Views from Mr. Govind Shrikhande, Ex- Shoppers Stop MD / Mentor and Industry Expert / Consultant
Covid has effectively converted the whole world into a Global Village. All Disruptions till Covid came along have been centred around a particular Country Or a Continent.
For the first time – the whole world has been affected by Covid – converting it into a Global Village- affecting both Lives & Livelihood of the whole world.
The most surprising issue about this Virus is- Why the whole World ignored what was happening in China for a very long time ??
Neither did Scientists Nor Economists fathom the extent of Impact & the Multiplier effect of the disease and its Trillion Dollar Impact on the Global Economy .
As the whole world gets into Quarantine & Lockdown – the count of People getting affected is Multiplying at a fast pace & the no of Deaths are also rising at a fast pace.
The Lockdowns have effectively bought almost everything to a standstill affecting the Livelihood of millions & GDP losses in Billions.
And all governments are staring at the obvious question of Lives Or Livelihood ?
The most obvious answer is Both need to be protected.
But when you execute Lockdowns and Quarantine across the World for a long period – the Economy has a Collateral Damage . The actions by various Countries over the next few months will decide whether the Covid impact on the Global economy will last for 12 months or 24 months.
What will be the Key Changes in Customer /Company Behaviour post Covid ?
Work From Home will be a permanent feature Flexi working will be adopted by all organisations Digitalisation will see a big boost Online shopping will spread faster than ever Lean Offices , Lean Manufacturing & Flexible Supply Chains will be the trend of the future 3 D Printing will become mainstream Distance Learning, Telemedicine will rise exponentially.
Collaboration between multiple Companies and sectors
Airlines, Travel & Hotel , Restaurants & eating out, Shopping in Malls, watching Movies in multiples will see a big drop at least in the next 12 months.
So what will be the Impact On the Global Economy and specifically the Indian Economy & Retail ?
From all Indications – except China – the Global economy is most likely to go into a recession.
There are various models of recovery of the economy that are being discussed – V shaped , U shaped & L shaped. The reality will emerge – only after the Peaks have been conquered and The Lockdowns have been lifted . This is likely to be a stage by stage and a long drawn process.
Almost all sectors are going to get impacted by the Virus except – Telecom, Digital , Health & Hygiene, FMCG and Food , Distance /Virtual Learning etc.
It will also require huge intervention by the Government’s in injecting the economy with Incentives including lower Interest rates, Moratorium on loans, Salary Subsidies, Direct Benefit Transfer (DBT) in terms of cheques/cash . Any Intervention upto 5 % of GDP is most welcome Indian Retail -other than Food sector has already been under stress for the last two years with Rising costs, lower sales growth, Continuous Discounting and loss of share to On line retail – which is simply burning cash.
The Brick and mortar model now faces its toughest test as Stores (especially Fashion & Accessories ) are Completely shut – with no income and all Expenses running at full speed. They are trying to work with malls to find a workable solution on rentals for the closed period and the rest of the year.
The 900 billion dollar plus industry employs more than 50 million people thro more than 15 million retailers. With a likely scenario of more than 25 % fall in sales for the year – losses are imminent. But if rent support and cost controls don’t happen-
Job losses and salary cuts are clearly the way ahead. There is big possibility of many small brands and retailers closing shop- leading to further economic impact .
On the other hand – Online Retail which is currently around 32 billion USD – is likely to see a multiplier effect. There will be a big move towards Consolidation with bigger players becoming more bigger. The sad part in this development is the fact that , India’s Digital ecosystem is completely foreign owned between US & Chinese companies. Whether its is Mobile Phones Or Operating Software Or Social Media Or Online Retailers – all of these are completely dominated by US & Chines Companies.
What actions should individual companies take up
This is a unprecedented challenge that comes in a life time . It is important to face the challenge with complete clarity of thought and precise execution.
I see a “3 R” action plan for Covid
Lets understand the actions under each R
React : as the challenge unfolded without any warning the only option to all companies was to React Fast. This phase consisted of Securing the safety of Customers , Employees and all assets .
Communicating Transperently with all stakeholders and ecosystem on a continuous basis to keep them informed and motivated. Understand the Cash Flow position and secure the same for at least a 4 month period. Overcommunicating & Overreacting is the best way to tackle the situation.
Reset : create the Various Business scenarios, reset the various metrics within the company , Debt, Costs, People productivity, Capex cycle, ROCE , Expansion plans, Rentals , Cash Flows etc
Reimagine :the Business Model, Strategy , Focus on Digitisation by refocusing on the company Vision, Values, Culture and Customers. Focus on Learning Capability, Agility, Collaborating with the entire ecosystem of Suppliers, Investors, Bankers, Partners within the ecosystem would be the right step for reimagining the biz.
Brick & Mortar will have to rethink their Physical expansion strategy , Focus on Brand & Clear Positioning, Omni Partnership & Collaboration with the entire Eco system
Countries and Companies that will focus on both Lives and Livelihood will come out of the Crisis Faster & Stronger. And Protect the 86 Trillion Dollar Global Economy.