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Omicron disrupts sales for offline electronics retailers by up to 70%

Omicron disrupts sales for offline electronics retailers by up to 70%
16 Jan, 2022
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The sharp increase in covid-19 cases since the start of the year has begun to impact the sales of offline retail electronics stores that had started to see some recovery on the back of festive season sales, according to industry experts.

"Offline retail has been on the backfoot since the pandemic. Just when they had started to recover, fear of another wave has disrupted sales. After Omicron, consumers are not coming to market. Sales have dropped by up to 70% for some stores," said Arvinder Khurana, national president, All India Mobile Retailers Association (AIMRA).

Khurana points out that in large format retail stores, which have thousands of products, sales have dropped by 30-35%. In chain stores, sales have dropped by 50%. In areas where the government has started imposing curfew and where cases have increased, sales have dropped by up to 70%. 

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“January used to be a lean month. However, sales have been impacted due to Omicron. Walk-ins have dropped drastically by almost 50%,” said Manish Khatri, partner, Mahesh Telecom. 

Though sales of other products have declined, some stores have seen an increase in demand for laptops. For instance, at Vijay Sales, "the laptop sales increased again. Overall sales have decreased by 10% compared to last month," said Nilesh Gupta, director at Vijay Sales. Mint had earlier reported that notebook demand in 2022 will be driven by commercial and government orders to support the return to work. 

According to Khurana, in the last 2-3 months, there has been a shortage of several key products including iPhones, which are only being supplied to large retailers. For brands such as Mi, products are available only for a week and then are not available for the rest of the month. Stocks are not the same due to chipset shortage. Sub 15k smartphones are in short supply and 80% of them are now being supplied to online stores. Brands are also prioritising premium smartphones due to chip shortages. 

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"Online sellers have also preponed sales. Some of the sales that were expected to start from January 26 are happening 10 days earlier," he added. 

To be sure, the gap between offline and online retail sales has widened after the pandemic.

According to International Data Corporation (IDC), offline channels registered an 18% year on year (YoY) decline in smartphone shipment in Q3 (July-Sept) 2021 as compared to a 5% YoY decline in online shipments. Online channels accounted for a record high 52% share of smartphone shipment in Q3 2021.  Khurana said for the first time in decades the offline market has shrunk below 50%. 

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"Early reports indicate stress in offline channels. Uncertainty around restrictions, weekend lockdown etc do not help. Offline has been severely challenged since March 2020," said Navkendar Singh, research director, IDC India. 

Singh noted heavy marketing and sales festivals led interventions by online platforms cannot be matched by offline. Brands try to help but the cost of operations offline is too high to broad-base it fully.

"There were some signs of recovery in Oct-Nov, which helped since it is a heavy sales period," added Singh. 

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The mobile retailers' association has been asking the government for relief measures. In 2021, AIMRA had urged the government to extend the interest-free moratorium for six months and allow collateral-free loans between Rs 25 lacs to Rs 1 crore with minimum interest for retailers. 

Khurana lamented that there has been no support from the government for offline retailers. Retailers are operating at loss-- 85% is the fixed cost of offline retail which includes salaries and rent.