Human Capital

With attrition still very high in the industry, human capital management continues to remain one of the
top three agenda points for the retailer. The attrition in the industry can be anywhere between 20 and
25% in non-food and grocery business to as high as 60% in the food and grocery segment.

Thus, the Indian retail sector has its own set of strengths and opportunities. However, the challenge
lies in overcoming the weaknesses and providing an environment that is conducive to the business, not
only for the national players but also the foreign retailers.

Data Analysis and Interpretation FMCG during the pre-COVID world

In India the FMCG market has evolved rapidly and in the years prior to the pandemic. After mid-2018
the market has been growing, with growth rates falling rapidly from mid-teens to roughly one half by
Jan / Feb 2020 over the past 15-18 months. In this situation, FMCG companies sought to bargain in
the expectation of a market share by lowering costs and selling customers higher supplies. For urban
India in particular. But the story of rural India can not be overlooked. Lately, in rural India the FMCG
sector expanded faster than the FMCG goods market, which accounts for roughly half the total
country expenditures. The semi-städtischen and rural industries account for over 40 per cent of FMCG
's total sales in India and the rural Indian FMCG segment is expected to be a growing force for the
industry in general with approximately 12 per cent of the world 's population in Indian villages.
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FMCG companies aim to introduce smaller packages for products which possibly correspond to the
lower incomes of people in rural India to improve their rural presence. It is a perfect illustration of
how corporations strive to implement innovative development plans.
Especially because of the skewed bargaining power and unorganized selling capacity of the Kiranas,
western trading and ordered exchange had given a very pernicious outcome to the Kirana district
market. This will improve, as steps have also been taken to digitize Kirana shops, so they can interact
with the larger retail partners.
There has been some attention given to the latest chemistry between global technology and Indian
telecom giants. The recently concluded Jio-Facebook partnership, which could have repercussions for
the entire FMCG market, is a job of Sajith Pai from Blume Ventures. The digitalization of Kirana
stories tells me that a number of businesses, including FMCG – Modern India, have the most
important developments. The FMCG industry is dealing with a broad variety of implications. The
skyrocketing smartphone penetration in the country, coupled with one of the lowest data charges in the
world, has helped bring India online. This has changed the face of consumer behaviour in the country.
With the majority of the population expected to be online, the e-commerce sector is flourishing. While
Covid-19 has accelerated the pace at which India adopts digital means of buying FMCG products, the
trend has been upward for a while now, with e-commerce expected to contribute to about 11 percent
of FMCG sales by 2030. Therefore, India stands to immensely benefit from the power of the internet.

FMCG during the post-COVID world

In India, post-Covid-19 outbreak, demand for hand sanitizers, hand wash and other health hygiene
products have to increase at an exponential rate. The year 2020 is anticipated to have the highest
growth for these products. The increasing knowledge of hand hygiene antiquates by Indian consumers
is anticipated to offer many domestic and foreign players a lucrative opportunity by 2022. In India, a
good e-commerce system would also lead to the production of hand sanitizers, hand washing and other
items for hygiene. Many leading customers claim that more than 600,000 Kirana outlets might have
shut down during lockouts, experienced a liquidity shock or have the owners returned to villages and
were scared that most of them might not reopen. In the phone industry, pressures are also felt, as the
All India Telecom Retailer Association reports that approximately 60% of the 150,000 stores that sell
smartphones have refused to open since they were approved to sell non-essentials. Industry managers
have said small channels are pinched by the reality that manufacturers work in cash and don't give

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compensation for 7-21 days. The industry is worried that these closures will further hinder demand
recovery.
Parle Goods recorded closing down in April and May nearly 10 per cent of the 5.8 million kirana
stores which used to sell tea and paan from home and road corners. Krishna Rao, head of parle
category B, has claimed that distributors have lost their ownership money from the channels. "All of
these channels may completely have been taken down. Also 1 to 2% of the 42 largest lakhs have been
shut down, with proprietors moving to their villages, and this may remain so for the next 5-6 months.
While some could reopen, the closing of small kiranas would also impact the scope of businesses.
Most of the retail closures may be transient and they will resume gradually, while kiranas could be
limited for long periods of time. Sunil Kataria, Chief Executive Officer of Godrej Consumer Goods
India & SAARC, expects shop closures to prove temporary even though the period is unsure. There
are approximately 10-12 million small retail outlets selling food and other quickly shifting consumer
items in India, but many are fractional and in the hinterland. On the smartphone industry, Arvinder
Khurana, AIMRA chief, reported that many shop owners have suffered liquidity problems, severe low
brand stocks in the sub15,000 region, shortage of consumer financing and very little losses. According
to Nielsen, FMCG industry sales fell 34% YO in April, contributing to a 38% decrease in sales in
smaller companies, while modern trade reported 5 % growth.
Chemical shops have emerged as a new grocery store, particularly in urban areas, for Indian customer
since they can run for longer hours than local kiranas and even modern businesses. Market research
company Kantar estimated that since the lock-off led by Covid, almost 35 million households have
bought fast-moving consumer items from chemist shops compared to 25 million in the previous era.
The growth of the customer base clearly demonstrates that everyday food is favored in the pharmacy,
he says in a survey. The cumulative FMCG prices in the nation are now 10 % higher than modern
chemicals. The platform is used for a long period targeting things like diapers, deodorants and frozen
product products. More than two decades of wellbeing and immunity-enhancing items have been
introduced in industries during the last three months.
In comparison to the segment of nutritional goods, businesses are showing a increase in health and
wellbeing, hygiene and protection revenue in these sectors. Homegrown Emami FMCG Business
experiences healthy rural post-March development. Robust sales in rural and semiurban markets have
been seen by leading FMCG performers, for example ITC, Godrej, Dabur, Emami and Marico, which
claim the expectation that the influence of the COVID-19 crisis will rebound rapidly. Furthermore,
businesses note, in addition to the segment of nutritional goods, an improvement in the sales of health

