Ipsos research shows liquor outlets have been losing about 50 percent of revenue, yet overheads remain unchanged.
Nearly 3,000 jobs have already been lost in the independently owned liquor store sector, which employs more than 14,000 people. This is according to research commissioned by the Consumer Goods Council of South Africa (CGCSA) and the Liquor Traders Association of South Africa (LTASA) into the impact of Covid-19 regulations on the liquor industry, particularly the off-site consumption liquor sector.
Many of the 1,400 stores in this sector are black-owned and employees are breadwinners, with the majority being black women. With each store on average employing five people – excluding service providers’ employees, such as merchandisers, security workers and cleaners – a great many risk of losing jobs, with devastating consequences.
Given the impact of the severity of the lockdowns so far, and considering that some retailers may need at least six months to fully recover from successive lockdowns, further retrenchments cannot be ruled out.
The study, by independent research company Ipsos, also found that at least 67 percent of those interviewed predicted business closure should the restrictions continue, with 35 percent at risk of closing in less than three months and another 25 percent in six months or more.
Some businesses even indicated that they can only operate for another month should the current situation continue.
The research concluded that the four-day trade restrictions imposed on retail liquor stores are unjustifiable, discriminatory and uncompetitive. The restrictions have also fuelled the illicit market, with significant revenue losses for the government as a result.
While the government has eased liquor restrictions, it imposed a four-day trading period for off-site consumption sales and permitted on-site consumption establishments to trade seven days a week.
According to the study, liquor retailers have been losing about 50 percent of revenue they would have earned from Thursday to Saturday, yet overhead costs have remained unchanged. The revenue losses for small liquor outlets were as high as 65 percent of weekly turnover between Friday and Sunday.
“To put this in perspective, aggregate loss in sales since the inception of lockdown stands at approximately R8.5 billion; sales volume has dropped by 20 to 50 percent across the retail formats per month and with 60 percent of convenience trading being done mostly post 5pm on weekdays and on weekends these figures are predicted to continue on a downward scale with great harm to business and jobs,” CGCSA said.
In addition to cutting staff and costs, retailers have been negotiating with landlords to reduce rentals, which in turn affects the revenue of commercial property owners. Some have reduced the working hours and wages of staff, and diversified products/service lines or changed/improved operations model to adapt to new conditions.
Yet others have explored e-commerce focus/capabilities, cut discretionary spending, cancelled salary increases, renegotiated leases or debt repayments, or applied for government support, although not all have received the required funding.
“The economic impact of the restrictions has been dramatic and devastating on the SMME businesses with the resultant severe impact on their employees and families. The continued bans on the sale of alcohol without significant government support, e.g., Covid TERS, could see the decimation of the independently owned liquor store sector,” said the LTASA.
