Retail reels from Covid-19 – sharp decline in sales, though online groceries show uptick: KPMG report

KPMG Lower Gulf’s latest report, ‘Navigating the pandemic,’ has revealed a mixed bag of challenges for the UAE’s consumer and retail sector, currently battling the ongoing Covid-19 crisis.

Among the strong performing sectors, online retail, particularly of groceries, has witnessed significant growth. Grocery retailers witnessed a 20% to 40% increase in sales during the first half of March, compared to the same period last year. Online marketplaces also saw surging demand, particularly for laptops/tablets (online learning and remote working requirements) and gym equipment (due to the closure of gyms and fitness centres).

On the other hand, with malls closed, sales at most luxury and fashion retailers declined by 20-50% in the first half of March. Across F&B concepts, sales have been down by 30-80%. Several prominent non-food retail businesses, which have been seeing a decline since February, indicated that sales in the first half of March were down by as much as 50-60% compared to the same period last year. Subdued consumer sentiment and volatility in gold prices contributed to declining sales in the jewellery and watch segment.

Anurag Bajpai, Partner, Head of Retail at KPMG Lower Gulf, said: “The Covid-19 outbreak has reshaped the UAE’s consumer landscape, disrupting businesses and impacting socio-economic health. With no end to the current crisis in sight, businesses that are agile and already thinking of various future scenarios are better positioned to survive and potentially thrive.”

Business continuity is a key near-term challenge for retailers right now, as operational costs are being incurred against low revenues, straining cash flows. Retailers are working with banks to defer payments, roll over lines of credit and activate additional ones, while also renegotiating business terms with suppliers. The UAE government has already announced a substantial stimulus package to support the national economy and ensure business continuity, while various mall operators have offered rent relief.

For UAE consumer and retail businesses to weather the Covid-19 storm, KPMG advises managing demand fluctuations, evaluating current cash positions and assessing the liquidity profile and potential changes in working capital dynamics. Retailers must have a plan for the health and safety of their employees and consider managing their workforce under evolving scenarios. While it would be difficult to predict recovery, businesses are relatively more upbeat about the last quarter of the year. Retailers that have been slow to digitalise will now need to swiftly develop an omni-channel strategy