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and wellbeing, hygiene and safety enhancing immunities in those industries. These products are being
sold to businesses in value bundles and their network is also being extended in rural and semi-urban
markets.
With migrant workers returning home and the government proposing additional spending on
MNREGA and expanded MSPs, rural use would definitely see a boom. In addition, this year's hopes
will be for average monsoon. In the hinterland, he said, further boost emotions. Early indicators of
strong demand are being seen at new releases including toilets and soaps from the spectrum of
personal hygiene. Initiatives such as reward schemes have been introduced in those markets by the
Kolkata company. In addition to fruit, fitness and wellbeing, hygiene and immunization booster goods,
particularly rural areas, are also at the center of customer demand. "Health and hygiene consciousness
among consumers in both urban as well as rural India has increased. Hand hygiene and hand washing,
in particular, have seen an explosive growth in India and penetration dramatically increased. In order
to reach these audiences, ITC has introduced a hand sanitiser kit at just 50 locations.
Experts said that as the crisis normalizes, metropolitan economies would recover. "The rural sector
could perform well in the future with the outlook of a regular mozon. However, when the case of
COVID in the urban markets is tracked, lockdowns and instability are minimized, urban markets
should bounce back, "said EY associate and National Leader of Consumer Goods and Retail,
Pinakiranjan Mishra. In April, Nielsen had reduced its FMCG sector's growth outlook by close to half
to 5 % to 6% for 2020, citing consequences of the coronavirus pandemic and potential locks.
Humanity has encountered many problems from the very beginning. The size of these problems was
distinct and came to us in multiple ways. Starvation, battle, pandemics, global turmoil, and climate
change all the way. Thankfully, several of them have mankind – better and more robust. Another
obstacle, which today hangs the globe, is the introduction of the modern coronavirus. There are only a
couple of these incidents, in which all the human beings become involved or possibly influenced –
Covid-19 is one of them. We are surely going to get through that too. Although this epidemic has
changed much of our lives, this destructive disease offers up possibilities for fresh prospects – the
individuals and organizations. This is just as valid for the field of Fast Moving Consumer Products.

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Impact of Covid-19 on consumer behaviour
For a moment, the novel coronavirus is here. It has proven that life and our attitude to it will never
ever be the same. Of necessity, this transition is having a detrimental effect on some firms and offers
some a boost. I expect several shifts in the consumer 's actions in the immediate to medium term that
require FMCG businesses to shift their customer acquisition and retention strategies. Owing to
COVID, the structure of the market basket has shifted and certain adjustments are lasting. An
increased focus on health and hygiene will become the norm. Demand in the discretionary categories
is likely to come back slowly but not immediately. We see aa rise in demand for goods to boost
personal hygiene in, in and about homes and workplaces for the typical customer. There is an
increasing market for such items such as soap, hand washings, bathroom sanitary appliances,
disinfectants, towels, gloves, home-cleaning goods such as floor-cleaners and cookware cleaners;
cleanliness and hygiene are considered to be the latest mantras. These criteria are likely to be fulfilled
by FMCG firms. Likewise, businesses focused on food essentials and nutritional items like instant
noodles, gourmet meals, frozen snacks, dinner, cooking oil, fast mixes and supplements would be on
demand. Consumers often expect large goods to help develop protection from disease. That said,
certain categories are anticipated to take a seat back for a while in the FMCG market. Companies are
prudent to change their emphasis from categories that are not basically deodorant, perfume, skincare
and other cosmetics, gourmet cuisine, etc. In order to eliminate issues regarding commodity freshness
and expiry, it would also be important to properly control inventories. The CSR activities of the
FMCG companies will be affected (Mahajan, 2018)
There are also two common shifts in the purchasing habits of consumers. Consumers will want to cut
their visits to stores as much as possible. This will mean that the total amounts paid on each journey
will possibly grow when they tend to stop going to the store on certain occasions. The current trend
will be internet shopping. Initiatives such as the 'no touch rule' from major actors would step up this
increase in online shopping and customers will be able to get the products at home from the
convenience of their homes. A big development in the industry is the fast increase in rural demand in
the short term. This is largely because of the relocation to their homes of the migrant worker
population. While they are mostly low-income, government schemes like the Mahatma Gandhi
National Rural Jobs Guarantee Act (MGNREGA) are supposed to provide households in rural India
with jobs, which would pave the way for rising rural demand, at least so long as migrants do not return
to town for work. The loan taken by the kirana stores through government schemes like mudra loans
(Mahajan, 2019) will be difficult to repay.

19
This change in customer demand would be the imminent obstacle confronting firms. A structural
change in the market divisions would be required in order to devote capital to the categories where
demand would grow and emphasis will be diverted from the categories that have to take a back seat.
Thankfully, the government seems pro-active in taking steps to curb the difficulty of the crisis-to raise
liquidity through customers, to concentrate on social schemes such as MGNREGA, to feed
disadvantaged parts of society, to make farmers timely harvest crops, to ensure that the country's food
procurement programs are in line with the needs of the population.

Macroeconomics of COVID – 19: Economic Impact on India

COVID – 19 arrived in India at a time when we were already battling the slowing consumption in our
domestic market. 2019 saw events like US – China trade war and Brexit. Economic vulnerability
already had a dark shadow on our global economy and its impact on our GDP was evident (KPMG,
2020). COVID – 19 came in the wrong time and added supply side disruptions as well along with the
slowing domestic and global consumption/demand. Disruptions in supply and weak demand causes a
series of spiral macroeconomic problems for any economy (Mishra et. al., 2020) . While multiple
sectors lost their demand or started seeing zero demand, sectors like FMCG and Pharmaceuticals saw
increased demand, but could not fulfil them due to the supply side disruptions in sourcing raw
materials and logistics/distribution challenges. The recovery scenarios are difficult to predict
considering that Indians are conservative spenders and thus a possible further drop in demand. This
sentiment is evident with analysts drastically reducing the 2020 outlook for GDP growth of the Indian
economy, as observed in Figure 2.

