“Retail Sector contributes to around 17.5% of GDP and provides employment to 16% of the labor force in Pakistan but it might not be able to sustain the impact of this virus and it may take years to recover”, said Mohammad Qasim, Managing Director, Firhaj Footwear Pvt. Limited (the sole official licensee of two international brands, Hush Puppies and Caterpillar, in Pakistan) during an exclusive Q&A session with Daily NewsPK on the impact of COVID-19 outbreak on retail industry in Pakistan.
1. How do you think industry as a whole is coping with this recent crisis?
No industry, anywhere in the world, was prepared for this pandemic. Our Industry has been affected more adversely as all the retail brick and mortar stores were closed for 7 weeks, leading to a loss of billions.Retail Sector contributes to around 17.5% of GDP and provides employment to 16% of the labor force in Pakistan but it might not be able to sustain the impact of this virus and it may take years to recover.
2. How is this pandemic impacting retail business landscape in Pakistan and how is it effecting supply chain?
Retail Sector was already struggling in Pakistan even before the coronavirus outbreak, due to increase in taxes by the Government on the organized retail sector as well as economic slowdown, leading to lower traffic in stores and lower purchasing power. Average traffic per day was about 20% lower in 2019 as compared to 2018. McKinsey’s forecast says fashion category in 2020 will be down 30% globally and 2021 will just grow by 3-4%, giving us an indication that it may take years before things can get back to 2019 levels.
Globally, e-commerce channel has played a key role during this pandemic but despite the importance of e-commerce, Government of Pakistan banned all e-commerce operations of brands, instead of encouraging contact-less transactions and supporting the retail sector. It was only two weeks ago when brands have been given the permission to resume e-commerce operations.
Supply chain has also been badly affected. Since most of the footwear in the country is imported from China, the industry started witnessing the effects of this pandemic long before it hit Pakistan, as the whole supply chain was disrupted due to China’s lockdown. In the long-run, brands will have to backward integrate to have the complete value chain within Pakistan, requiring huge capital investments.
3. Since lock-downs are in place mostly everywhere, what initiative have your company taken to overcome logistics issues and at the same time ensuring minimal health and safety risks for your staff and partners?
Our Hush Puppies Retail Team has been working from home. We opened our Export Unit once the Government gave us the permission, ensuring compliance with all SOPs for the health and safety of our employees. We have also donated masks and PPE suits to major government hospitals in Lahore.
4. Do you reckon it will be business as usual post this crisis or there will be massive changes in the way businesses have been conducted?
Things will not be the same. Consumer behavior has already changed. Global Hush Puppies team informed us that our China counter-part have already opened 90% of their stores, since things have settled down in China, but the traffic is 60% down. However, according to Neilson, Pakistan is relatively more optimistic than the rest of the world and 8 out of 10 people believe that we will surpass this challenge in the next 1-3 months. Despite this optimism, wallet size is expected to decrease due to predicted recession; according to Neilson, 49% of retailers have reported shopping basket size has dropped up to 50%, while 18% have reported that it has dropped even more than 50%.
Omni-channel will be key for the brick-and-mortar retail stores and the quicker brands adapt to this new channel the quicker they will be able to get back into the market. We have already started work on this and expect to be live soon. Brands will have to enable customers to have limited physical contact yet provide them with a good customer experience and the ability to enjoy their favorite brands.
5. How do you see consumer behaviour shifting towards digital during this crisis time and what is your approach while understanding and responding to their needs?
Already, globally, online shopping has increased significantly, where 33% more people are buying groceries online, while 20% more people are buying clothes and other luxury goods online now. We have seen a similar surge in our online sales in these past two months. To facilitate customers, we decided to revise our exchange and return policy to make it more convenient and comfortable for consumers to order online. Furthermore, online sales provides us with meaningful insights related to consumer preferences, enabling us to do targeted marketing through social media channels and email marketing, leading to a higher conversion and retention rates.
