Weekend lockdown crippling MSME-dominated retail; recovery continues to be in red from last year

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Updated: Aug 25, 2020 5:36 PM

Ease of Doing Business for MSMEs: In addition to low margins, weekend lockdown has caused limited flexibility for retailers leading to layoffs and downscaling or even shutting down operations.

UP, Tamil Nadu, Punjab, Nagaland, MP, Jharkhand, J&K, Haryana, Chandigarh, Assam, Andaman & Nicobar have imposed weekend lockdown.

Ease of Doing Business for MSMEs: Weekend lockdown or partial lockdown imposed in 15 states and union territories continue to hurt Indian retailers, around 95 per cent of which are MSMEs, a top representative of the retail sector told Financial Express Online. Under unlock 3.0, Uttar Pradesh, Tamil Nadu, Punjab, Nagaland, Madhya Pradesh, Thiruvananthapuram in Kerala, Jharkhand, Jammu and Kashmir, Haryana, Chandigarh, Assam, Andaman & Nicobar have imposed weekend lockdown while Uttarakhand and West Bengal are partially locked down and Maharashtra’s Thane district has shut malls. “Almost 95 per cent retail is MSMEs and they are struggling. All kinds of retailers see around 45 per cent of their business on the weekend. Demand per se is inelastic. Despite safety norms, customers are not willing to come to the store,” Kumar Rajagopalan, CEO, Retailers Association of India (RAI) told Financial Express Online.

According to the association’s Retail Business Survey in July, there has been only marginal recovery last month to minus 63 per cent year-on-year vis-à-vis minus 67 year-on-year in June 2020 after seeing over 80 per cent losses in April 2020 y-o-y. Apparel & Clothing stood at -69 per cent, sports goods at -69 per cent, and beauty & wellness at -65 per cent at a y-o-y basis also haven’t recovered yet.

Also read: RBI to MSMEs: No need to re-register under Udyog Aadhaar for reclassification as per new definition

“Beauty has not gone anywhere, jewelry is kind of okay while textiles, restaurant, footwear etc are in big trouble,” said Rajagopalan. According to RAI, weekend and partial lockdowns continue despite the importance of keeping the stores open on all days and for extended hours to help retailers recover from the financial distress. Rajagopalan argued nearly 60-70 per cent of costs are fixed costs including rents and salaries to employees. In addition to low margins, this has caused limited flexibility for retailers leading to layoffs and downscaling or even shutting down operations. The association, however, said that it has submitted representations to state and local authorities for restrictions around timing and days.

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