Coronavirus outbreak: Retail market could be set back by at least a quarter

Companies expect recovery by the second quarter of FY21

India’s consumer and retail market could be set back by at least a quarter due to the coronavirus scare, top executives of companies have told Business Standard.

While supply-side concerns remain, the bigger worry for most companies is the impact on domestic demand, which has been weak for a few quarters now.

October-December 2019 saw the fast-moving consumer goods (FMCG) market report its lowest growth in six quarters, according to market research agency Nielsen. 

The forecast is that growth could be muted for the three months ended March 31, 2020, as coronavirus cases grow, said Nitin Gupta, FMCG analyst at brokerage SBICAP Securities.

 

 

A recovery in demand, said companies and analysts, would be visible by the second quarter of FY21.

The only bright spot is the health and hygiene space, where players have seen demand for face masks, hand sanitisers, and soaps grow exponentially in the last few weeks. But, as Gupta says, it may not compensate for the lack of growth in other segments of the market.

The situation is no different in sectors such as automotive and real estate, which have been battling a slowdown for many months now. A recent report by India Ratings said the domestic auto market, which was over 3 million units in size, had seen volumes plunge over 16 per cent between April and December 2019, its worse in two decades. 

The industry could close FY20 losing 12-15 per cent of its market size in terms of volume versus the previous year, the ratings agency said.

Real estate, on the other hand, has seen sales grow at a sluggish pace in 2019 in most of the top cities and metros, sector experts said.  The forecast is weak for the first three months of the current calendar year as the government issues travel and health advisories, forcing consumers to postpone big-ticket purchases. The Delhi government, for instance, has asked schools, colleges, malls, and theatres to remain shut till March 31. 

 

 

Karnataka, Kerala, and Maharashtra are on high alert as coronavirus cases steadily increase in these states.
 

Firms are bracing for the worst. “This is a challenging period. The FMCG market was grappling with an overall consumption slowdown anyway and now the coronavirus scare has exacerbated the situation. People in urban areas are not getting into malls and stores due to health concerns around the virus. This will impact sales coming from modern trade. Even traditional trade will get hit,” he said.

Kamal Khetan, chairman and managing director at Mumbai-based Sunteck Realty, said there could be an impact on the real estate market if the situation aggravates any further. India has reported 73 confirmed coronavirus cases so far with the number likely to rise as more people report sick across the country.

Conversations with retailers and mall owners in cities such as Mumbai, Delhi and Bengaluru reveal that footfalls are down 25-30 per cent due to the virus scare. Key events and launches across categories have been postponed and even the Indian Premier League matches are likely to be played for a television audience only.

Avneet Singh Marwaha, chief executive officer, Superplastronics, an original equipment maker and brand licensee for Kodak and Thomson TVs in India, said he saw price hikes kicking in as supply disruptions remained for manufacturers. “The crisis has led to a substantial price increase in television panels, which constitutes 65 per cent of a TV set’s cost. This will lead to a minimum price hike of 10-15 per cent by March-end for consumers,” he said.

Ashish Harsharaj Kale, president, Federation of Automobile Dealers Associations (FADA), an apex national body of automobile retailers, said there was an alarming drop in customer walk-ins at showrooms. 

The worst hit, he said, was the two-wheeler segment, where 60 per cent of sales happened through walk-ins. Kale also said the overall outlook for auto sales in the month of March remained weak due to the coronavirus.