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 IMF

S&P

Fitch

Barclays

UBS

Moody's (CY 2020)

-1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Before COVID - 19 Current

Figure 2. FY21 GDP Growth Projections for India - Current vs Before COVID – 19. Data from IMF,
S&P, Fitch, Barclays, UBS, Moody’s (2020)

India saw a slow growth of GDP in the year 2019, with growth rate hovering around 5% in all the
quarters of 2019 (Press Trust of India, 2020). Weak financial institutions, underlying structural
weaknesses due to policy matters resulted in low investor confidence on the supply side of the
economy and issues like unemployment impacted the demand side of the economy. While 2019 was
the slow year, 2020 was looked upon as a year that will bring back India’s GDP into the growth track
and most of the outlooks for the FY21 GDP growth rate were optimistic between 5.2% - 6.6%.
However, COVID – 19 changed these outlooks. Historically, a recession has always been due to
liquidity crunch caused by weak financial institutions. Several economic measures and tools are
available with the Governments to face these challenges. However, probably it is the first time in the
history of Global markets, we are facing recession due to people not being able to get to work. Most
economic indicators suggest that some of the biggest economies are on the verge of the greatest real
recession in nearly 100 years (KPMG, 2020). The trauma of financial markets coupled with the
sudden stop of all economic activities and the reduced domestic/global demand will lead to much
serious problems like high unemployment, and

21
left unchecked, we might be staring at a stagflation or a depression, something more serious than
recession (Boissay et. al., 2020).

Along with the domestic impact of reduced consumption, factory shut downs and travel restrictions,
India would also be affected by external impact due to COVID – 19 – Weaker global demand (less
exports), supply chain disruptions, and global financial shocks (CRISIL, 2020). Authors’ analysis of
the export and import share of India to/with the world’s most severely affected countries (that has 67%
of the COVID – 19 confirmed cases) shows that highly affected 10 countries account for 43% of
India's exports and 39% of India's imports (World Health Organization, 2020) (Figure 3). These
countries also account for 59% of the world GDP that indicates a global financial slow down. This
would severe the impact on the Indian economy as a whole.

South Korea
UAE
China
Iran (Islamic Republic of)
France
Germany
The United Kingdom
Italy
Spain
USA

0.00% 5.00% 10.00% 15.00% 20.00% 25.00%

2018 - 19 Export % share 2018 - 19 import % share

Figure 3. Export / Import Share of India to/from the most affected Countries by percentage

2018 – 19. Data from Ministry of Commerce and Industry, Government of India (2020)

22
Sector wide Impact

While it is evident from the previous analysis that we are staring at a negative to zero growth in GDP,
impact of COVID – 19 on sectors has not been uniform, unlike a financial recession.
During a crisis like COVID - 19, industries can be classified into three buckets based on Market
demand and recovery probabilities,

a) Stable or Increasing Demand: Currently, these industries are not able to cope up with the
demand and will continue to have high demand post COVID 19 impact.
These sectors will not see recessionary trends Examples: Essential sectors like FMCG, E-grocers and
delivery centres.
b) Suspended Demand: These industries currently have low to zero demand but will spike and
recover the suspended demand post COVID 19 impact. Recession trends would depend upon
government fiscal policies and cash flows. Examples:
Discretionary sectors like: Automotive, Apparel, Consumer durables, etc.

c) Lost Demand: These industries currently have low to zero demand. The demand lost will be
permanent and cannot be recovered post COVID 19 impact. Demand will not fully resume to
normalcy post COVID 19 leading to recessionary trends.
Examples: Service sectors - Travel and tourism, Malls and theatres etc.

Since demand and recovery scenarios vary for different sectors, the impact and strategies for recovery
also differs from sector to sector. Figure 4 indicates the varying impact on different sectors of the
Indian market due to COVID – 19.

23
 Automotive Power FMCG Healthcare Telecom
0.00 %

-5.00 %

-10.00 %

-15.00 %

-20.00 %

-25.00 %

Figure 4. Impact on Indian Markets due to COVID – 19. Data from Bloomberg (2020), Mint (2020)

Demand and Supply Analysis – FMCG

Fast moving consumer goods is the fourth largest sector in Indian economy (India Brand Equity
Foundation, 2020). The growth of this market has been mostly in double digit, closely linked with the
GDP growth of the Indian economy. Better macroeconomic indicators would mean consumers would
have a better spending power and that essentially translates into a better growth for the FMCG sector.
Also, most of the essential goods falls into this sector, which is another reason for a high growth.

24
 103.7

83.3

68.4

52.8
49

2016 2017 2018 2019* 2020*

*FY 2019 and FY 2020 are estimates

Figure 5. FMCG Market size in India from FY 2016 - FY 2020 (in Bn US Dollars). Data from Statista
(n.d.)

It can be seen from figure 5 that FMCG has seen a consistent growth from 2016 till date and the future
of this sector has been pledged very prospective as well. However, CY 2019 has not been very
promising for FMCG sector. According to the market research firm Nielson, the growth slowed down
to 9.7% from 13.5% in the year 2018. The growth slowed down to
6.6% in December quarter, the lowest in last three years. This growth is also much lower to 15.7%, the
growth rate an year ago (Malviya et al., 2020)

25
Rural sales have always been ahead of urban sales in the FMCG Industry (PTI, 2019). Rural sales of
FMCG saw a slow growth in 2019. This can be attributed to reduced GDP growth rate, liquidity
crunch in the markets which weakened the household consumption. Along with liquidity pressure,
consumer spending was also weak due to low job addition, no salary hike, etc. Adding to all these
were the floods and drought in the rural part, that indirectly resulted in high food inflation, that
impacted the consumer (Subramanian, 2019).
FMCG Sector was expected to be back on track in 2020. Nielson had predicted a growth rate of 9 –
10% for FMCG market in the CY 2020 before COVID – 19. GDP was expected to be back on the
track, Monsoon was expected to be good, Government spending on infra projects were expected to
increase, and all these gave indications of money in the hands of consumer and thus a bright year for
FMCG sector.

