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India’s smaller towns and cities could report signs of weakening demand, with the covid-19 caseload surging, fear offline retailers. This is significant as these towns and cities had led the move of businesses towards recovery after the restrictions imposed to contain the first wave of the covid-19 pandemic were lifted.

Mobility in these markets was strong. Consumer appetite for value apparel, footwear, and smaller home appliances was intact as India moved out of a lockdown last year.

“Definitely tier-II and tier-III cities, as well as rural areas, seem to have been more affected than last year and that will impact demand for value retail and value apparel, which was doing pretty well last year," said Anuj Sethi, senior director, Crisil Ratings.

“It is still early days and we are unable to ascertain the shutdowns happening in smaller cities, while we are able to see them in the other large cities. For a quarter or so we should see some impact in smaller cities," Sethi said. A faster vaccination drive could counter the dip in demand, he said.

Maharashtra, followed by Uttar Pradesh, Delhi, and Karnataka continued to add the most number of daily covid cases, according to a covid tracker published in Hindustan Times on Wednesday. This, in turn, has led to a combination of night curfews, partial lockdowns and weekend curbs across several states.

The mood in smaller cities is that of caution as the severity of the pandemic has households scuttling after medical supplies and testing facilities, said retailers. “This time even tier-II and tier-III towns are impacted. Maybe the numbers (of cases) will be less because of lower population in these towns. However, the concern is across all geographies and all sizes of geographies this time with the younger population also getting infected. We are seeing a very different impact compared with last year," said Sanjay Vakharia, chief executive officer, Spykar Lifestyle.

The brand draws 60% of sales from smaller cities and towns.

Vakharia said some pockets are still exhibiting consumer demand ahead of the marriage season. “However, overall sentiment is low and consumers are very cautious," he said.

Vakharia said the impact is more geographically split. Parts of east and south India are performing well, while large parts of central, north and west India have been badly impacted, he said.

The impact is no longer about bigger cities or smaller towns, but more state-wise, agreed Siddhartha Bindra, managing director, Biba Apparels. “While metro cities are facing more restrictions, especially places such as New Delhi, Mumbai, and Bengaluru, the surge in cases is affecting consumer sentiment equally even in smaller towns," he said.

Wherever there are lockdowns and night curfews, people are afraid of stepping out. “While metro cities are facing strict restrictions because of a spike in cases, smaller cities have been equally hit this time," he said.

Retailers reported strong recovery in the March quarter, driven by strong sales in January and February. In all, retailers were reporting between 70% and 80% of pre-covid numbers as stores opened and consumer mobility went up. Pent-up demand also helped.

“If covid spreads in tier-II, tier-III, and tier-IV cities now, we will definitely see an impact. We are getting news of some markets that were holding ground in the past also seeing an impact. The intensity could be lower, but we do foresee an impact," said Sundeep Chugh, managing director and chief executive officer, Benetton India.

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