Job cuts on anvil: Small, medium retailers may layoff this many employees as Covid-19 kills liquidity

Skilling, Labour, Talent for MSMEs: Small and medium retailers in the country are heading towards manpower rationalisation amid financial pressure and liquidity crisis due to Coronavirus outbreak that has crumbled their operations. While small retailers are likely to lay off 30 per cent of their employee strength ahead, medium retailers are expected to cut 12 per cent of their manpower, according to 768 retailers (including 682 small and medium retailers) responding in a survey by the retail trade body Retailers Association of India. Large retailers are also expecting a 5 per cent workforce reduction while there could be overall around 20 per cent workforce cut among the retailers responding in the survey.

“If the government doesn’t help it will become very serious because retailers want their employees to be with them but they cannot afford them currently. A big chunk of retailers’ expenditure is manpower costs but SMEs themselves are not able to function. They don’t have money to pay even salaries,” Kumar Rajagopalan, CEO, Retailers Association of India told Financial Express Online. India’s retail industry has over 15 million retailers employing 40-50 million people including over 6 million employed under modern retail stores.

Coronavirus has hit hard most of the businesses in segments including garments, furniture, electronics, except grocery and other essential products including healthcare products. Non-grocery/food retailers are reporting 80 per cent to 100 per cent decline in sales while those selling essential goods are reporting losses “as they aren’t allowed to sell non-essential items, which would bring them higher margins,” according to the survey. Importantly, 85 per cent of the retail costs for retailers are fixed costs, thus straining their finances. “Although they are selling, they are not making money. They are selling at a loss,” Rajagopalan said.

Over 95 per cent non-food retailers have shut their shops during the lockdown while revenues are expected to shrink 40 per cent in the following six months in comparison to last year’s revenues. Income for food retailers is expected to be relatively better at 56 per cent in the coming six months vis-à-vis last year. Moreover, the survey also reported 51 per cent of respondents expecting a business recovery in six-12 months while 26 per cent small retailers are likely to earn profit till August this year.

Retailers have sought employee salary and rent support to manage fixed costs and limit layoffs apart from an additional 60 days for payment of electricity charges and waiver of minimum demand charge for the same period. “Support for salary, a larger amount for sustaining business, relief in interest rates, and a better moratorium for repayments is what we seek from the government,” said Rajagopalan.