However, with COVID – 19 coming into picture, Nielson has slashed the growth rate of the

FMCG sector to 5 – 6% from its earlier 9 – 10% (Tandon, 2020). In the quarter ending March, FMCG
sector grew 6.3% (including e – commerce) in value turns, which is a sharp downward trend compared
to the 13.8% growth the sector saw in the same period in CY 2019 (Tandon, 2020). An interesting
break up from this data point is that demand for packaged food segment of FMCG grew by 7.8% in
March quarter of 2020, compared to non – food categories which grew only 1.8% in value. This trend
points out at the panic buying and stock piling of the food items that occurred in the Indian market at
the end of March quarter as the country prepared for the lockdown.

Despite panic buying and stockpiling trend that occurred at the end of March quarter in FMCG sector,
2020 looks like a gloomy year for the sector. It is evident that while stockpiling trend would increase
sales once, then the demand would stabilize as the consumers would have enough stock. Also, since
COVID – 19 has hit the economy the most, money would not flow to consumers and thus consumers
would resort to conservative spending, which essentially translates into a hit on the FMCG sector.

26
Immediate Impact of COVID – 19 on Demand and Supply in FMCG Industry of India can be
summarized in the below points

1. Panic buying increased the demand in the industry initially. However, the demand would
stabilize soon.
2. Essential products like packaged food, groceries, health and hygiene products like soap,
sanitizers, etc. saw unprecedented demand.
3. FMCG companies struggled to serve the market demand at the panic buying phase in last
weeks of March and first half of April, due to disruptions in their supply chain – from sourcing raw
materials, manufacturing, till last mile distribution. With lockdown and travel restrictions, companies
are still producing at sub optimum levels and pushing sales of only essential items.
4. The disruptions in manufacturing and distribution due to lockdown resulted in the drying up of
inventory amongst the retailers, which impacted the supply of products to the consumers.

27
Demand and Supply Analysis – Retail

Retail is one of the largest segment in the Indian economy, that contributes to 40% of India’s
consumption and employs an approximate of 40 – 50 million people (Boston Consulting Group,
2020). With a consumption of $1.7 – 1.8 trillion and an estimated CAGR of 9 – 11% from 2019 –
2025, retail segment is a breadwinner for many families. While there is a clear picture of organized
retail segment/modern trade, data points are not available for the magnificent traditional trade
segment, and it is estimates that a large number of Indians are dependent on Retail segment for their
livelihood.

COVID – 19 has had a significant impact on retail in multiple fronts. In India, with mandatory
lockdown, all retail shops and the entire modern trade was asked to shut down for more than 2 months,
except establishments that sold essential goods. However, according to an estimate from Retail
association of India (RAI), only 8% of the retail segment in India sold essential goods (The Hindu,
2020). This implies that 92% of the establishments saw zero sales for close to two months.

While the data is not out yet for the lockdown period in the Indian retail segment, we can look at data
from China during their lockdown period. China imposed lock down and drastic travel restrictions to
contain COVID – 19 in the month of January, February, and March, and the figure 6 indicates the
drop of retail sales of consumer goods to -20.5% in the months of January and February. The drop can
also be seen during May – 2003 in China, when SARS – 2003 was at its peak and there were similar
restrictions on movement. Similar drop of retail sales of consumer goods can be expected in India for
the months of Q1 2020 and Q2 2020, considering that most of the establishments were ordered to be
closed.

28
15.00%
SARS - 2003, Peak during May - 03 COVID - 19, Peak during Jan & Feb - 19
10.00%

5.00%

0.00%
Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Oct-19 Nov-19 Dec-19 Jan and Mar-20
Feb - 20
-5.00%

-10.00%

-15.00%

-20.00%

-25.00%

Figure 6. China's month-on-month Growth of Retail Sales of Consumer Goods during SARS - 2003
and COVID – 19. Data for February – 2003 till August – 2003 from National Bureau of Statistics of
China through CEIC (2004), Data from October – 2019 till March – 2020 from Statista (2020)

29
Below are the likely disruptions in Indian retail segment due to the drop of Sales and changing
consumer behaviour (Invest India, 2020);

1. Ballooning of Inventory: Unlike FMCG, where there was a trend of drying up of inventory of
essential goods, in non-essential goods retail segment, there is a likely ballooning of inventory in
stores and warehouses since summer inventory is still lying in the stores and next season
inventory(autumn or festive) are lying in the warehouse due to advanced orders (longer lead time for
orders).
2. Higher discounting to excess inventory: Retailers would be forced to run multiple discounting
schemes to attract conservative customers so that they can generate some liquidity and also liquidate
lying inventory. This would dilute the margins and would hit the profitability of the entire segment.
Inventory from the past season that might not move may have to be written off.
3. Cash crunch or liquidity issues: Ballooning of inventory would lead to a low liquidity and cash
crunch for almost all retailers. Also, smaller retailers without enough buffer might be forced to shut
down the business.
4. BOPIS (Buy Online and Pick up in the store) is being encouraged and is being practised by
many modern retailers due to delivery challenges
5. Multi-brand rtailers are becoming omni – channel – deliver by themselves, or collaborate with
other last mile partners. For example, Future Group, which serviced online orders for groceries only
from its Easy Day stores in Delhi NCR, has extended that capability to 250 of its Big Bazaar stores
across the country. Kolkatabased Spencer’s Retail has also partnered with internet firms like food
delivery platform Swiggy, cab-hailing app Uber and bike taxi start-up Rapido to deliver orders placed
by customers on its website

Retail sector consists of multiple segments under it like online retail, essential goods, automobile
retails, etc. With varied segments, the impact of COVID – 19 on all these have not been uniform and
has been at various levels. An examination of China’s total retail sales broken down by segments
during the period of lockdown – January and February, 2020 would give an understanding of the level
of impact on various segments under retail. Similar drop in sales and impact can be predicted for
segments under India retail as well during the period of the lockdown and subsequent quarter after it,
based on the recovery scenarios, which we will examine in the later part of this paper.

