With the travel and tourism downturn, the baggage industry has been hit hard by many dealerships whose leased stores have closed permanently due to the impact of the second wave of Covid-19. According to industry estimates, luggage manufacturers and retailers have experienced a 40-45% drop in sales.
“The balance sheets of companies like VIP and Safari will show their revenues are in dark red. VIP has closed almost 200 stores while Samsonite has also closed over 100 stores, ”said Sanjeev Mehrotra, luggage industry consultant and general manager (sales), Sonnet Luggage Private Limited. VIP and Samsonite did not respond to questions sent by Activity area.
The little players struggle
Even the smallest players find it difficult to maintain themselves. SMERRERS, a merger and acquisition portal for SMEs, has seen a 40 percent increase in listings by struggling companies in this segment.
“Our three existing retail stores were closed for three months due to the coronavirus lockdown. The shopping centers have recently reopened and our stores have also reopened. Our sales have declined due to the pandemic, ”said one of the companies listed on SMERGERS, a portal for struggling SMEs to find an investor or a buyer.
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Recently, the Witco luggage store chain closed its doors after 65 years in business. According to Mehrotra, the Indian luggage industry reached nearly 4,500 crore in turnover as of fiscal year 20. However, there was a sharp drop to 1,700 crore.
Mehrotra, said Sonnet Luggage had to use its working capital to keep business afloat, which was down 50% in the first quarter of CY21 compared to the same period last year.
“Unlike last year’s lockdown where players were able to get rent waived, this time around many rented stores have been closed permanently due to the impact of the second wave of Covid – given that it doesn’t There was no lease waiver this time around, ”said Karan Khanna, Research Analyst at Ambit Capital.
He explained that while the industry experienced a rapid recovery in the fourth quarter of last calendar year which continued into January / February of this year, “the second wave derailed the recovery of the baggage industry.” , he added.
Low sales of school bags
Mehrotra and Khanna said backpacks as a category continue to disappoint due to limited visibility on the reopening of schools, colleges and offices. Usually, backpack sales increase in the first and second quarters of the year, however, as students are home-schooled, this category saw a sudden drop in sales.
The only respite, according to Pratik Furia of 369 Baggage, is the category of students traveling abroad. However, the supply chain is deeply impacted. He explained that many products are either original or made in China. Furia’s activity was down 40 to 45% compared to the previous year.
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Ambit’s research has shown that luggage imports from China have declined 70 to 75 percent since the pandemic due to supply chain issues.
The cost of freight, which has risen 300 to 400 percent, pushes the overall cost upward.
“That said, with the acceleration of vaccination and travel showing encouraging signs now, the industry will only experience a faster recovery from 3QFY22 during the holiday season, with a better recovery in CY22,” he said. added Khanna.