Retail Resurgence Post-Covid19?

I was discussing the future with a friend (@NalinM) and he quoted several economists on the crisis created by the pandemic. He has access to a lot of material because he is a business coach and also happens to be ex-MD of a major Mahindra company. According to the predictions made by these economists, growth in the Indian economy is going to slow to 1% – 1.5%, vehicle sales already threatened by the switch to BS6 are going to fall through the floor and so on. Much doom and gloom – now wonder they call economics “The Dismal Science”!

My outlook is a lot more positive. Of course, I am not discounting the impact this crisis will have on the way we live and work. A lot of things will fundamentally change. I am not going to address everything that will change, just the points relating to logistics, especially last-mile logistics.

1. Personal Vehicles will see a surge in buying and usage. Not only is all public transportation currently shut down, but most people also will not want to travel in those crowded crucibles of disease. This means people will travel more by car and two-wheeler when they need to. Of course, people will visit offices less, and a lot of business will be conducted over phone and video. However, everyone can’t work from home all the time – in fact, very few can. Most likely, offices will stagger and/or rotate shifts and people. So at any given time, about thirty percent of employees will be in the office. So, food in and around the office will become more expensive, although not by much, but more importantly, real estate prices will crash.

2. The above scenario also means that more petrol will be used and this implies more pollution and more traffic jams. Vehicles both personal and commercial will need to be spread out over the course of the day and the week.

3. This is perhaps my most important point. Spending will go up sharply. There is both pent-up demand and a bottled-up supply. So you will see a massive surge in buying – both business and personal. This also means that the logistics industry will see a huge increase in volume, one which will lead to bottlenecks and delays.

4. A lot of manufacturing will shift out of China. There will be an economic as well as an emotional backlash against the Middle Kingdom. Japan has announced a multi-billion dollar package to help Japanese companies relocate from China. Many funds and investors will bring pressure on companies in India as well, forcing them to recognize the risk not just of China, but of far-flung resources. This, along with encouragement from the government will bring significant commerce to India.

But will all this last? Will the demand go back to normal after say, six months or so? I predict that demand, and therefore commerce, will continue to rise. One of the main reasons for this is that the COVID-19 virus will not be beaten so soon or easily. Despite lockdowns and flattened curves, flare-ups of the infection will continue until the entire world is immunized. And that will take possibly as much as two to three years AFTER a vaccine is developed – which is, at best, a year away.