30
It can be observed from figure 7 below, that non-essential segment of retail is being hit the most
during the lockdown. The hypothesis of increase in sales of food grains due to panic buying and
increasing e–commerce penetration in retail (e – tail) can be confirmed from the below data points.
While all other retail segments have seen a negative growth rate, online retail sales of physical goods,
Grain and foodstuff, and beverages segment has seen a positive growth rate of 3%, 9.70% and 3.10%
respectively. The most impacted retail segments have been automobile, furniture, and Garments with
the steepest negative growth rate of -37%, 33.5%, and -30.90% respectively. Similar trends can be
predicted for Indian market as well, except for the beverages segment, which is expected to see a
negative growth due to the lockdown orders.

Total Retail Sales of Consumer Goods -20.50%

Online Retail Sales of Physical Goods 3.00%

Grain, Oil, Foodstuff

9.70%
Building and Decoration Materials -30.50%

Automobile
-37.00%
Petroleum and Related Products -26.20%

Communication Appliances -8.80%

Furniture -33.50%

Cultural and Office Appliances -8.90%

Household Appliances and AV Equipment -30.00%

Commodities -6.60%

Cosmetics -14.10%

Garments, Footwear, Hats, Knitwear -30.90%

Tobacco and Liquor -15.70%

Beverages 3.10%

-40.00% -30.00% -20.00% -10.00% 0.00% 10.00%

31
Figure 7. China: Total Retail Sales of Consumer Goods in January-February 2020. Data from National
Bureau of Statistics of China (2020)

According to a report by the retail intelligence platform Bizom, Indian retailers suffered a significant
71% drop in demand during the first week of lockdown (Abrar, 2020).
Confectionary is the worst hit category, after beverages. The report reveals that the sales in this
segment was down almost 25 – 30% after Holi and similar trend might continue till May end.

Recovery Scenarios – Markets of Tomorrow

COVID – 19 would impact commerce in three major streams – reduced labour supply, reduced
demand and supply in specific industries, and rising trade costs (Bekkers, 2020). In terms of recovery
scenarios, three scenarios were proposed by WTO. V – shaped scenario is assumed to be the
optimistic scenario, in which health related effects and the social distancing measures are expected to
go away quickly. In U – shaped scenario, which is considered as mildly pessimistic, the social
distancing measures are expected to stay for around 6 month. In L – shaped scenario which is a
pessimistic scenario, the social distancing measures are expected to stay for around a year. The
demand and supply recovery of different sectors in the commerce post – COVID are expected to differ
based on what recovery scenario, the respective economy and global economy goes through and the
impact is expected to vary between sectors within an economy as well. The below figure illustrates the
change in GDP growth rate of different countries in these scenarios of recovery.

32
Table 1

Percent Deviation of GDP from Baseline

Real GDP V - shaped U - Shaped L - Shaped
2020 2021 2020 2021 2020 2021
ASEAN -6.1 4.6 -12.2 9.7 -14.7 3.3
China -4 -3.5 -7.9 7.2 -9.9 2.5
European Union -5.2 4.1 -10.1 8.4 -12.1 2.9
India -5.4 4.6 -11.1 9.9 -13.4 3.2
United States -5 4.8 -8.8 8.6 -10.8 2.9
Japan -4.4 3.9 -8.1 7.4 -9.5 2.4
Other Asian Countries -5.8 5.1 -11.4 10.3 -13.4 3.2
Data from WTO (April, 2020)

With respect to Indian economy, the initial impact of COVID – 19 was the supply chain disruptions
due to the non-availability of raw materials from China. It was expected that the recovery would be V
– Shaped, given that COVID – 19 was limited to China. However, with COVID – 19 being declared as
a pandemic, the V – Shaped recovery is expected to be unlikely and a U – shaped recovery is
expected. But if the spread of COVID – 19 continues in the current rate and spreads in the community,
then the recovery might be a long path and India might see a L – shaped scenario with severe impact
on its economy. With L – shaped scenario, the economy is expected to be stuck in recession
throughout the year and the economy might take a long time to come back to normalcy (ASSOCHAM,
2020). In case of a U – shaped scenario, it is expected that the supply chain problem/sluggish global
demand would intensify and the Indian economy bounces back to normalcy in Q4 FY 2021. On other
hand, in case of a L – shaped scenario, the situation would ease in Q1 FY 2022 (Deloitte, 2020).

33
 Chapter 2
Research Methodology

A research process involves number of stages or steps that leads the project from its conception
to the final analysis, recommendations and actions. The research process is a systematic and

34
planned approach to any project which makes sure that all the aspects of the research remain
consistent with each other.

OBJECTIVE OF THE STUDY

In this paper an attempt is made to-

Study the impact of COVID on the Indian Retail Sector

Study the effect of the same on Indian Economy

There are two types of data:-

1. PrimaryData

Primary data is that data which is collected by a person or a researcher from first
hand sources, using methods like surveys, interviews, or experiments. It is collected
with the research mind, directly from primary sources.
2. SecondaryData

Secondary data is that data which is gathered by a person from studies, surveys,
or experiments that have been conducted by other person/s for the same or for
any other purpose. In this people collect information from second-hand sources
which is published or printed generally.
I generally took secondary data which was published and researched by researchers as I
had limited time. For theoretical knowledge I mostly used information from external
sources i.e., published and commercial. I generally used research papers and newspapers in
order to collect information to make my project.

Limitations of study:

Any research in any field topic gives some new results, discovering new areas etc.But there are
always some limitations thereof:

The data collected is totally dependent on respondent’s view, which could be basicnature.
35
Sometimes respondent do not give a response or give partial response. It is callednon
response error. The reason may be lack of knowledge or unwillingness toanswer.
The sample size is small and it may not actually represent the wholepopulation.

It’s very timeconsuming.

Lack of time- I had the limited time as an adversary, the research period was shortperiod
to carryout study with almostprecautions.
I heavily relied on external sources for the information i.e. published andcommercial.

Researchers ‘information which I gathered varied and some information was temperedby
many users who used the researchers ‘information so, I tried to eliminate the irrelevant
and wronginformation.

