
With the retail industry slowly re-opening for business, many new challenges emerge that have compelled the leadership teams to reassess how they have been working and what are the critical changes and additions to stay afloat. The total shutdown in both the offline and online retail operations has put added pressure on retailers and brands, as customer preferences and shopping habits have significantly shifted over the last 3 months. On an average, for retailers that have opened doors for business, the current sales are 25-30 per cent of pre-COVID-19 levels.
To survive and re-accelerate, the retailers have adopted new strategies, most of which they never planned for, and are also looking at emerging gaps and opportunities for new growth directions. First and foremost, quick recovery is a priority and depends on how best resources are managed in the shortest possible time with minimum impact on business.
Apt management of human resources
One of the major assets that any company has to support the recovery is the human resources, which has also been severely impacted during this phase. Retailers are looking at ways to reduce the level of impact on the people to the minimum through effective communication and transparency, continuously upgrading the team as to what is happening and what measures are being taken to safeguard jobs and get the retail back on its feet, so as to build trust with employees. “We knew that there will be an impact on the people, so our initial focus was on how to take care of their issues, so that they feel confident and engaged in the company’s challenges,” said Himanshu Chakrawarti, CEO, Unlimited (Arvind Lifestyles Ltd.).
Once the stores were re-opened, the unpredictable future and the shifts in consumer demand has forced the retailers to adopt a flexible and fluid decision-making process in order to respond quickly to the market. This means greater power to its teams, which has gone down well with the people giving them a greater sense of responsibility and accountability.

At Big Bazaar, the decision-making was decentralised to store level. Also, putting safeguards in place became critical. “Before even going back to the customer, our people should feel confident and safe to start operations, so building their trust on their safety to open stores with new norms was critical, so the same confidence can rub off on the customers walking in,” avers Sadashiv Nayak, CEO, Big Bazaar.
Uncovering solutions to inventory pile-up
Another important area that required immediate attention for recovery was to minimise the impact of inventory on the business. The sudden lockdown of the country halted the operations of the retailers and had put a pause on the sales. Therefore, the retailers ended up in having huge amount of inventory which was just received in the warehouse or was with the suppliers. This really put the retailers on the back foot. What worked in Arvind’s favour was that even before the crisis, they had already moved their ordering cycle time to 8 weeks which helped them to maintain their inventory and minimise the impact due to it.
Fashion brands like Tommy Hilfiger, Calvin Klein, Ritu Kumar, Arrow and Jack and Jones are pushing their Spring/Summer 2020 collection till October or pre-Diwali to clear up inventory. Retailers are trying to cope with the jolt by shifting whatever possible to online platforms which will help in better revenue generation and also selling the piled-up inventory. Few retail brands are also taking the unusual step to ‘pack and hold’ part of the inventory to next season, similar to what Gap Inc. has done.
It is unanimously agreed that retailers need to relook at their business model and act according to the situation that emerges, as the demand can no more be forecasted and therefore planned. “Today I think that planning ahead of even 3 months is also a challenge,” commented Vineet Gautam, CEO, Bestseller, India. In general, industry watchers expect the demand to recover over the next 3 months, as green-shoots are visible but recovery is still slow, further 80 per cent of pre-pandemic level sales is the ‘new normal’ to be achieved.
Depending on old customers
While following the path to recovery, a 10X challenge for the retailers could be making new customers, as the customer buying pattern has shifted and they are now more conscious and prefer to shop with trusted and tried brands/retailers. Retail leaders advise the community to pay more focus on how to retain the existing customers of the brand, as most of the revenue will be from them.

Even for old customers, winning back their trust will hinge around retail shopping experience, which now includes ensuring physical distancing in stores. In the meanwhile, the maximum number of new customers will be through the digital platform that might need new and different marketing strategies in order to attract these new customers.
The change in trend for recoveries
Globally, different countries have shown different recovery rates which are because of various reasons from time of reopening to government support and customer confidence. Europe has surprisingly shown the fastest recovery, in just 6-8 weeks, while China took almost 14-16 weeks to reach 80 per cent of the sales. The reason for Europe’s quick recovery can be attributed to the fact that they shut down very early and opened when the cases were going down, so the customer confidence was much higher. Also, the government’s financial support to the economy has played a major role, as it resulted in less job losses, and thus, customer spending power was retained.
In India, fashion return percentages are between 25 and 28 per cent, much slower than Europe at 60 per cent, primarily because customer expenditure has been affected as the country opened at the peak of the pandemic. The mortality rate and the increasing number of cases are the biggest concerns for retailers. Moreover, unlike other countries, the offices haven’t completely opened and also there is no socialising happening, a lot of people are still working from home, hence, there’s no upfront demand for fashion. All of these reasons are contributing to the slower recovery of the country’s fashion sector and creating new challenges for the retailers, which they have to deal with on a day-to-day basis.
What products are working
“Today casual clothes are the ones moving and that is basically because sales are very proportional to what kind of lifestyle a customer is living. I am hopeful that the demand might come back in the next 3 months, reason being that we will learn to live with the virus and learn to take precautions while regaining our lives beyond the home,” opines Vineet. Himanshu adds that smaller towns and cities are bouncing back faster, while in metros, recovery varies by micro-catchments. Significantly, the top 10 metros account for 60 per cent of the fashion business, so efforts are on engaging customers in the metros. It is worthwhile to note that neighborhood stores in metros are performing well, as they are close to the customers and are not much crowded. While the high street stores are slowly picking up, destination malls are the ones in most trouble as customers are avoiding crowded places.

