With the current lockdown under the national disinfection program, the mandatory closures of shopping malls and non-essential retail outlets is now building up the pressure on the retail sector. While, the impact triggered is clearly visible within financial markets, there is still no clarity on the deeper impact that it is having or will have across retail businesses.
With an aim to understand these challenges better, BUZ Management & Marketing Consulting’s (BUZ MMC) interviewed over 150 top retailers of UAE on the impact of the coronavirus pandemic on their business. The survey report – ‘UAE Retail Response on COVID-19’ covers the impact industry wise and also provides an in-depth understanding of their current sentiment and a quick guide on how these businesses are planning to respond.
Commenting on the release of the report, Baiju Kurieash, Managing Director, BUZ MMC said “We have been talking to our retail sector clients about the impact this pandemic may have on their business and how can this be minimized. More importantly, we are learning how to prepare for the longer-term effects and ease the shorter-term shocks. Opening up the economy with an emphasis on ‘Safety’ is a must, and our retail partners are investing all their efforts to adhere to the best practices, as the industry will grow out of this pandemic in the times to come.”
The two-week conversations suggest many areas where retailer will be focusing their attention in today’s highly-fluid social, economic and health environment.
Major retailers report serious impact
According to the ‘UAE Retail Response on COVID-19’ survey, 75% of the businesses reported major negative impact, out of which 12% of the retailers don’t see recovery anytime soon. Most of the businesses that reported high impact were from sectors including clothing & specialty, Jewellery outlet, Shopping Malls, Furniture, health& wellness and entertainment.
The rest of the 13% reported a moderate impact and forecasted a possible recovery within the coming quarter.
With falling brick and mortar sales and increased online competition, some retailers are expecting this gap to further widen post the lockdown period.
Coronavirus Concerns Hit Retail Supply Chain
Expanding global spread of COVID-19 is having a major impact on retail supply chains. 63% of the respondents said that there has been a huge impact and are looking at different channels of supply. The affected categories include F&B, health & wellness, entertainment, and electronics.
While 36% of the respondents, mostly from the clothing & specialty category and beauty were not disturbed with the impact, and expect a smoother function post the lockdown period.
The retailers in the textile, technology and household goods industry will be the most affected with their supply chain.
Reconsidering 2020 Business Forecasts
The COVID-19 pandemic is making retailers reconsider their 2020 business plans and forecast. Majority of the respondents have claimed that they are expecting 75% or more less than their original business forecast. While fair percentage of the retailers claimed to be expecting 50% less than their 2020 forecast.
While most multi-nationals and domestic businesses will re-strategize their expansion plans and optimize operational costs, surprisingly 27% of the respondents suggested to continue with their growth plans for 2020. These are respondents from the clothing & specialty, F&B and beauty brands.
Impact on Retailer Marketing Activities
Given the prior dates of Expo 2020, most of the retailers had major marketing plans and budget for 2020. However, in the current situation most of the businesses have curbed their spending’s for the year and will look at low-cost digital marketing solutions.
A lot of the retailers are also depending on UAE’s Retail Calendar to help recover the business and achieve their revised forecasts for the year. 65% of the respondents confirmed they will consider retail events such as Eid, Back to School, Fall or Winter as part of their new plan.
Measures to Mitigate the Impact
While some retail landlords have proactively offered rent freeze for a set period; 37% retailers are expecting this support from other retail landlords across different emirates, where their retail stores are present.
Additionally, the businesses are in discussion with the government entities to relook at the possible tax waivers and discounting licensing fees. The survey shows a massive 24% in favor of tax waivers and 22% requesting for discounted licensing fees.
Some retail categories have been severely ravaged while others have seen sustained growth. This mixed impact is one of the most common themes reported by a variety of retail names and business owners. For more insights and analysis, download the report from www.ibuz.ae.