36
 Chapter 3
Initiative of Government for Retail Sector

Retailing in India is one of the pillars of its economy and accounts for 14 per cent to 15 per cent of its
gross domestic product (GDP). The Indian retail market is estimated to be US$ 450 billion and one of
the top five retail markets in the world by economic value. India is one of the fastest growing retail
markets in the world, with 1.2 billion people.

37
Indian retail industry, considered as a sunrise sector, offers huge growth potential. The sector is
expected to grow almost three times its current levels to US$ 660 billion by 2015, according to
Investment Commission of India.

The foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to June
2012 stood at US$ 42.70 million, according to the latest data released by Department of Industrial
Policy and Promotion (DIPP). Cash and carry represents an opportunity worth around Rs 8,250 billion
of the Rs 27,500 billion annual retail businesses in India.

Major Investment in Indian Retail Sector

Some of the major investments in Indian retail sector are as follows:

• Max Hypermarket India has partnered with French retail giant, Auchan Group to open
franchise hypermarket stores in India. The existing stores of Max Hypermarket will be
rebranded as 'Auchan' and shall operate under a franchise agreement. Max Hypermarkets and
Auchan plan to open 12-15 new stores in a year across various geographies in India
• Sahara India plans to enter the retail sector and will invest Rs 3,000 crore (US$ 542.50 million)
initially to set up the business. The company will start its retail business under the ‘Q’ brand
name and plans to expand its reach in nearly 1,000 cities and towns by 2013
• BhartiWalmart plans to invest Rs 104 crore (US$ 18.81 million) in expanding its outlets across
the country. In all, BhartiWalmart has about 17 stores in India

Government Initiatives

The Government of India is playing a vital role in making the Indian retail industry the most lucrative
for non-resident Indians (NRIs) and person of Indian origin (PIOs). Some of the major initiatives by
the Government are as follows:

• The Government of India has allowed 51 per cent foreign direct investment (FDI) in
multibrand retail and 100 per cent FDI in single-brand retail
• DIPP is likely to consider relaxing the sourcing norms for global retailers to establish shops in
India, as IKEA is asking for further relaxation of mandatory conditions

38
 • The Union Ministry of Finance has provided relief to the Rs 18,000 crore (US$ 3.25 billion)
software industry by replacing a multi-level structure of tax deducted at source (TDS) on
distributors with a single TDS. This would be deducted by the first distributor—one who
directly purchases packaged software from a developer

The federation has welcomed the new FDI in retail announced by the Government of India. The
Government has announced its decision to allow 51 per cent FDI in multi-brand retail and 100 per
cent FDI in single-brand retail. In addition, the Government has also opened up the aviation sector and
put up four PSUs for disinvestment.

39
 Chapter 4
Growth of Retail Sector

Indian retail industry is one of the fastest growing in the world. Retail industry is expected to reach
Rs.
76.87 lakh crore (US$ 1.1 trillion) by 2020. India ranked 63 in the World Bank’s Doing Business 2020
publication. India ranked 73 in the United Nations Conference on Trade and Development's Businessto-
Consumer (B2C) E-commerce Index 2019. India’s direct selling industry recorded sales of US$ 2.47

40
billion in 2019, improving its rank to 15 from 19 a year before. Consumer spending in India increased
to US$ 245.16 billion in the third quarter of 2020 from US$ 192.94 billion in the second quarter of 2020
India is the fifth largest and preferred retail destination globally. The country is among the highest in
the world in terms of per capita retail store availability. India’s retail sector is experiencing exponential
growth with retail development taking place not just in major cities and metros, but also in tier II and
III cities. Healthy economic growth, changing demographic profile, increasing disposable income,
urbanisation, changing consumer tastes and preferences are some of the factors driving growth in the
organised retail market in India.
Indian online grocery market is estimated to exceed sales of about Rs. 22,500 crore (US$ 3.19 billion)
in 2020, witnessing a significant jump of 76% over the previous year.
India’s population is taking to online retail big way. India’s E-commerce business will reach US$ 99
billion by 2024, growing at a CAGR of 27% over 2019. Online penetration of retail is expected to reach
10.7% by 2024 versus 4.7% in 2019.
After an unprecedented decline of 19% in the January-March 2020 quarter, the FMCG industry
displayed signs of recovery in the July-September 2020 quarter with a y-o-y growth of 1.6%. The growth
witnessed in the fast-moving consumer goods (FMCG) sector was also a reflection of positivity recorded
in the overall macroeconomic scenario amid opening of the economy and easing of lockdown
restrictions.
India is expected to become the world's third-largest consumer economy, reaching Rs. 27.95 lakh crore
(US$ 400 billion) in consumption by 2025. ^Increasing participation from foreign and private players
has given a boost to Indian retail industry. India’s price competitiveness attracts large retail players to
use it as a sourcing base. Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing
their sourcing from India and are moving from third-party buying offices to establishing their own
wholly owned/wholly managed sourcing and buying offices in India.
The Government of India has introduced reforms to attract Foreign Direct Investment (FDI) in retail
industry. The Government has approved 51% FDI in multi-brand retail and 100% FDI in single-brand
retail under the automatic route, which is expected to give a boost to Ease of Doing Business and Make
in India schemes, with plans to allow 100% FDI in E-commerce. Cumulative FDI inflow in retail stood
at US$ 2.17 billion between April 2000 to June 2020. India’s retail sector attracted US$ 970 million
from various private equity (PE) funds in 2019.
According to the Ground Zero Series findings of the consulting firm RedSeer, the retail sector is
expected to recover ~80% of pre-Covid revenue (amounting to US$ 780 billion) by end-2020. India will

41
become a favourable market for fashion retailers on the back of a large young adult consumer base,
increasing disposable income and relaxed FDI norms.
During the online festive sale in October 2020, the Indian e-commerce firms—Flipkart, Amazon,
Myntra and Snapdeal—together sold goods worth US$ 3.1 billion.

