How 2020 was the year for the Retail sector and what change in the policies, growth & trends

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Mr Rohan
Mr Rohan

New Delhi : The retail sector, a significant GDP contributor and a means for consumers to connect with products have seen a shift in recent years towards the organised sector as well as tremendous growth in recent years. With the world’s second-largest population and ever-increasing consumer spending, Retail still has a lot of potentials to expand even further in the years ahead. Grocery to travel till liquor, a wide range of products and needs of our economy are still retailed through the brick and mortar or traditional ways, all of which took a great hit amid COVID lockdowns as well as in the post lockdown norms. A lot of traffic did shift to the electronic retailing (e-commerce), a method was unheard in the liquor industry in India before COVID-19 lockdowns. A few states (excises) did take action in this new direction by allowing food and other delivery apps to get into liquor delivery game, while still trying to maintain control over the trade as much as possible. Till now this new method of liquor retailing hasn’t quite hit it with the consumers, but better things can be expected in the coming years with support from state excises in form of some relaxations in policies.

Liquor trade and specifically the retail sector of the trade has been a restricted, controlled and governed space by the respective state excise and its laws. The liquor industry has for a long time maintained two types of retail; on-trade (bars, pubs etc) and off-trade (shops, no consumption allowed on-premise, mostly), as electronic retail/e-commerce was/is banned in almost all states given restrictions and policies of respective state excises. 

First total lockdown, then facing temporary closure for a long period and currently with social distancing and other precautions in place, on-trade businesses have struggled to survive this year with extreme low/negative liquidities, with some barely able to pay for the taxes and direct expenses. On an average with sales less than 50% of the pre-COVID figures, partly due to social distancing norms and rest with low consumer confidence. Although help from some state excises has made matters better, e.g.: Karnataka and Maharashtra did allow microbreweries to sell beer to consumers in their own growlers/containers for home consumption. Some states have seen relaxations in licence fees while others have supported on-trade by adjusting licence fees on pro-rata basis (only for the time retail was open/will be open). Even Manufacturing companies have made efforts and extended support in terms of monetary, credit, other schemes to help retail trade, keeping in mind the long-term impact this short help may bring the whole trade.

Off-trade retail contributes to around more than 80% of total liquor sales in the country to the end consumers. This part of liquor retail licences commands a substantial amount of fees and duties either each quarter, bi-annually, yearly or once in a couple of years. With nearly 2 months of lockdown period and a current sale that is yet to recover to pre-COVID figures (down 15%-35%, across India), even off-trade licences have struggled to sustain and without support coming in various forms from the respective state excises, would have been a mess for the liquor trade, consumers and ultimately the state revenues. Some have adjusted the licence fees on a pro-rata basis, others have relaxed the yearly hikes on duties and licence fees. Although there have been instances of nominal increase in duties in the form of covid-tax or some local state taxes which have been borne by the ultimate consumer, taking a toll on the off-trade retail sales. 

Better things are expected next financial year, with hopes of returning consumers and sales back to pre-COVID numbers atleast. This won’t be possible without the support of respective state excises, who need to look out at the licence fees and other state levies which may be justified and in-line with the current financial scenario of the industry, as well as some relaxation of rules which in-turn may encourage the retailers to attract the consumers back with full confidence, still maintaining all precautions till required.