THE collective loss runs in billions of rupees. The pandemic has dealt a crippling blow to the retail sector. A prolonged lockdown and commercial disruption, in the absence of a bailout, could wipe out weaklings and leave strong ones financially bruised.

The anxiety in traders’ ranks is real and understandable. They have a peculiar business cycle where their capital is locked in inventories, working capital is raised through personal credit and half the sale bills are cleared after a lag.

Also read: In Faisalabad, traders conduct business before officials ‘wake up’

Shopkeepers plough back their savings in business and prefer to rent shops and houses. The majority operates under the official radar — hardly 0.4 million of 26m commercial electricity meter-holders file tax returns. They say they pay 10 per cent income tax and 7.5pc sales tax charged in their electricity bills. Facing acute liquidity crunch after weeks of lockdown they want the government to come to their rescue if it wishes to keep them indoors.

Their demands include: cancellation of electricity bills for April for small retailers; activation of 90-day letters of credit by banks; acceptance of commercial property papers as collateral for credit at concessional rates and the admissibility of personal guarantees for small loans. They called for a free investment policy in the retail sector exempted from the condition of source disclosure.

Shopkeepers should shed their old habits that are rooted in belief rather than logic

The fact is that shopkeepers are faced with a daunting near-term challenge — health and safety of staff and customers, supply chain, employees, cash flow, changing consumer preferences. “Navigating through these issues may not suffice. To succeed in the post-pandemic world, they might need to learn and respond to the calls of modern times and shed old habits rooted in belief more than logic”, noted an expert.

Adviser for Commerce Abdul Razak Dawood told Dawn by phone from Islamabad that the government is working on a separate package for retailers based on the data of commercial electricity connections and consumption. Discussing the defiance of the lockdown by shopkeepers, he said he would err on the side of caution. “I sympathise with the provinces, compelled to make difficult choices.”

“Stern health warnings necessitate sub-normal market operations during the pre-Eid peak business season, escalating the challenge to a magnitude that many retailers find beyond their endurance capacity.

"The government needs to engage with the community. If not addressed, I fear the discontent can spill over in the streets, diluting the gains made so far to contain the deadly virus,” said Zubair Tufail, former president of the Federation of Pakistan Chambers of Commerce and Industry.

All Pakistan Anjuman-e-Tajran Secretary General Naeem Mir advised the government to act swiftly. “A compassionate smart response to mitigate the risks of bankruptcy in retail can earn the PTI government precious goodwill and serve the purpose of economic sustainability.” The gentleman shared with Dawn what he calls a workable pragmatic plan.

Talking over the phone from Lahore, he said the PTI has served extreme ends of the social scale while ignoring the middle majority. “Rs150 billion Ehasas programme is for poorest. We support the move as people must not die of hunger. But disbursing Rs200bn in refund claims to the richest exporters does not make sense. Why now?” he said while questioning the sequence of relief measures.

“The preference for a bailout should be for the sector with a broader base and stronger economic linkages. Everyone knows that prospects of exports are clouded in a pandemic-stricken world and a turnaround can take years. I see no reason for the haste unless the objective is to make super-rich friends happy.”

“The government has made an allocation of Rs100bn to agriculture and SMEs. So far, shopkeepers are excluded from bailout efforts. The data of commercial meters can be used to profile them in top, middle and small segments for the purpose of targeted relief,” he said.

After agriculture and manufacturing, retail is the biggest sector in terms of its share in both GDP and employment. Over 26m shops, with their collective annual turnover running in trillions of rupees, absorb as much as 16pc of the country’s workforce.

Over the past four decades, the sector has been on a high growth trajectory, sometimes double and triple of the GDP growth rate. The performance inspired investors and today all major business families have a stake in this sector. Eying the margins, many foreign brands also landed in the country.

The fallout seems to be unevenly shared. In Sindh the lockdown been longer and more stringent and as compared to rural areas the spread of disease is rampant in cities. Kiryana merchants are comparatively less affected as additional demand for ration donations has more than compensated for leaner demand for other items.

According to Haroon Agar, former president of the Karachi Chamber of Commerce and Industry, big retailers of basic kitchen products have stretched the margins way beyond the reasonable limits despite the crisis. “I am in business and can tell you that retailers are charging up to 100pc margins on certain basic kitchen items in place of 15-20pc margins some years ago. The prices of lentils have crashed in the international market after India stopped imports. Items that are fetched for Rs70-80 in wholesale are marketed for Rs200 and higher after packing in plastic bags that cost Re1 per kilogram. You can add transport and overheads, but that does not justify the profit per kilogram,” he said.

“That might be true, but the business wheel is turning in the reverse direction for many others. Take furniture, electronic, chemical, toy, garment and footwear markets. Businesses are crashing left, right and centre. Our stores are filled to the brim and the financial cycle has broken in the absence of sales,” said Muhammad Talha, a furniture merchant.

Haji Nasir Gaddi, representative of milk sellers, shared his sector’s tragic tale. “With the closure, we are facing a glut and milk is sold for as low as Rs50 per kilogram at some places because of the compulsions of this trade as the product has to be sold within 24 hours.”

Published in Dawn, The Business and Finance Weekly, April 27th, 2020