Growth:

Due to the large scope of business and high growth potential, India is attracting investors across the
globe. In FDI Confidence Index, India ranks 8th (after U.S., Germany, China, UK, Canada, Japan, and
France).

India is all set to gain from the latest FDI policy in retail.

There has been an increase in purchasing power of the consumer due to easy availability of credit which
has given a push to higher value items and encouraged repeated purchases. There has been a clear shift
in consumer mindset in buying. They are more educated and well informed. They have become more
experimenting and are willing to try and buy products which they haven’t been used as yet. The
expansion of middle class has led to higher purchases of luxury products and brand consciousness.
Significant growth in discretionary income and changing lifestyles are among the major growth drivers
of Indian retail industry.

With GST taking its shape, it has helped the retailers simplify its tax structure. This will lead to better
supply chain structure, better cash flows, pricing, and profitability.

Opportunities:

Rural markets show high growth potential if tapped with the right set of products and pricing. With
increasing investments in infrastructure, connectivity to such towns is now becoming easier. This helps
the retailer to increase reach in such high potential markets.

42
The private label space in the organized Indian retail industry has begun experiencing an increased level
of activity. The share of private label strategy in the US and the UK markets is 19 per cent and 39 per
cent, respectively, while its share in India is just 6 percent. Thus this gives a tremendous opportunity for
the homegrown label to expand its base.

India‘s price competitiveness attracts large retail players to use it as a sourcing base.

Many international retailers are increasing their sourcing from India and are moving from third-party
buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying offices

Challenges:

Although retail industry in India is on a growing track not everyone has tasted success. Due to various
diversities in the state policies and local influences, it becomes a larger hindrance for the retail to expand
rapidly.

The high cost of real estate, deep discounting from e-tailers, non-availability of skilled labor in rural
market are a few challenges that may hinder the growth of retail industry. Innovative concepts and model
shall survive the test of time and investment.

Hence, Indian retail industry is no doubt one of the largest and fastest growing industries. Like most
developed countries, India’s growth also relies on growth of its retail industry. India is becoming a
dynamic market with many international brands entering India to capitalize on the growing consumption
pattern shown by the country. With right reforms and government initiatives, India retail industry is
surely inching its way towards becoming the next boom industry. The future of the retail industry looks
promising, as more and more Government policies have come into play, making it favourable to do
business.

43
44
 Chapter 5
Impact of COVID-19 on the Retail Sector

RETAILING IN INDIA-A PANDEMIC SCENARIO

The novel covid-19 pandemic has tilted the entire globe and the life of human beings. This pandemic
has greater effect on individuals and also the business community. The global business scenario has
slowed down and it doesn't fail to leave a mark on the retail sector too. This pandemic disease has
created a large impact on the retail sector and made it to a standstill position, especially the high end
45
and luxury retailers. This effect on necessary items retailers is also notworthy but not to the far extent.
In India, this pandemic has started affecting retailers from the last week of march 2020 to till date. The
lockdown announced by the government has made all the retailers to face a degrowth in their
business. The traditional retailing pattern has supported the consumers a lot in this pandemic situation
to get the necessity items. Most of the traditional retailers deal with the necessity items such as food
and grocery which helped a consumer to a greater extent. The modern luxury retailers such as
electronics stores, jewellery stores, fashion and apparel stores are the real sufferers of this season. As
the malls remain closed due to lockdown, they want to move out of these large buildings to fetch
customers of their own. Apart from this the confidence of spending among the people has reduced to a
large extent due to uncertain economic conditions prevailing in the society. Most of the disposable
income has been spent on food, grocery and medication, the thought of spending for lucrative items
has been postponed which affected the organized retail sector in high proportion. The organized
retailers are in a position to face the financial crisis of their business and also to long for the dawn of a
booming economy. Though the traditional retailers are less affected in their business, they too face
problems related to the supply chain, stockpiling, hygiene maintenance, government rules and
regulations, etc., During this period the consumers are also facing the threat of losing jobs, reduction
in financial benefits, health care difficulties and other lifestyle disruptions which all have a direct
effect on the retailers.

CHALLENGES FACED BY RETAILERS DURING PANDEMIC :

The novel pandemic has changed the business practices of retailers and made them face many
confrontations in doing business. Some of the challenges faced by retailers are as follows:

➢ Shrinkage of business: Due to the lockdown, the entire economy has faced a slow pace and all
the retailers faced the shrinkage in their business volumes. In India, most of the apparel,
footwear and fashion retail shops has the habit of doing march year end sale/ march clearing
sale in the last week of every March. This financial year end sales have got affected by this
lockdown.
➢ Fall in consumption: The consumption pattern of the consumers has also decreased which
tends to fall by 25 to 30 % for the next six to nine months. This lockdown has reduced the

46
 confidence of consumption among the consumers, and the decrease in consumption pattern is
due to the fear of disease, loss in income and also fear in job security.
➢ Diminishing brand loyalty: The recent change in shopping habits of the consumers made them
to stick on to one retail store even for buying necessity items. But, the restrictions laid in
commutation during lockdown make people buy the essential items from the nearby retailers
itself and avoid them going to their usual shopping areas. This has paved the way to the
consumers to use / switch over from nationalized brands to private brands, as small retailers
are selling more amount of private label items.
➢ Subsidised hedonic needs: The growing young population of this country has given importance
to hedonic needs when compared to the utilitarian needs. But in this pandemic situation, the
young generation also changed their need pattern due to life fear. This fear and the restrictions
made by the government also made the youngsters to turn towards the online retailers instead
of brick and mortar retail stores.
➢ Reduction in money flow: This novel pandemic disease has created a large amount of fear
among the earning families due to salary cut, low business volume, fear of losing job, etc., This
decrease in the money flow among the low income group people who purchases the necessary
grocery items only and avoids unnecessary items. This fearful situation has created a setback to
the luxury item retailers and also switching off to local brands.
➢ Managing the fixed cost: In retail business, the proportion of fixed cost is high when compared
to the variable cost. The fixed cost includes rent, employees salary, power cost, etc., which
utilizes the 60% of their revenue. During this lockdown, this fixed cost has to be managed with
the poor revenue earned by the retailers and this may lead to shutdown of business also.
➢ Operational difficulties: Apart from the business fall, the retailers have to change themselves in
the way of doing their business. Organised retailers have to manage the supply chain
disruptions, restriction in the footfall of the stores due to the social distancing, hygiene
improvements as per the local governance, reduction in promotional campaigns so as to avoid
over crowd. Even unorganised retailers are in a position to face these kind of operational
changes such as home delivery, epayments, hygiene practices laid by local authorities, etc.,
➢ Other threats: Recently developed formats like Malls, Hypermarkets, Supermarkets are facing
the threat of shopkeepers moving out of these large buildings due to rent problems, restriction
in consumer traffic, etc., The retailers association is having a negotiation with mall owners in
order to have a revenue sharing rental method but which was not been accepted by the mall
owners. Forum mall in Bengaluru has accepted for some kind of rental relief for its retailers.
47
 The branded necessity stores are facing a major downfall due to this lockdown by losing their
business to local Kiranas, mom and pop stores, etc.,

