As malls and brand owners anxiously await the coronavirus lockdown to be lifted, they all know that it will not be business as usual. While their high street stores have always generated higher sales conversions (70:30 conversion in favour of high-street stores), consumers walked into malls to experience their brands. A large number of mall-goers are window shoppers. With social distancing becoming the new norm, one is going to see a lesser number of window shoppers. So, will shopping-by-appointment become the new norm? Will brands be able to justify adequate sales conversions to justify their presence in the malls? Retail brand owners in a webinar organised by the Retailers Association Of India, discussed revival strategies post the COVID-19 lockdown.
From smart inventory management to cash reserves to aspects such as shareholder outlook and the importance of building seamless online-offline business models, retail brand owners said that post lockdown the retail world won't be like the way it earlier was. "We have to unlearn what we had learnt earlier and adhere to the new norms," said Ajay Kapoor, President (Retail), Fabindia.
Amit Kumar Sirrohi, Head, Retail Business, Raymond, said business will be a fraction of what it was earlier. "Not only the way business is done will get altered, even the inner motivation of consumers to come out of their homes to shop would be altered."
Retail businesses would have to account for a host of variables. "There is a variable of when the economy will open up, also whether the green zones will be open for business post lockdown. The other variable is how will demand bounce back, as there are talks about not just a 'V' or 'U' curve of recovery but also a 'W' curve (which suggests that post the flattening of the pandemic there will be a relapse which will lead to a second round of recession). Organisations should model their business for various scenarios," explained Sumit Dhingra, MD (India, Sri Lanka and Nepal), Crocs. He said that businesses need to have a hard look at their cash and inventory situations and plan accordingly.
Businesses would also need to reimagine and reinvent. While the salon industry is expected to be among the first to bounce back post the lockdown, one wonders whether customers would dare to go to a salon, or salon services at home would become the trend? Bhupesh Dinger, Director, Enrich Salons, said that his company had surveyed its loyal customers who had indicated that they would be back within a week or two to avail of essential services such as haircuts but were sceptical about indulgence services such as hair treatment or a facial. While home services are likely to surge, Dinger said there would be limitations there. "The services that require the use of equipment can't be offered at home. But new business models will surely evolve. We could probably look at sending product kits to consumer's home and we could guide the consumer through a video call."
The retail brand owners also agreed that online could no longer be an after-thought. This will now become an integral part of their business model, as consumers post COVID-19 would not just buy essentials online, they would also do quite a bit of indulgence shopping. "We have to start looking at online as a way of selling and not as a different channel. Brands need to get themselves listed on platforms such as Myntra or Amazon and also get their omni-channel platforms active," said Sumit Ghosh, Director, Fossils India.
Kapoor of Fabindia agreed that the time had come to marry online and offline so that costs can be reduced to the bare minimum. He said that his organisation is working on inventory optimisation so that 80 per cent of the online orders are served from the local stores. "One has to learn to get the maximum benefit from minimum inventory."
Will there be extended periods of the end of season sales in the new normal? While huge piled up inventory will surely lead to extended periods of discounting and sales, Dhingra of Crocs said that the amount of discounting and sales would differ from brand to brand. "End of season sale is a function of how much inventory you are carrying and what is the urgency of converting that inventory into cash. Retailers who can control their incoming inventory in the next 6-7 months would not go for extended periods of sale. Those who wouldn't be able to cancel will have to liquidate at whatever price. I expect margins to get diluted because of high discounts," Dhingra further explained.
Sirrohi of Raymond does expect extended periods of sales post COVID-19, but he sees the industry moving to a more demand-led model. He said that instead of having spring-summer or autumn-winter collection, fashion retailers would move to a demand-led model, where they will start making closer to the season and also make collections for different pockets of the country as opposed to one collection for the entire country. "The season concept is something which we have adopted from the West and it doesn't fit into India which has varied climates. Corona will force retailers to look at demand-led models, and once that happens end of season sales will be about liquidating excess inventory and not pursuing sale."
There has been news of mall owners and tenants being at loggerheads, as the former have billed the latter during the period of lockdown when their revenue has been zero. While both the parties are negotiating hard, Kapoor of Fabindia said that they need to understand and appreciate each other's concerns. "Mall owners will have to work out with brands to increase footfalls. It is not going to my way or highway, because if the tenants vacate, there will be no one in the waiting list."
"Brands will take tough calls and close down its non-performing stores. On one hand, there will be supply that will come up and on the other hand, new malls will also not come up," added Sirrohi of Raymond.
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