A survey conducted by the Innovation Village, an innovation hub that works with entrepreneurs to use technology to solve challenges in various areas such as business, government among others, has revealed that online retailers reported an increase in sales during the COVID-19 lockdown.
Olga Kiconco, the Lead Innovation Strategy at the Innovation Village presented the survey findings in a report titled “the future of retail” released at an event held in Kampala on Thursday.
The survey covered mostly micro and small businesses with 85.9% of respondents having businesses with less than 5 employees, 10.8% of respondents employed between 5 and 10 persons while 3% of respondents employed between 11 and 50 persons.
Approximately, 86% of the businesses surveyed were micro enterprises while 14% were small enterprises.
While the report indicated increase in sales by online retailers, it showed that brick and mortar retailers reported decrease in sales.
“With the limitation in movement as one of the ways to slow down the spread of the virus, brick and mortar retailers have reported a decrease in sales since customers could not access their areas of business operation. Online retailers on the other hand reported an increase in sales as customers turned to online platforms to buy items,” the report indicated.
Kiconco said, “it is undeniable that COVID-19 has presented an opportunity for use of digital tools within the retail sector due to the consumer behavioural shifts. Businesses that typically depended on walk-ins had limited access to customers, which prompted use of delivery services as well as online channels for them to stay in touch with their customers.”
The report indicated that majority of the retailers reported a drop in their sales due to numerous factors presented by COVID-19 especially low demand for their products and reduced consumer spending power as people lost their jobs and created uncertainty.
“The various lockdown measures impacted on the entire business ecosystem for example closure of borders and airport affected business in Jinja which hosts many tourists annually. Additionally, consumers were also scared of catching the virus and opted to stay home rather than go physically to the brick and mortar shops in towns and cities,” the report revealed.
It also indicated that the advent of the pandemic led to a sharp decline in the revenues of most retailers in 2020 compared to 2019.
Overall, up to 78.1% of the businesses that participated in the survey projected that their revenues will decrease by more than 25% while 21.9% projected that their revenue will decrease by less than 25%. Only 5.5% of the respondents projected revenues to increase year on year from 2019 to 2020.
Retailers also noted that there was an increase in their cost of operation which was caused by an increase in the cost of supply due to transportation challenges and disruption of supply chains.
The need to follow the different Standard Operating Procedures (SOPs) that were put in place by the government to contain the spread of COVID-19 pandemic was an additional cost for the retailers who had to buy hand sanitizers, masks, soap, water, hand washing equipment and to enforce social distancing.
“Reduced revenues and increased costs have affected cash flows for most retail businesses. This has adversely affected the capabilities of the businesses to repay loans or retain staff.”
Businesses which projected lower revenues were forced to lay off staff in order to reduce operational costs.
Further, the survey findings indicated that curfew has affected business for most retailers as they have less time during the day to make sales.
“Up to 64.2% of the respondents indicated that they were making less revenue due to the government imposed curfew. Disruption of public transport and closure of borders has also affected their business operations as it ultimately affected supply chains and movement of customers,” the report revealed.
Kiconco recommended that in order for retailers to compete in the digital economy, the concept of digital transformation should not be downplayed.
“In order for us to be competitive in a digital economy, we have to look into things around digital transformation, we need to skill as many youths as possible, equip them with the necessary digital skills and tools that they need to be competitive moving forward. We need to address challenges around access to necessary training on business development because this is key on how sustainable businesses will be in the future,” she said.
Kiconco also recommended import substitution and advocated for the Buy Uganda Build Uganda (BUBU) policy.
She also noted that a move to a cashless economy will facilitate the transition from traditional retail to online retail.