OPPORTUNITIES FOR RETAILING DURING PANDEMIC:

In Spite of having more confrontations and threats by this COVID 19 to retail sector, it has offered a
chance to retailers to identify the new way of doing business. Some of the opportunities created by
covid-19 for retail sector are as follows:

➢ Modification of operations: This Pandemic situation made customers to move highly towards
the online retail activities when compared to brick and mortar system. So, organised and
traditional retailers has to find out a online platform to sell their products, without pulling the
customers towards the physical stores. Many retailers in tier 1 and tier 2 cities has started to do
business and services using smart phones through Whatsapp, Messenger etc., and receive
payments using online platforms such as Gpay, Pay tm, Pay U, etc.,
➢ Market penetration: Middle class family of India has got economically affected due to this
lockdown and they form a large proportion of business for the organised retailers. To ensure
their continuation in the business, retailers can go for reduction in price and also value and
range. The retailers have to concentrate on low premium products when compared to the high
end products.
➢ Diversifying the products: The retailers can concentrate on the products which are necessary in
this pandemic situation. For example, Bata showrooms are now concentrating on home chapels
when compared to the fashion footwear, as people are remaining at home and most
professional has shifted to work from home mode. Even more number of drug manufacturers
has started to produce hand sanitizers and garment manufacturers moved to produce masks and
gloves.
➢ Looking beyond the Market: Organised retailers have to move to new market or to rural market
which can balance the business loss in tier1 & 2 cities. For example, Maruti Suzuki has
planned to open new dealer showrooms apart from tier one or two cities so as to reap the
benefit of economic stimulus package announced by central government for rural people. The
giant retailers can start to concentrate on tier two and tier three cities to multiple their business
volume. Many small retailers in tier 3cities are facing financial crisis due to this lockdown and

48
 may be running out of business. This situation can be easily utilized by the organized branded
retailers to open their outlets.
➢ Move out of large buildings: Due to business crisis, the organised retailers are ready to move
out of the malls, hyper and supermarkets towards the high end streets. Doing their business as
standalone in the retail hub areas will get their own customer traffic and dependency is not
required. This situation is quite obvious as malls and Hypermarkets are at the end of the list for
relaxation of lockdown.
➢ Benefit for unorganised retailing: The least affected group of retailers is unorganised sector.
This sector has supported a lot to the consumers in providing the necessary items during
lockdown. Thanks to this sector for their incredible service in this situation. Unorganised
retailers who constitute 92% of retail business in India has the timely option of changing
themselves by introducing new services to the customer for the same value.

49
 Chapter 6
Conclusion

CONCLUSION
Indian retailing is dynamic in nature and it has to face the changes imposed by the environment. Both
the organised and unorganised retailer has got affected by the novel corona virus and it is the time for
them to rethink about their business. Instead of categorising them as organised and unorganised
50
retailers they can be divided as essential item retailers and nonessential item retailers. This covid-19
had a great impact of non-essential items retail business and whereas it has shown ways to essential
item retailers to form a new strategy, adoption of technology, operational changes, etc, to stay in the
business forever. Either the effect is positive or negative this COVID-19 has been an important factor
for the retail business to have new facets.

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 Chapter 7
Bibliography

Bibliography
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descriptive study of Delhi / NCR”; International Journal of Management and Applied Science
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52
➢ Meena Rajesh, “Challenges and Opportunities faced by Organised retail players In Nagpur
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➢ Roggeveen, Anne L and Sethuraman. Raj, “How the COVID-19 Pandemic May Change
theWorldofRetailing”;JournalofRetailing;(2020)https://doi.org/10.1016/j.jretai.2020.04.0 02

➢ Menaga Gandhi. B and Chinnadorai. K.M, “Retail in India”; International Journal of

Engineering Development and Research; ISSN: 2321-9939; Volume 5, Issue 1 2017.

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https://m.economictimes.com/industry/services/retail/covid-impact-retailers-threaten-to-
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Annexure

Questionnaire
1. Demographics :-
54
 A) Name:-
B) Age:- C) Gender:-

D) Contact No :-
E) E-Mail Id:-
F) Designation :-

Survey Questionnaire

1. My business has been suffering loss for past:

a. 1 year
b. 6 months
c. Less than 6 months
d. NA

2. My business is running on no-profit and no-loss for the past:

a. 1 year
b. 6 months
c. Less than 6 months
d. NA

3. My Business is experiencing growth in terms of profit for the past:

a. 1 year
b. 6 months
c. Less than 6 months
d. NA

4. Government has taken many initiatives to boost the growth of retail sector. I am:
a. Happy with the same
b. Neutral to the same
c. Dissatisfied with the same
d. Satisfied with the same

5. What has COVID-19 done to your business:

a. Hampered it
55
 b. Boosted it
c. Remained Neutral
d. No-profit and No-Loss situation.

6. What do you have to say to the government in order to suggest some initiatives or
reforms for retail sector?

56