Dr Mark Morley, Trade and Investment Commissioner, and Harsh Mohan Puri, Team Leader, Food and Agriculture, Austrade New Delhi
As many Australian clients know, India announced a 21-day lockdown across the entire country, commencing on March 24. At this point, this is the affecting more than a billion people. On April 14, this lockdown was extended until May 3.
In the days preceding this initial announcement, Indians were indulging in bulk-buying of essential groceries and staples, in expectation that the government would move to further restrictions. Indians have largely reacted positively to the government’s call to stay safe at home. Many – particularly poorer – consumers have shifted to survival mode by buying staples such as flour, oil and rice.
This article provides a short overview of the current situation for retail and food logistics.
Delivery challenges
The first challenge and victim of India’s lockdown was the shutdown of trucking operations and those labourers who rely on a daily wage being made jobless overnight, and then making a beeline to their villages in rural India. The government significantly underestimated the impact its lockdown decision would have on such labourers.
The first impact was on supply chains within the country – from small retail stores dotted in every neighbourhood across India, to modern retail stores, e-commerce and medical supplies. It also brought customs clearances to a standstill. Only a fraction of e-commerce was able to operate. BigBasket is an online platform but follows an inventory model to be able to supply. Amazon India has taken two weeks to restart its operations.
Therefore, an immediate issue was the delivery of essential items, particularly via e-commerce platforms, following the announcement. Considerable stocks were being ordered via BigBasket, Amazon, Grofers and others, with reports of delivery drivers allegedly . This is in spite of government assurances that the delivery of essential items would continue.
The government moved rapidly, clarifying what constitutes essential and non-essential goods, and finally allowing the movement of non-essential goods too. But the impact has caused a significant lag in the transport sector. Only 120,000 out of 1.2 million trucks across India are back on Indian roads. To make matters worse, India has entered the harvest season. With reports of produce thrown on highways, or fed to animals for want of transport, the initial trucks have been directed to address the transport needs of fresh produce at the village level.
State police have moved to educate their colleagues responsible for enforcing the lockdown to allow the delivery and movement of goods. The supply chain is slowly improving but there is a significant gap of processed foods in the market, and reports of shortages of other ‘staples’ such as pulses, biscuits and noodles. Startup companies, online food aggregators and QSRs have tried to provide relief by delivering essential items.
A timely trigger for e-commerce
Despite the small mum-and-dad stores being the first point of call for neighbourhoods, and key to supporting the population at the time of lockdown through essential item supply, e-commerce channels have picked up their operations. Customers who sat on the fringe have also jumped in and ordered online. With significant flexibility and home delivery, this outcome has also been driven by the widespread notion that cash is a key carrier of COVID-19. This expanded customer base will help e-commerce companies in the future as some customers will be retained after the crisis abates.
Imported products, as of now, are understandably not the most sought-after items but even products like pastas and flour tortillas are being picked up. Australian products such as Mission Foods’ wraps are in particular demand, according to a national retailer.
Importantly, most supermarkets are open but entry is strictly controlled and the practice of safe social distancing is being followed. This is leading to long wait times to enter retail premises. Difficulty in staffing many retail stores has also impeded operations. In addition, there are increasing stock-out situations for a wide range of stock keeping units (SKUs) due to the break in supply chains as well as imports.
Customs: delays and clearances
The government has confirmed that Customs will work 24×7 and clearances will happen. On the ground, however, many CNF [cost and freight] agents in Delhi and Mumbai say that clearing agents acting on the owner of goods are not coming forward to clear shipments from the CFS. This is due to a lack of transport and fear of locking in capital till the visibility on payments comes through.
With the availability of trucks, this is expected to pick up. In addition, there are several vessels idling on the high seas (unable to unload cargo at other ports) and it is anticipated that there will be delays in the clearance of containers and turnaround times as operations begin.
For the moment, importers are treading carefully. Their focus is on clearing any shipments that have already arrived at the ports. New orders will have to wait, and many will watch the market trend post-lockdown and keep assessing the situation.
A new e-commerce platform for Australian produce
During these hard times, e-commerce is emerging as a potential source of supply and e-commerce companies are improving their supply chain day by day. Many sites have seen an exponential increase in customers as well as in the volume of transactions. Many first-time users will likely become permanent participants in the e-commerce marketplace.
When the world and India emerge out of these testing times, e-commerce will have inculcated itself in a broader section of the society. The convenience and ease of e-commerce will be an accepted advantage, and we anticipate a tremendous growth in online purchases. This is a significant opportunity for Australian small to medium enterprises in the food and beverage space.
Austrade has worked with Amazon India to help set up an online ‘Australian Store’, and to connect increasing numbers of companies to the digital platform. The Austrade team will also roll out increasing numbers of webinars and insight pieces dedicated to digitally connecting Australian companies with Indian importers and platforms.
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