Kidswear segment performed the best since the lockdown was lifted, followed by womenswear, and the category which was subdued was menswear. But as the weeks progressed, menswear has started picking up and womenswear has gone down, while kidswear still tops the list. The second trend which is quite obvious is that customers are down-trading and opting for more basic clothing, hence the average selling prices have gone down.
Managing the cash flow through savings for survival
With opportunity to reboot and realign the business model from scratch, there is a need to respect cash flow, since cash saving has become one of the vital steps for survival. Existing unit economics were built for a different era; the need now is to adapt them in line with shorter planning cycles. Cutting down on extra cost, like playing royalty music in the store, can be temporarily taken down, thus saving the expenditure. This might seem like a very small cost, but with the network of stores that the retailers would have, the saving can sum up to a sizeable amount. Experts advise to keep all internal feedback channels open, as best cash conserving ideas can come from the sales and marketing teams.
One of the examples on how Arvind is doing the cost cutting is that before the outbreak of the pandemic, the stores used to take almost an hour for settling down before the stores opened and after the stores shut down for the customers. This now has been reduced to about 15 to 20 minutes, therefore saving the extra amount of money that is otherwise spent on electricity, security, etc.
Looking at how Bestseller has tried to manage the cash flow also sets a good example for the retailers. The brand focused on the inventory, though it is considered to be an asset for the retailers, but it is also one of the biggest costs. The retailer has clubbed the entire seasons of spring and autumn into one, looking on the market scenario. This has helped the company in saving huge amount of cash which is otherwise spent in collection launches and other activities. The company has also undertaken a “deep-cleaning” of inventory and rationalised store network. “One has to be dispassionate when rationalising store network. It is important to base decision on today’s costs and not on future store potential. We have closed down even high performing stores of the post-COVID-19 era because the landlords are not ready to negotiate on rent,” shared Vineet.
Some ways to save cost suggested by retail giants include unlocking value hidden in time and movement which could mean more use local vendors rather than a large distant vendor; move to variable cost structure and reduce fixed expenses. Sadashiv Nayak also suggested that all non-essential projects should be stopped.
Collaborative supply chain a must now
Retailers are also revisiting relations with the vendors, as long-term relationship is what has been proven to be a saviour for many retailers. “In terms of vendors, we have not been very transactional and have worked with them for years and that has really helped us. I think this has been one of the strengths, as together as a value chain we have come back stronger,” commented Vineet. He advises the suppliers to invest more in technology, as retailers have already started the process of digitization, and to stay relevant, it was important that vendors too followed suit.
Digital commerce is the need of the hour
Another thing that everyone should relook at is the channels of businesses they are operating, since the e-commerce platform has plenty of new opportunities available. One of the big opportunities for the retailers is Hyperlocal. In India, a very few retailers have looked at the concept and have invested in it, yet it holds great potential for them. The other thing is social commerce which is gaining momentum. The retailers should now have a strong presence not just through a brand website and mobile application, but should also have online presence through different models including e-commerce, click and collect, etc.
Capitalising on ‘stay-home’ mindset; heightened expectation from e-commerce
The above is very critical for survival, as the customers prefer to stay at home and get the products delivered at their doorsteps, therefore the retailers need to not just focus on the e-commerce, but also on the digital commerce, which is having an online presence on social media, mobile app, click and collect, omnichannel and not just on the shopping website and marketplace. “E-commerce has always been a part of our strategy from day one, but it took a little bit of time to understand. Till last year, it was 15 per cent of my business, but today it’s almost 60 per cent of my business. I think that by the end of the pandemic and a year ahead, it will be 25 to 30 percent of my business and it will come from the entire digital commerce” commented Himanshu.
“I know that it is not the correct time to put in the money in new ventures, but it’s better to shut down 5-6 stores where landlords are not corporative and rather invest that money in e-commerce today,” reasons Himanshu.
Arvind today is working on the Phygital model in which the customers can shop for the product online and it is then delivered by the nearest store staff at their home. The stores also provide any kind of alteration service to the customers, if required, so as to provide them similar experience of an offline shopping. For adopting the digital commerce, it is very important to have a centralised view of the inventory from the warehouse and the retail store in order to streamline the operation. This would allow the order fulfillment to the customers at the earliest possible time. Therefore, for establishing digital e-commerce and phygital projects, the retailers should get the inventory centralised.
Moreover, since the digital will now be the major source for gaining new customers, the retailers should focus on delivering different kind of first experience for them. Also, expanding to different channels and marketplaces is the new need for tapping the maximum number of customers. Through the shift to the online channel from the offline stores in India is temporary, as a huge number of consumers still like to touch and feel the garment and are not very confident, it cannot be ignored that e-commerce is the fastest growing channel for fashion retailers, expected to contribute 25-30 per cent of overall sales by the end of the current fiscal.