News

COVID-19 and Romanian Retail

03/06/2020

Covid 19 has had many effects worldwide. The most notable being on the health and well- being of global citizens; the impact on the health services globally; and the negative impact on the economy.

In the view of EFMP Romanian partners, G7, the economic effects of the pandemic have divided businesses in Romania into four main categories in terms of their operational capabilities. They are the following: 1.Essential services; 2. The big winners; 3. The Unlucky Ones; and 4. Survivors.

Within the essential services, the main players were the pharmaceutical and food industries, and telecom and utility providers. The big winners, however, were the companies whose activity was mainly focused on e-commerce, video communications, cloud type platforms or tele-medicine. While the obvious unlucky ones were the businesses engaged in tourism, entertaining, traditional retail, restaurants and bars. The survivors were any of the above which managed, against all odds, to keep going.

G7 are of the opinion that non-food retailers are the ones most affected by the measures taken during the state of emergency. In order to prevent the spread of Covid-19 in Romania, a military ordinance was instituted throughout the country and the majority of the population faced an (almost) complete lockdown.

As a result, non-food retailers were among the businesses most affected by measures taken during the state of emergency. According to a study conducted by Colliers International’s Retail Division, which involved 84 tenants and 21 landlords from the retail sector in Romania, their results showed that 45% of retail tenants expect a more than 30% decrease of their turnover in 2020; and another 39% foresee up to 30% decline as a result of the measures instituted and also due to the fact that they experienced at least 2 months of no trading.   In addition, only a slow recovery is expected in the second half of this year. While that was the situation experienced by tenants, the Colliers International study showed that the landlords of retail spaces reacted rapidly in  the context of lockdown by closing part of the shopping centers, where it was physically possible to do so (67%),  and by renegotiating terms with third party suppliers (45%) and even with banks (29%). Almost all the landlords have also made use of the state benefits made available, such as the delay of tax payment (52%), the use of the technical unemployment fund (48%), and the opportunity created to allow delayed bank payments (24%).

The measures taken by the retail trade in response to the economic hardships imposed by Covid 19 have been decisive and the industry has been assisted to some extent by assistance from the State. It may be cold comfort, however, to those companies in category 3, which were unfortunately not able to survive. But there is a light of hope at the end of the tunnel which is Covid 19; the first signs of recovery in the retail market in 2020 are expected to start in Q4, with more consistent results predicted for 2021.  This shows that both retailers and landlords are confident in a relatively fast recovery. That would bode well for all sectors of the economy as some businesses continue, others re-open, and yet others innovate and re-invent themselves to adapt to life after the Covid 19 pandemic.  It too will pass.

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